Foundations, knock it off with the philanthropic Sophie’s Choices and increase your payout

[Image description: A very cute corgi, lying down, looking cute but exhausted. This corgi has nothing to do with this post. I just got worked up writing it and decided I need to look at pictures of of puppies to calm me down.]

Hi everyone, I hope you are doing ok. I know things are rough everywhere. Last week I talked to an executive director of an international organization. His team faces funding cuts, potential furloughs and layoffs, and a pervasive sense of anxiety. “But we are fortunate,” he said, “transportation systems have been challenged, so there are workers in India walking for hundreds of miles to return to their villages from the city. They barely have money or food, and they’re just walking. Their villages don’t have jobs either, but they have nowhere else to go.”

Luckily, we have many funders stepping up. I want to give a hearty shout out to Open Society Foundations, who just committed $130M in funding for covid relief for many people both in the United States and across the globe. This is amazing! Thank you, OSF, for all the important work you do and the many critical missions that you support.

Unfortunately, I hear rumors that this additional $130M funding is not coming from OSF’s $18Billion in reserves, but from central leadership asking program officers to return up to half of their current 2020 grant budgets to be reallocated to this new fund. Meaning they would have to take back funds that are already committed or would be going to groups doing vital work, who are already facing so many difficulties. Those orgs would be devastated!

This is outrageous that anyone would spread such malicious rumors! Accusing an esteemed entity such as OSF of doing something so cruel, so heartless, so UTTERLY UNCONSCIONABLE as cutting existing funds during these challenging times and redirecting them to the covid emergency fund! I know the Open Society Foundations would NEVER, EVER do something this awful and callous, as it would SEVERELY betray everyone’s trust in light of this VERY reassuring message to all their grantees, where VP Leonard Benardo states, “we would like to reassure all our grantees that the Open Society Foundations are in a stable financial situation. There is no reason for you to be concerned that we will be unable to meet our obligations to you.”

Everyone, please tweet @opensociety to thank them effusively for standing with grantees during this time by releasing new funds and not doing something so horrific and unbelievably appalling as asking their staff to cut existing funds that are supporting the work of so many organizations in crisis. Use #AwesomeFundingPractices. Say something like “Thank you @opensociety for increasing your payout to fund the new covid emergency fund and not cutting existing 2020 budgets #AwesomeFundingPractices.” Meanwhile, whoever spread the rumor, you should be ASHAMED of yourself for even suggesting that a foundation with integrity like OSF would do something this mind-bogglingly repulsive, cold, and short-sighted when an additional 130M is less than 1% of OSF’s 18B endowment.

Thank you, OSF, for doing the right thing. Because right now, there are so many organizations facing financial and other challenges, and unfortunately, the way many other foundations have behaved is to hunker down to protect their assets under some misguided belief that this is best for communities. This has forced a multitude of Sophie’s Choices on the sector. Sophie’s Choice, of course, refers to the horrendously sad Meryl Streep movie where a woman is forced by Nazis to choose which of her two young children will be murdered and which will be sent to work camp. It has become an expression to indicate having to make a difficult decision with no ideal outcomes. In philanthropy, it manifests in questions like do we fund food pantries, or do we fund arts organizations? Do we prioritize addressing senior isolation, and if so, will we have enough left to help museums? Can we afford to fund advocacy? Which organizations will be support and which will we let close?

In the past few weeks, I have seen so many arts, museum, and other organizations undergo endless challenges. Admissions tickets and events have disappeared, and with them a significant revenue stream. Many funders, however, have been focusing on missions that are classified “essential” (and they are) like safety and basic needs, which means that these arts and cultural organizations are struggling even further.

I can imagine how frustrating this would be for our colleagues in arts and cultural organizations. Over the past decades, they have done what funders and consultants recommended as “best practices”: Diversify funds, generate earned-income, don’t be reliant on institutional funders, etc. And because of that, they are severely and negatively affected as COVID has closed everything down. For all my colleagues at these organizations, I’m very sorry. You did what the sector asked of you in terms of funding strategies, and now you face furloughs, layoffs, and an uncertain future. Your work is important. Please hang in there. We need you.

To the funders out there and to the entire sector, we need to stop perpetuating these philanthropic Sophie’s Choices, this belief that we must make difficult sacrifices because of the lack of funding. No, there are hundreds of billions of dollars in endowments just sitting there because philanthropy has been continuously saving for a rainy day, with most foundations giving out only 5% of their assets each year. This means that 95% remains untapped, and today is that rainy day. There is plenty of funding for basic needs. And arts and culture! And advocacy! And community mobilization! And capacity building! And leadership! And research! And political engagement!

What we lack is not the funds, but the boldness among foundation leaders to challenge their archaic philosophies and practices, combined with a thorough denial of the reality of this moment. Funders, if you don’t think that this pandemic warrants an increase in your payout beyond 5%, to 10% or 20% or more, then you live in a bubble of privilege wrapped in another bubble of delusions. Take action now, and stop clinging to some bizarre idea that you’re saving up for the future, when there may not even be a future at this rate!

If I see one more communication from funders that calls this an “unprecedented” crisis, I’m going to roll my eyes so hard and fast that I’ll warp backwards in time (to 2019, aka 10 years ago). If this is an unprecedented crisis, then respond with some unprecedented actions! And what’s more unprecedented than foundations doubling or tripling the pathetic and inadequate 5% payout rate during this global health and financial catastrophe? Yes, in the short run, you’ll decrease your corpus. But in the long run, you will still have lots left over, so you will make it back. In the words of David Morse, “If you spend 10 or even 15 percent of your much-depleted endowment for a few years, you’ll probably still survive. Many of your grantees may not; for them, this pandemic is existential. To think you can and should exist in perpetuity is hubris anyway.”

These Sophie’s Choices Resulting from Assets in Philanthropy Scarcity (SCRAPS) are not real. Stop believing that they are. Instead of feeling helpless at the lack of funding, I want everyone in the sector to get angry and start demanding that foundations and donors release the trillions that are just sitting there in endowments and in Donor Advised Funds (DAFs). Demand it! Write op-eds. Tweet at foundations. Call up your elected officials and ask them to use their influence to get foundations to give out more. At every webinar, every Zoom panel of funders, every chance you get, ask “What is your current payout rate, and how much are you planning to increase to deal with this unprecedented crisis?” Of community foundations and financial institutions, ask “Also, how are you encouraging folks with Donor-Advised Funds to liquidate their accounts during this unprecedented crisis?” It is unethical that so much money is just lying around while millions of families are hurting. We must get angry; the time for putting up with SCRAPS and crap is over.

Side note: I need all those people who are like “see, that’s why nonprofits need to forget foundations and invest in individual donors” to just shut up. Individual donations are great and we should keep at it, but it takes a very long time and a lot of staff and other capacity to build relationships, and also it doesn’t always work so well for marginalized communities because wealth is concentrated in white households and there is a host of issues like unconscious biases to deal with. So like it or not, foundations play a crucial role in the survival of many critical nonprofits, especially those led by and serving marginalized communities, and everyone needs to understand this.

Basic needs, arts, museums, culture, education, environment, capacity building, leadership, advocacy, research, community power building, etc.—these are all important to a functioning sector and society, and should be funded if we want to come out of this pandemic intact. Let’s stop with the scarcity mindset, the false difficult choices, the hubris, the narcissistic delusions of perpetuity. People are suffering. This is a time for our sector to choose whether to rise to the occasion, unlock our potential, and serve our community more effectively; or to continue our weak and destructive practices. I am hoping that it is the former, because this is what each of us signed up for.


A couple of quick announcements: I’ll be in a free virtual fireside chat with MindPop this Wednesday 4/22 at 11am PST, to talk about arts and philanthropy and stuff. Hope to see you there. I’m going to comb my hair and try to avoid cussing too much.

Also, I’m having trouble verifying my location for the NonprofitAF Facebook page, so Facebook won’t let me post. Sorry, I’m working on that. Meanwhile, I’m still active on Twitter, where every tweet is carefully crafted amidst screaming children.

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