With the goal of stabilizing and sustaining a nonprofit sector facing the economic and social impacts of COVID-19 and an epidemic of racial injustice, the Doris Duke Charitable Foundation, Ford Foundation, W.K. Kellogg Foundation, John D. and Catherine T. MacArthur Foundation, and Andrew W. Mellon Foundation have announced a joint commitment to increase their grantmaking by $1.725 billion over two years, in part by issuing debt.
The Ford Foundation, which awarded $520 million in grants in 2019, plans to raise $1 billion through the issuance of thirty- and fifty-year bonds, which it will disburse to nonprofits over two years — effectively raising its annual payout rate from about 6 percent to 10 percent. The other four foundations will increase their grantmaking by at least $725 million over the next two years, with DDCF planning to raise and disburse $100 million by 2022 through the issuance of thirty-year bonds and MacArthur starting with an initial $125 million bond offering. The Mellon Foundation, which expects to award grants totaling $500 million this year, up from $300 million in 2019, and the W.K. Kellogg Foundation, which will boost its grantmaking by $300 million over two years, are in the process of finalizing their financing plans.
Each foundation will determine how the additional funds will be allocated, with the aim of supporting vulnerable communities hardest hit by the impacts of the coronavirus.
In May, a group of philanthropic and nonprofit leaders urged Congress to increase the mandatory payout rate for private foundations and donor-advised funds (DAFs) to 10 percent to help address the impacts of the pandemic on the nonprofit sector. While a handful of foundations, including the Wallace Global Fund, have committed to spending a greater percentage of their assets on grantmaking this year, foundations typically are reluctant to dip into their endowments. Issuing bonds to raise funds for additional grantmaking allows a foundation to avoid that scenario.
"This is a time that calls for bold leadership and innovation," said W.K. Kellogg Foundation president and CEO La June Montgomery Tabron. "Philanthropy needs to respond to the scale of the challenges we are facing. Post-pandemic, our grantees, communities, and partner organizations will need to be strong to re-imagine and rebuild systems centered on racial equity. They have the leadership, knowledge and resolve to advance their communities; we want to be a catalytic partner in that process.
"COVID-19 presents an existential threat to nonprofits, and we must respond in creative and innovative ways," said Ford Foundation president Darren Walker. "The pandemic has brought into sharp relief the results of decades of growing inequality. The virus is only compounding that inequality, taking a disproportionate toll on the poor, people of color, immigrants, people with disabilities, and others who were already marginalized before the crisis hit. Our goal for the additional funds is to help shore up, strengthen and deepen the resilience of key organizations that are advancing the fight against inequality and injustice at a time when the need is greatest."
(Photo credit: John D. and Catherine T. MacArthur Foundation)