Delayed reaction | Despite hits to endowed assets, 2009 grant-making won't suffer much. Watch out for 2010, though.
Like their counterparts nationally, Maine’s largest foundations have lost as much as 30% or more of their assets, or some hundreds of millions of dollars, in the economic turmoil of the past year.
Even though the market is performing poorly, leaders of some of the state’s largest philanthropic institutions say nonprofits will not see a noticeable decrease in funding in 2009 because grant-making budgets are determined by the year prior to the current one. (2010 may be another story, though.)
“Our endowment was hit significantly,” says Nancy Brain, executive director of the Sam L. Cohen Foundation in Portland, which supports nonprofit organizations that benefit York and Cumberland counties. “We are working closely with our investment advisors, watching our assets and paying attention to our expenses. While a well-diversified portfolio usually helps, with deflation every asset class is affected.”
By law, private foundations are required to spend 5% of their endowment’s fair market value annually on grants and program-related expenses. “The Cohen Foundation’s fiscal year is the calendar year,” says Brain. “Because the economic crisis only affected the last four months of 2008, the foundation’s 2008 grant-making budget was not as impacted as it might have been.”
While the Maine Health Access Foundation in Augusta lost around 30% of its overall asset value, President Wendy Wolf says the foundation will fulfill multi-year grant obligations and continue to focus on strengthening Maine’s safety net by supporting nonprofit efforts to improve the health care system. MEHAF will cut costs, not grants, says Wolf: “We will have less flexibility to support special policy-related initiatives, but those changes will be largely invisible to our grantees.” In Ellsworth, the Maine Community Foundation’s endowment also suffered a 20% to 25% drop in 2008 — similar to other community foundations nationally. As a result, President Meredith Jones says grant-making will decrease, but maybe not significantly, since, “some donors may make larger grants to compensate for the reduction.”
The endowment at the United Way of Greater Portland is down 28%, as are assets at the United Way of Eastern Maine. But, both organizations’ annual campaign results matched 2007 closely. “We are committed to making sure those essential programs and services are still available in our community,” says John Shoos, vice president of United Way of Greater Portland.
Threats spark innovation
Janet Henry, president of the Maine Philanthropy Center, which represents many of the 302 foundations registered in Maine, says that while foundations and corporations are often the most visible philanthropic players, they make up less than 15% of the charitable pie in terms of total dollars given. (Seventy-five percent of all charitable giving historically comes from individuals.)
Threats to federal and state funding, however, could be painful. “If you took all the grant dollars awarded in 2006, it would only amount to 4% of public funding,” explains Henry, referring to a 2007 MPC report on charitable giving in Maine. Maine nonprofits are anticipating cuts in state and federal funding, and will know the outcome of annual fundraising efforts from individual donors by the end of January. “You know the saying, ‘You never want a crisis to go to waste?’ That’s the silver lining now,” says Henry. “This economy will require a lot more leadership and new vision. “ Wolf agrees: “The crisis could be a crucible for the sector.”
Innovation is already happening by way of new loan programs — the MaineCF and MEHAF recently used a portion of grant-making assets to make low-interest loans to nonprofits. MaineCF made a $1 million loan to Maine Farmland Trust to preserve farmland. MEHAF established a loan fund at the Finance Authority of Maine to help clinics and primary care practices switch to electronic records. “In this market, where positive returns on investment are hard to find, making low-interest loans both preserves our resources and furthers our mission,” explains Wolf.
A group of Maine funders have also joined together to identify vulnerable organizations and to create services to help leaders assess their organization’s viability, find efficiencies, and, where appropriate, explore mergers, program acquisition, restructuring or dissolution.
“We are honing our review process to better identify red flags and be prepared to triage,” says Kathy Crossman, vice president at the United Way of Eastern Maine, which recently granted $1.2 million to 34 human service agencies and 76 programs. (Because of multi-year funding commitments, new grants won’t be made until July 2010.) “We have to be more stringent, and also remain aware that nonprofits are trying to keep their heads above water.”
“There is going to be a shake-out,” says Maine philanthropist Warren Cook, “and the number of nonprofits will be reduced. The opportunity here is not to throw money at problems. The nonprofit sector is no different than the car or banking industries; there is no easy way out. No one is equipped to solve the problem themselves. When organizations stop to ask, ‘Who else is playing in the arena I seek to serve?’ that is where the magic starts to happen. If you have that lens, you create fertile ground for new relationships, ideas and approaches that go way beyond the benefits of fundraising alone.”
Elizabeth Banwell is director of external affairs for the Maine Association of Nonprofits in Portland. She can be reached at editorial@mainebiz.biz.
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