Open letter from Northwest Environmental Funders
According to the Council on Foundations, foundations have reported declines in asset values that average 28%. Since foundation grantmaking budgets are often tied to the value of investment portfolios, many decreased giving in 2008 and are decreasing giving further in 2009. The impacts of this economic climate will be broad and deep, and the specific experiences of funders and the organizations they support will vary markedly. What does this mean for your organization?
Dear friends and colleagues:
Organizations like yours are our most important partners in efforts to protect and preserve our environment. Over the past few years, we have collectively defended bedrock environmental policies, forged relationships with unexpected allies, informed and inspired a new generation of activists, and proposed solutions to some of the vexing problems we face. In part because of these efforts, we now have the best opportunity in over a decade to make significant conservation gains. However, we also will need to partner through one of the most challenging situations in recent memory.
Unfortunately, the rapid and significant decline of our economy now presents us all with unprecedented challenges. We know that many of you are closely tracking the situation, but the latest statistics are worth repeating:
- The Dow Jones industrial average fell nearly 34% in 2008, the worst year since 1931 when the country was in the midst of the Great Depression. The Standard & Poor's 500, a broader index of market performance, dropped 45% from its peak in 2007. Investors in the market have lost nearly $7 trillion in equity.
- The Standard & Poor’s Case-Shiller 20-city home price index has fallen a record 18.2% in the past year. Property values in the U.S. have declined by an estimated $2 trillion, leaving nearly 12 million households owing more on their mortgages than their homes are worth.
- The U.S. lost 2.6 million jobs last year, more than in any year since 1945. In January, the Department of Labor reported that the number of Americans receiving unemployment benefits soared to its highest level since record keeping started in 1967.
Those of us in the philanthropic sector are now grappling with the consequences of this economic disaster. According to the Council on Foundations, foundations have reported declines in asset values that average 28%. Since foundation grantmaking budgets are often tied to the value of investment portfolios, many decreased giving in 2008 and are decreasing giving further in 2009. Many corporate funders are also facing serious shortfalls resulting in decreased budgets available for charitable investments. Assuming the market doesn't rebound, continued cuts to grant levels are also likely in 2010.
The impacts of this economic climate will be broad and deep, and the specific experiences of funders and the organizations they support will vary markedly.
What does this mean for your organization?
We can’t say for certain how many groups will face a significant crisis, but it’s an unfortunate fact that some organizations will not survive.
We also know that planning pays off. Recent experience shows us that organizations that act decisively to address and adjust their financial positions are the ones that suffer least.
For example, the National Center for Charitable Statistics reports that the 2001 recession led to a decline in real contributions (adjusted for inflation) to environmental organizations that did not fully rebound until 2004. During that time, many organizations trimmed expenses, cut staff, tapped reserve funds, and/or eliminated programs. Some organizations merged.
The current recession, longer and more severe than the last, will cut deeper. Financial statements reviewed last year and early this year already show that some are experiencing dwindling cash reserves, meager unrestricted fund balances, and lower-than-budgeted revenue tallies. Other organizations are submitting organizational budgets that rely on increased giving from individuals and foundations to cover program expenses, anticipated support that may be based more on hope than sound planning.
We know that many organizations have already taken steps to respond to the real or potential impacts of current economic conditions.
This is not a time to be complacent or spontaneous. A plan is essential for every organization, not just those feeling the impacts today. We urge you to question previous assumptions you have made in your 2009 budgets and to undertake rigorous contingency planning.
Besides planning, communication will be an essential step. We recommend that you contact every significant donor upon whose support you depend—individual, corporate, or foundation—to discuss with them their situation and the likelihood of renewed funding and at what level. This helps keep your supporters informed about the steps you are taking and will allow you to make informed and timely decisions based on the information that you gather.
We encourage you to take such steps now to avoid more severe issues later this year. As we all face these issues, we believe we can help each other. Call us if we can help with:
- Thinking through budgeting, staffing, program or other issues. The more we know about your needs, the better able we may be to help you.
- Sorting out projects or programs that make sense in this financial climate compared to what you described in your grant proposals. We can consider changes to the proposed activities if alternatives produce outcomes to which we’ve agreed.
Our intent is to offer proactive advice without becoming unnecessarily alarmist.
We encourage you to share this letter with your boards. We hope this inspires a robust conversation between the staff and board that helps you plan--and act--to assure the viability of your organization and its mission.
See here for a list of helpful resources and articles (PDF) provided by the Foundation Center, whose mission is to strengthen the nonprofit sector by advancing knowledge about U.S. philanthropy.
We also recommend reading Managing in Hard Times, available at http://www.icl.org/toolkits/hard-times.php. This free publication provides best practices and tools for managers of environmental and conservation nonprofits in challenging economic times. Workbook tools include step-by-step instructions to assess your financial situation, sample contingency budgets, and more. The Environmental Support Center and Institute for Conservation Leadership originally created this resource in 2003 with the generous support of the Beldon Fund, The McKnight Foundation, The George Gund Foundation, and The Moriah Fund. It remains highly relevant to managers today.
We appreciate all of the great programmatic work that you’ve done through the years. We send this letter because we are your partners and collaborators. Your success is our success. We look forward to hearing what steps you’ve taken to ensure that your organization is sustainable and effective for many years to come.
Fred Munson, Executive Director
Nick Hardigg, Executive Director
Alaska Conservation Foundation
Vice President, State & Local Government Relations and Global Corporate Citizenship
The Boeing Company
Ann Krumboltz, Executive Director
Denis Hayes, Executive Director
Lisa Jaguzny, Executive Director
Dorene Schiro, Trustee
The Endurance Fund
Kay Treakle, Executive Director
Martha Kongsgaard, President
Julia Kittross, Executive Director
Laird Norton Family Foundation
Sybil Ackerman, Executive Director
David S Mann, President
Northwest Fund for the Environment
Patty Ryan, Grant Committee Chair
Sustainable Path Foundation
Richard Woo, Executive Director
The Russell Family Foundation
Tim Greyhavens, Executive Director