Many philanthropic foundations are asking themselves what 2009 will bring. Predictions of severe strain on the budgets of charities and on the disbursement capacities of endowments are rampant. This leads to  both a short term focus on granting decisions for 2009, and to a desire to review investment strategies and other options for easing the strain both for foundations and for grantees.

Alarm continues to grow as the economy in Canada slows down and sources of charitable funding come under pressure. Some public foundations, particularly in the community foundation sector, have been forced to announce reductions or suspensions of their disbursements. They are mandated to do so by donor provisions, or statutory requirements (such as community foundations in British Columbia that were established by provincial legislation).

Some institutional foundations such as university foundations, have announced reductions or a halt in disbursements. Private foundations are waiting to evaluate the length and depth of the economic crisis in Canada and the impact on their assets before making major decisions.

Facing Central Questions

Looking to the long term, there are larger questions about the impact of this major downturn on the very structures of North American philanthropy. How will the economic downturn impact internet giving, venture philanthropy, and remittances from diaspora communities? Will the current state of the economy see new banking rules, new charitable giving laws, new philanthropic approaches, new tax structures, and new public service demands?  Will foundations assume greater responsibility in supporting charities in the current climate, and will we see a resulting increase in the mandated 5% payout rule? Will social investing take on new momentum or go into reverse?

The emerging answers to these questions will no doubt inform responsive action. Regulators at federal and provincial levels may be forced to confront the potential conflict between disbursement requirements and prudent investor rules.  Charitable organizations and other leaders in this sector are lobbying for more tax stimulus for giving.  

Looking to History to Help Anticipate the Future

Some interesting sources of information about foundation behaviour during past economic crises in the United States could prove useful as guidelines in Canada as well. The U.S.-based Foundation Center has gathered research findings on past downturns and the responses of American foundations. The Center’s research shows that despite concerns that foundation funding priorities may shift, grant-making priorities are remarkably consistent over the long term. Could this hold true for Canada as well?

Two advisories, Do Foundation Giving Priorities Change in Times of Economic Distress? and Past Economic Downturns and the Outlook for Foundation Giving, were released in October and November. According to the data, during each recessionary period — 1980, 1981-82, 1990-91, and 2001 — U.S. foundation giving in inflation-adjusted dollars did not decline and, in fact, increased slightly. After 2001, foundation giving did decline from $30.5 billion in 2001 to $30.4 billion in 2002 to $30.3 billion in 2003 — the first consecutive years of decreased foundation giving tracked by the Center. Yet this marginal 0.6 percent reduction (4.4 percent after inflation) was quite modest compared to the inflation-adjusted 16 percent drop in foundation assets recorded between 2000 and 2002.

The Philanthropist’s Perspective

Belinda Stronach of the Belinda Stronach Foundation spoke recently in Toronto about trends in global philanthropy and about the mission and goals of her philanthropic work.

In her remarks, she commented on the role of philanthropy in the face of economic and financial hardship. To illustrate her own position, she quoted the president of the MacArthur Foundation of New York who said publicly this fall:

“The issues the MacArthur Foundation confronts at home and abroad – human rights, conservation and affordable housing preservation among others – grow more, not less urgent, when the global economy is in recession. We chose to maintain our grantmaking levels in past recessions and we intend to do so again now.”

Ms. Stronach chose to make a strong statement in favour of the crucial role of philanthropy and generosity in hard times. As a business leader and politician recently come to philanthropy, her influence and contacts will be important to raising the profile of Canadian philanthropy both at home and abroad. We hope that other Canadian foundations will continue to share this view as 2009 unfolds.