WINSTON-SALEM, N.C. – While the Kate B. Reynolds Charitable Trust plans to honor all its current commitments, the foundation will curtail new funding in fiscal 2010, the foundation’s president says.
But its focus on health care and the poor will stay the same.
“One of the worst things we could do is stop moving forward with our mission,” says Karen McNeill-Miller, president of the Winston-Salem-based foundation.
The trust will award about $33 million in grants this fiscal year, which ends August 31, about the same amount awarded in fiscal 2008.
The trust bases its grantmaking budget on the value of its assets in the previous 12 months, so 2009 spending is based on 12 good months.
But fiscal 2010 will see a drop, she says.
That’s because the trust’s assets have taken a hit, falling to about $410 million from a high of about $650 million, says McNeill-Miller.
The trust was created so that 25 percent of its grantmaking benefits the poor and needy in Forsyth County, while 75 percent funds health care throughout the state.
Based on scenario planning the trust underwent in January, the funder decided to cancel all 2010 “responsive” grantmaking by its Poor and Needy Division, which in fiscal 2008 awarded $5.8 million.
In the meantime, the trust informed its eligible applicants within the Poor and Needy Division of the cancellation, extended the deadline for its spring 2009 grant cycle, and encouraged them to make requests while new funds are still available.
That sparked a doubling in funding requests to the division, to 48 from an average of about 24, says McNeill-Miller.
The nature of those requests also changed, with few nonprofits looking to start or expand programs and more seeking “bridge funding to hold them over until donations pick backup or until the lines slow down,” she says.
The trust’s Health Care Division, which awarded $17.9 million in grants last year, will have only one grant cycle next year.
And in both divisions, the trust is shortening the duration of its grants. The Poor and Needy Division, which typically considered commitments for up to five years, will scale back to single-year grants, while the Health Care Division has scaled back to two years from seven.
“That gives us the space to entertain responsive grantmaking in 2011,” says McNeill-Miller.
The trust also will hold back some grant dollars this year, totaling about $700,000, in case the situation worsens for nonprofits this summer.
And if there’s no need for such emergency funding, the foundation likely will distribute the money through a request-for-proposal process.
In addition to limiting new grant dollars, the trust is considering ways to cut costs internally.
While no layoffs are planned among its 15 full-time employees, the trust is looking at salary freezes, has become more selective about travel and has lengthened its timeframe for updating technology.
“Just as our grantmaking contracts, so does our administrative budget,” says McNeill-Miller.
The greater shift, perhaps, is a psychological one.
“I’ve tried to stop focusing on what we had, but on what we currently have,” she says. “We can be an outstanding $400 million foundation and not bemoan the fact that we’re no longer a $650 million foundation.”
That will mean digging into the trust’s toolbox to look for low-cost and no-cost ways to pursue its mission.
That has been part of the organization’s strategy for the past several years, and now the goal of becoming “more than just a grantmaker” will assume a higher priority.
“This downturn has forced us to do that,” says McNeill-Miller. “We’ve got to get better at using other tools in our toolkit.”
That could include more advocacy work, additional efforts in convening people and groups around important issues, and providing technical assistance where possible, she says.
And it involves working with other funders across the state.
“For the field of philanthropy in North Carolina, we were already on the way to becoming more collaborative and sharing information to cover all the gaps,” she says of the state’s funders. “This has accelerated that. We’re talking to each other all the time now.”
And while some smaller nonprofits may not survive the downturn, McNeill-Miller believes the groups that are well-run and strategic will take the opportunity to find ways to improve and will emerge even stronger.
But all organizations need to learn the hard lessons a recession brings, taking the time to put in place more robust, rigorous and thoughtful scenarios.
“This gives us the wake-up call that we always have to be prepared for something like this,” she says. “Next time shouldn’t catch us unprepared.”