An Update on Philanthropy and the Economic Crisis: How Atlantic Is Responding

Since October, the situation has worsened everywhere – something you don’t need me to tell you, since the news each day brings fresh tales of economic distress in virtually every country, and among our families and friends. Here in Ireland, where I am spending most of this week, there is growing unrest about the government’s handling of the crisis, which has made deep cuts in the budgets for human services and for human rights enforcement agencies.

In Ireland, Atlantic is the largest philanthropy in a sector that was just beginning to develop when the economic crisis hit. In the U.S., where thousands of foundations operate, nearly all foundation endowments are down significantly. At least two significant foundations – the JEHT and Picower Foundations, both close funding allies of Atlantic’s, based in New York – have closed their doors, since their holdings were with the disgraced investor Bernard Madoff.

In the case of JEHT, a leading funder of human rights and criminal justice reform, a great many of its grantees were shared with Atlantic. We could not stand aside when the sudden cancellation of scheduled grant payments for critical work wrought such devastation. With the Open Society Institute (OSI), we offered in late December to match the contributions of MoveOn.org members to four organisations identified by MoveOn who were also Atlantic grantees. In just a few days, over a million dollars was raised in small contributions from individual donors. It was an unusual instance of foundations’ funds being used to attract commitments of small gifts to social justice organisations, an approach we are eager to build on in the future.

At this writing, Atlantic, OSI and other donors are working to identify remaining critical needs in 2009 for JEHT grantees. In the coming weeks, Atlantic will make additional one-time grants from a fund of up to $5 million authorised by our board, which also approved substantial additional support for time-sensitive policy initiatives to take advantage of the season of opportunity ushered in by the new administration in Washington on issues including economic recovery, health care, immigration reform and the restoration of civil liberties.

While it authorised these extraordinary expenditures, Atlantic’s board also approved my recommendations to slightly reduce our overall grant spending for 2009 and cut some of our operating expenses. Are these mixed messages? I don’t think so, and let me take a minute to explain why.

Most foundations seek to exist and maintain a certain level of grant spending in perpetuity, so their economic forecasts are based on managing their endowments to produce a steady level of income. Given the state of the market, most of these foundations are facing at least a few difficult years, as their performance is off by 30%, in some cases ranging as high as 50%. This year, most of our colleague foundations have managed to maintain or even, admirably, increase their grantmaking, but the next few years will be even tougher.

Atlantic is an unusual kind of foundation in that we are deliberately trying to spend down our assets and go out of business by the end of the next decade. While our endowment performance has been much better than most, we were still down about 15% by the end of last year. Atlantic has a careful plan in place to manage our remaining assets to make good on the investments in issues, organisations, leadership and movements in health, human rights, ageing and youth during our remaining years of grantmaking. So to make sure we can stay largely on course, we reduced our authorised grant spending level by about 5%, to a still considerable $355 million. We also took steps to reduce our operating expenses, trimming travel and consultant budgets, moving to a web-only based release of our lauded Annual Report, and cancelled our global staff conference this year.

What does this mean for Atlantic’s programmes and grantees? It means that each of our programmes has a little less to spend this year, and we may have to defer some new initiatives that are not time-sensitive. We will be moving away from a few grantmaking areas, and by extension from support of some organisations we have worked with in recent years, but these steps – which we will take with appropriate care and notice – flow primarily from our recent review of strategic direction, not from any fiscal exigency. (We have almost completed a months-long strategic process to align our programmes more closely with social justice principles, and I’ll have more to say about that in a subsequent column.) In short, we are working on a somewhat tighter budget, having made a few tough choices, and are staying fundamentally on course.

President Obama is taking an approach to the economic crisis that in some areas, despite the current crisis and the mounting deficit, the U.S. needs to step up public investment to deal with long-term and neglected structural changes in health care, education and energy. We and our colleague donors also need to recognise that tough economic times sometimes require us to step up the pace on urgent, time-sensitive initiatives. That’s why Atlantic is pressing ahead on supporting advocacy for health care and other policy opportunities, because if we wait a year the moment may have passed. It is critical to remember what is at stake in the effort to affect large expenditures of public dollars on core human needs: the recent U.S. economic recovery, or “stimulus” bill, at $787 billion, dwarfed by many times the annual spending of all foundations in the U.S. combined. This is a time for some fiscal prudence, to be sure. But foundations exist to take risks, and Atlantic in particular exists to make lasting changes in the lives of those who have been left out of power and public benefits for too long. We must rise to the moment.

On Thursday night in New York, I’ll be moderating a panel on philanthropy and the economic crisis – details are here – and I encourage you, if you are in the area, to come by for a discussion with perspectives from large and small foundations and social justice organisations. We are trying to do the best we can, as everyone is, to manage through these anxious times. We may not always get it right, but we aim to be as open about our thinking as possible, including to better ways of responding and communicating. To that end, as always, I am eager to hear from you.

Gara LaMarche

Atlantic was recently featured in an article in The Nation magazine about the impact of the economic crisis on nonprofits and foundations, which you can read here.