Quote of the Day (November 28, 2008)

"But something important has happened in this last stage of the industrial era that sets it apart from the past: Globalization has brought a level of independence between nations and regions that has never existed before, along with truly global problems that also have no precedent. This includes environmental crises such as increasing levels of waste and toxicity (which often spill over from one country to another) and growing stresses on a host of finite natural resources, but also the widening gaps between the wealthy and the poor and alarming political reactions to these imbalances in the form of global terrorism. Just as the Iron Age didn't end because we ran out of iron, the Industrial Age isn't ending because of the decline in opportunities for further industrial expansion. It is ending because individuals, companies, and governments are coming to the realization that its side effects are unsustainable...."

-- Peter Senge, The Necessary Revolution: How Individuals and Organizations Are Working Together to Create A Sustainable World

TypePad's New Features

TypePad, the blogging software/service behind PhilanTopic, has added new features and tools that make it easier -- and fun -- to stay in touch with people who share your interests and concerns:

• Now you can create a personalized TypePad profile that includes your interests and a picture. Any time you leave a comment on PhilanTopic, TypePad will display your picture next to the comment.

• The TypePad Connect suite of tools make it easy to reply directly to other readers' comments, track and manage your comments across the Web, and turn your blog comments into a vibrant community.

• For recently laid-off journalists, TypePad has even more to offer.

We've made the move to TypePad Connect. What are you waiting for?

-- Regina Mahone

Happy Thanksgiving!

The Turkey Trot is over (five miles; don't ask) and blood has begun to flow back to my extremities. Seems like a good time to count my blessings:

-- My amazing sons and beautiful wife;

-- Mom, my brothers and sister, my uncle and aunts, my in-laws and brothers- and sisters-in-law, my nephews and nieces, and all my cousins;

-- Work that is interesting and fulfilling;

-- The good fortune to live in a country that has a genius for reinventing itself;

-- Being able to run five miles at my advanced age.

Miss you, Dad. Happy Thanksgiving to all.

-- Mitch Nauffts

More Foundations Respond to Economic Crisis: Gates, California Endowment, Otto Bremer, Rasmuson

More statements from U.S. foundations in response to the financial crisis and deteriorating economic situation....

The Bill & Melinda Gates Foundation, the nation's largest, has released a statement from CEO Jeff Raikes in response to the economic crisis. In it, Raikes promises that the foundation will:

Stay focused on our issues
We’ll stay focused on the core set of issues where we think we can do the most good: increasing opportunity in the United States -- primarily through education -- and improving health and fighting extreme poverty in developing countries. Within these areas, we'll continue to follow the evidence. We will make grants in the areas where the data tell us we have the best chance to make the greatest impact.

Grow our payout
We are planning to grow our payout in 2009 by about 10%. This is lower than previously planned, but represents the commitment of our co-chairs' and leadership to our mission during a difficult time.

Keep operating costs low
We have always tried to be great stewards of the resources that have been entrusted to us. Even as we work to make sure that every grant dollar goes as far as possible, we also strive to keep our operational costs low. I have asked our employees to reduce expenses wherever possible, and we are closely scrutinizing our budget.

Continue learning
There's still a lot we don’t know about the effects of the economic downturn. How will it affect the budgets of the cities, states, and nations that we work with? What about multilateral organizations like the United Nations and the World Bank, and what about the businesses whose innovations are critical to improving people's lives? We are working with all of our partners to understand these issues better in the coming weeks and months.

Click here for the complete statement.

_______

The California Endowment has released the following statement:

Like many other philanthropic organizations, we are not immune from the effects of Wall Street's woes. The current volatility on Wall Street has caused us to lose a sizable portion of our investments and assets. In response to this challenge, our Board of Directors and senior management team have spent considerable time in recent weeks deliberating on an appropriate and timely response. Of greatest concern to us is the impact that the stock market and the troubled economy will have on working and low-income individuals, families and underserved communities -- as well as the nonprofit organizations that serve them.

In response to the current economic climate we are announcing the following:

• All current grant commitments and current-year grantmaking levels will be honored and upheld.
• Grantmaking levels for our coming fiscal year (beginning March of 2009 for us) will not be reduced from our existing multiyear spending plan -- although we will seek reductions in our administrative costs.
• Early in 2009, we will announce a funding response to address immediate needs for those hardest hit by the economic downturn, as well as additional resources for advocacy organizations, in anticipation of the high demand for services faced by community-based nonprofits.
• We remain committed to the implementation of our new 10-Year Strategic Plan of Building Healthy Communities.

Click here for the complete statement.

_______

The Anchorage-based Rasmuson Foundation has released this statement from board chair Edward B. Rasmuson and president/CEO Diane Kaplan:

In 2001, the Rasmuson Foundation began receiving significant assets from the estate of Elmer Rasmuson. Since then, the Foundation has prioritized both creating responsive programming to meet the needs of Alaskans and diversifying the investment of those assets which are necessary to provide the funding.

By now, everyone is well aware of this year's unprecedented economic challenges. The conditions are unlike those experienced during our lifetime. Everyone -- individuals, families, nonprofits, businesses, governments, Alaska's Permanent Fund and foundations -- has been financially impacted. As long-term investors, we believe that time will restore value.

In the short-term, many have asked "how is the Foundation doing"? While our approach to diversification has, to an extent, softened the impacts of today's market, we too have sustained losses. In response, we are working diligently to minimize the impact on Alaska's nonprofit sector over the long-term. As such, until the markets stabilize, one might expect to see fewer and smaller awards, but no major changes in our commitments or programs.

Rest assured that our commitment to our partners and Alaska remains unchanged. We know that during times like these, our nonprofit partners are under great pressure to deliver basic services or to provide uplifting experiences through cultural and recreational opportunities. As always, we are inspired, guided and sustained by the notion that "helping others is an Alaskan tradition"

_______

And the St. Paul-based Otto Bremer Foundation, in partnership with Bremer Bank, has announced the creation of an Emergency Fund "to provide grants of up to $100,000 to nonprofit organizations with the capacity to identify community members who can benefit from financial assistance, provide timely disbursements, and offer appropriate follow-up and referral services."

Grants will be made to organizations whose beneficiaries are residents of the Minnesota, North Dakota, and Wisconsin communities served by Bremer Bank. The application outlines the proposal information needed and the criteria used to review proposals. The application deadline is December 15.

-- Mitch Nauffts

Quote of the Day (November 26, 2008)

"Now, obviously, [Oppenheimer Securities analyst] Meredith Whitney didn't sink Wall Street. She just expressed most clearly and loudly a view that was, in retrospect, far more seditious to the financial order than, say, Eliot Spitzer's campaign against Wall Street corruption. If mere scandal could have destroyed the big Wall Street investment banks, they'd have vanished long ago. This woman wasn't saying Wall Street bankers were corrupt. She was saying they were stupid. These people whose job it was to allocate capital apparently didn't even know how to manage their own...."

-- Michael Lewis, "The End of Wall Street's Boom," Portfolio magazine (December 2008)

Best. Photo-illustration. Ever.

 

(Photoillustration: Ji Lee, Portfolio magazine)

The accompanying article by Michael Lewis (Liar's Poker, Moneyball) is also great.

-- Mitch Nauffts

More From the 'Economic Storm' Summit

Last week, regular contributor Michael Seltzer offered a first-hand account from the 'Economic Storm' summit convened by the Foundation Center, the New York Regional Association of Grantmakers, and the United Way of New York City. The three conveners of the summit have just released an executive summary of the proceedings. Here are some highlights:

Today's economic storm is our economic challenge, said keynote speaker Geoffrey Canada, president and CEO of the Harlem Children's Zone. And with Wall Street in trouble, "New York is ground zero."

Don't count on immediate federal assistance, said Linda Gibbs, New York City's deputy mayor for health and human services. Gibbs said Mayor Bloomberg is working to protect Medicaid reimbursement for the neediest households and to attract infrastructure projects that create jobs.

Engage in scenario planning for best and worst outcomes, advised Clara Miller, president and CEO of the New York City-based Nonprofit Finance Fund. Think about how technology can be more effeectively deployed in your organization and the best, most efficient ways to get services to the neediest, added Miller.

Protect, build, and solidify donor relationships, advised New York Secretary of State Lorraine Cortes-Vasquez. Since many companies don't understand the nonprofit sector as they once did, it's imperative to educate them and keep making the case. Cultivate small donors for a reliable revenue stream; the community is full of them.

Foundations are looking for people with sensible and creative ideas that will have the greatest impact, said Phillip Henderson, president of the New York City-based Surdna Foundation. "We'll sustain nonprofits where we have relationships," he added.

The sector will be winnowed, said Paul Light, professor of public service at New York University's Wagner Graduate School of Public Service. There are 900,000 nonprofits in the U.S. -- "too many," said Light -- and at least 100,000 will be forced to close their doors over the next couple of years. Light forsees the sector losing "a big, brand-name nonprofit," and hiring and salary freezes becoming the norm.

Be willing to make uncomfortable changes, said Ronna Brown, president of NYRAG. "We are all on the same side, of doing better for our community, and we need to partner with each other to advocate for and move the sector forward."

To download the summary (3 pages, PDF), click here.

-- Mitch Nauffts

Weekend Link Roundup (November 22 - 23, 2008)

Our weekly roundup of noteworthy posts from and about the nonprofit sector...

Economy

As Rosetta Thurman points out in a recent post, in times like these it's up to each and every nonprofit to develop a sense of urgency about the work it is doing. And it's the most efficient organizations, Thurman reminds us, that tend to generate the best results and are most likely to weather the current storm.

Robert Thalheimer, an associate director at the Community Foundation Serving Richmond & Central Virginia (TCF) and a guest contributor to the PhilanthroMedia blog, expects 2009 to be a tough year for nonprofits and charities. To help local agencies meet the growing demand for their services, Thalheimer and his colleagues have created a Safety Net Fund and seeded it with $1 million so that "the rising tide of basic need in our community...does not grow into a civic tsunami." Tom Byer, chairman of the foundation's distribution committee, explains how the fund will work:

Anyone may give to this fund, from which 100% of the dollars will be used strategically to help our region's nonprofits meet basic human needs in our community such as emergency financial assistance, housing, food, employment and health care.

Part of this cash infusion will be deployed as TCF collaborates with the Partnership for Nonprofit Excellence (created by TCF two years ago) to help nonprofits identify innovative solutions to meet payroll, reduce overhead, improve budgeting practices and maintain core services. Nonprofit managers and their boards should evaluate whether their long-term survival may require consolidation or other fundamental changes....

Sounds like something other community foundations around the country might want to consider. 

Fundraising

Those skeptical about the potential of peer-to-peer giving are still scratching their heads over the huge amounts of money Barack Obama raised online during the homestretch of his presidential campaign. As Lucy Bernholz notes on Philanthropy 2173,

Having unleashed $660 million in support from three million individual givers (as well as tens of millions of votes from tens of millions of voters), the campaign clearly demonstrated its ability to mobilize. Its podcasts, Flickr tools, Facebook pages, organizing tools for house parties, text messages, 30-minute TV shows, twitter feeds, and daily email feeds set a standard that will be required of campaigns to come...

On the Social Actions blog, Peter Deitz predicts that "a shifting communications environment and changing donor demographics" could render traditional fundraising best practices "ineffective at best, and obsolete at worst, as early as 2012." Says Dietz:

Raising money in 2012 will require creativity and foresight. Micro-philanthropy -- that ambiguous term that refers to all things socially networked, small-scale, and charitable -- will have matured.

Donors of all ages will be looking for meaningful points of engagement with your organization. They'll want to set the programmatic agenda, select the beneficiaries and target areas, communicate the organization's message, and, in real-time, evaluate feedback as it comes in.

Notice something strange about those tasks? None of them involve passive check-writing on behalf of your organization. In 2012, individuals will come to your organization with the expectation of being full partners in your work, not just dollar wells to be tapped when cash is needed. Donations will be a consequence of meaningful engagement, not a measurement of it.

Over the next four years, innovative organizations will use technology to transfer to individuals the reins on everything from program work and evaluation to fundraising and communications. Raising money in a micro-philanthropic environment will come naturally to these groups.

Is your organization ready?

Nonprofits and Social Media

The Monitor Institute has launched a new blog, Working Wikily, that will explore how "the social sector is adopting the new tools, strategies, and practices of networking -- from collaborative Web 2.0 software, to network mapping, to forming coalitions, to engaging and mobilizing people." This is one to keep an eye on.

FORGE -- a nonprofit in Santa Rosa, California, that works to empower refugees in camps in Zambia and Botswana -- has been much in the news of late, and not for the usual reasons. After the organization ran into financial difficulties earlier this fall, its founder and executive director, Kjerstin Erickson, began to blog about its problems on the Social Edge site. Tactical Philanthropy's Sean Stannard-Stockton picked up the story from there, praising Erickson for her gutsy decision to embrace "radical transparency." But, asks Mike Burns at Nonprofit Board Crisis, "when is crying the blues radical transparency?" Writes Burns:

Speaking the truth is just that and nonprofits actually have an obligation, at least internally, of understanding missteps and taking corrective action.  At the same time I remember one foundation exec calling me over one day and saying: "Mike, no one reallys wants to hear your sad story -- they want to hear what you are doing right -- they want to hear how you are fixing what is broken."

I didn't really take away solutions from this FORGE story, only a sad story. And one of the big credits given to social entrepreneurs is that they are by definition, solution-focused. Telling a sad story just isn't enough for me. But you know, if it works, it's good....

There are lessons to be learned from the FORGE story; we're just not sure what they are.

Philanthropy

The Council on Foundations has unveiled two new social media projects: Economic Xchange, a collaborative blog that will examine how the "current economy impacts philanthropy"; and Thought > Action > Impact, a new "e-journal of philanthropic ideas" featuring contributions from council members and other thought leaders.

Paul Brest, co-author of the recently published Money Well Spent: A Strategic Guide to Smart Philanthropy (click here for a PND Q&A with Brest), was invited by Stannard-Stockton to debate Bill Somerville, co-author of Grassroots Philanthropy: Field Notes of a Maverick Grantmaker, at a recent Tactical Philanthropy Forum in San Francisco. Because time constraints made it impossible to answer all the questions from the audience, Sean is posting some of them on his blog, including this one, for Somerville.

Joining the discussion, Aaron Dorfman, executive director of the National Committee for Responsive Philanthropy, posted his opening remarks at the event on his blog, Keeping a Close Eye:

I actually agree with about 80 or 90 percent of Brest's book. When foundations are NOT strategic, they waste some of the precious resources with which they have been entrusted.…But here's where I differ with Paul Brest.…When taken to its extreme, strategic philanthropy becomes overwhelmingly controlling. It's as if the foundation is a puppet master, pulling the strings of nonprofits in order to produce a desired result. In the extreme, strategic philanthropy reduces nonprofits to being contractors working to achieve the vision put forward by the foundation. This type of control, I believe, leads to less impact from philanthropy, not greater impact....

I just finished Brest's book, and nowhere in it does he argue for strategic philanthropy as a one-size-fits-all solution; in fact, the framework he lays out in the book is quite flexible (or so it seemed to me). But Dorfman's point is a valid one, and this is a conversation leaders in the field need to have.

That's it for now. Enjoy your Thanksgiving!

-- Regina Mahone and Mitch Nauffts

Mertz Gilmore, Argosy Foundations, Harvard Respond to Economic Crisis

I've written previously (here) about the good work being done by the New York City-based Mertz Gilmore Foundation in the area of climate change. At its fall meeting, the foundation's board approved a 2009 budget that maintains current funding levels for the NYC Dance and NYC Communities programs, as well as its Climate Change Solutions program. Said Jay Beckner, the foundation's president:

Regardless of current or future investment returns, we believe it is very important to recognize the difficulty that nonprofits in New York will have in the face of declining individual, corporate and governmental support. Mertz Gilmore will do everything it can in 2009 to sustain the work it supports while looking for creative responses to this sector-wide crisis.

With respect to climate change, foundation vice president Lukas Haynes added: "The country is on the verge of major new initiatives to address the climate crisis while transforming the nation's economic and energy future. Therefore, the Climate Change Solutions program will maintain its current level of investment to reinforce positive change and seize timely new opportunities."
_________

The Argosy Foundation, a private family foundation founded in 1997 by John Abele, co-founder of Boston Scientific, has released this statement:

We, like many other organizations, have been adversely affected by recent developments in global markets. Unfortunately, this means that we have to significantly reduce our grantmaking until we are confident that our long term ability to fulfill our mission is secure. We understand how challenging these times are. We remain committed to our vision of creative, productive philanthropy and remain committed to helping you fulfill your own missions.

The foundation does not accept unsolicited proposals.
_________

And this is an excerpt of a statement issued a couple of weeks ago by Drew Faust, president of Harvard University:

...[W]e must recognize that Harvard is not invulnerable to the seismic financial shocks in the larger world. Our own economic landscape has been significantly altered. We will need to plan and act in ways that reflect that reality, to assure that we continue to advance our priorities for teaching, research, and service.

Our principal sources of revenue are all likely to be affected by these new economic forces. Consider, first, the endowment. As a result of strong returns and the generosity of our alumni and friends, endowment income has come to fund more than a third of the University’s annual operating budget. Our investments have often outperformed familiar market indexes, thanks to skillful management and broad diversification across asset classes. But given the breadth and the depth of the present downturn, even well-diversified portfolios are experiencing major losses. Moody’s, a leading financial research and ratings service, recently projected a 30 percent decline in the value of college and university endowments in the current fiscal year. While we can hope that markets will improve, we need to be prepared to absorb unprecedented endowment losses and plan for a period of greater financial constraint.

The economic downturn also puts pressure on other revenues that fuel our annual budgets. Donors and foundations will be harder pressed to support our activities. Federal grants and contracts for sponsored research will be subject to the intensified stress on the federal budget. Tuition remains an important source of revenue, but in times like these we want to keep increases moderate, mindful that many students and families are facing economic strain.

Over the past several weeks I have been meeting individually and collectively with the deans of the faculties, as well as the Corporation, to share ideas on how we can best respond to this changed economic environment. We need to sustain our high academic ambitions at the same time that we bring greater financial discipline to all our activities. We have to think not just about what more we might wish to do, but what we might do at a different pace or do without. Tradeoffs and hard choices that can be avoided in times of plenty cannot be averted now. And, given the ongoing volatility and uncertainty, we need to plan and budget with a range of contingencies in view, including scenarios for reducing our spending both this year and next....

If Harvard, with a $35 billion endowment, is feeling pain, I shudder to think what may be in store for the rest of us....

-- Mitch Nauffts

Q&A: A Conversation With Paul Brest

A few weeks ago, I had the opportunity to speak with Paul Brest, president of the William and Flora Hewlett Foundation, about the impact of the economic crisis on Hewlett and other foundations, the importance of a strategic approach in philanthropic work, the elements of such an approach, and why the stakes have never been higher. The following is an excerpt from our conversation....

Philanthropy News Digest: So, here we are fourteen months into what some are calling the worst financial crisis since the Great Depression. How has the Hewlett Foundation been affected by the turmoil in the markets? And should we expect to see the foundation's overall grantmaking decline in 2009?

Paul Brest: The value of our endowment has declined significantly. One difficulty that many endowments have is trying to value alternative assets; if you have them, it's a little bit harder to get an accurate valuation. But there's no question that it's down. Nevertheless, we plan to make good on all of our existing commitments. Our grants budget for next year will be down a little bit, but we feel that we'll be able to keep the reductions manageable. We have a range for our payout, and we'll probably be paying out closer to the high end of that range. We have also been working over the last couple of weeks on reducing our administrative costs in a way that does not impact the strategic nature of our grantmaking.

PND: Based on your conversations with colleagues and friends, are other foundations -- in the Bay Area and around the country -- in the same boat?

PB: Everybody is in the same boat with respect to the decline of their endowments. But I have not heard of a major foundation that has said it is not going to keep its commitments in 2009. And my guess is that most foundations are going to look to reduce their administrative costs.

A Recipe for Tough Times: Something Old, New, Borrowed, and...

(Michael Seltzer is a regular contributor to PhilanTopic. His recent posts include the A to Z Survival Guide for Uncertain Times and the A to Z Grantmakers' Guide for Uncertain Times.)

Yesterday, the Foundation Center, the New York Regional Association of Grantmakers, United Way of New York City, and Citi joined together to host a timely roundtable forum on the economic crisis. More than three hundred representatives of foundations, corporations, local government agencies, and the nonprofit sector gathered to discuss the implications of the current recession on the most vulnerable in our midst, the nonprofits who serve them, and how the sector might best respond in the weeks and months to come.

An Economic Hurricane

Natalie Abatemarco, the director of North America Community Programs at Citi, opened the discussion by noting how the people served by those gathered are among those who "will be hit first and hardest" by the downturn in the economy, and that the people in the room, collectively, comprise society's "first responders." Brad Smith, the Foundation Center's new president, referenced how the United Nations had coined the term "human security" a decade ago after the Asian financial crisis, and how relevant the concept is today. Human security focuses on shielding people from pervasive threats and empowering them to take charge of their lives. It demands creating genuine opportunities for people to earn enough to meet their basic needs and live in safety and dignity.

The event's keyonote speaker, Geoffrey Canada, president and CEO of the Harlem Children's Zone, echoed the prevailing sentiment that we are facing an "economic hurricane," and predicted that we will see a dramatic upsurge in "the new poor" (i.e., the recently unemployed) as well as the "old poor" as conditions for the most vulnerable worsen over the next few years.

"This is a time where leadership matters," added Canada. "We have a few months perhaps to prepare for the next two years. Nonprofit leaders must raise their voices with government officials at every level, especially on the federal level, which must invest money on the local level to preserve the vital human service infrastructure in our cities."

Does the Free Market Corrode Moral Character?

A no-brainer, right?

That question is the basis of the fourth in a series of conversations among leading scientists, scholars, and public figures about the "Big Questions" sponsored by the John Templeton Foundation. The answers may surprise you:

• "To the contrary" (Jagdish Bagwati -- author; professor of economics and law, Columbia University; senior fellow, Council on Foreign Relations)
• "It depends" (John Gray -- author; emeritus professor, London School of Economics)
• "Yes, but..." (Gary Kasparov -- author; politician; former world chess champion)
• "No" (Qinglian He -- author; economist; former senior editor, Shenzhen Legal Daily)
• "Of course it does" (Michael Walzer -- author; co-editor, Dissent; professor emeritus, School of Social Science, Institute for Advanced Study)
• "No! And, well, yes" (Michael Novak -- author; George Frederick Jewett Scholar in Religion, Philosophy, and Public Policy, American Enterprise Institute)
• "Certainly. Or does it?" (Bernard-Henri Levy -- author; philosopher)
• "Yes, too often" (Kay S. Hymowitz -- author; William E. Simon Fellow, Manhattan Institute )
• "No, on balance" (Tyler Cowan -- author; Holbert C. Harris Professor of Economics, George Mason University)
• "We'd rather not know" (Robert B. Reich -- author; former secretary of labor)
• "Not at all" (Ayaan Hirsi Ali -- author; politician; human rights advocate)
• "It all depends" (John Bogle -- author; founder/former CEO, Vanguard)
• "No" (Rick Santorum -- former U.S. senator senior fellow, Ethics and Public Policy Center)

Interesting stuff. Now it's your turn. Who offers the most convincing argument? Will the current financial crisis kill globalization? Should it? And what is the appropriate relationship between the free market and philanthropy? Discuss.

-- Mitch Nauffts

Consequences of a Prolonged Downturn?

Couldn't help but notice that the normally upbeat David Brooks was unusually somber in his column this morning ("The Formerly Middle Class," New York Times):

...This recession will probably have its own social profile. In particular, it's likely to produce a new social group: the formerly middle class. These are people who achieved middle-class status at the tail end of the long boom, and then lost it. To them, the gap between where they are and where they used to be will seem wide and daunting.

The phenomenon is noticeable in developing nations. Over the past decade, millions of people in these societies have climbed out of poverty. But the global recession is pushing them back down. Many seem furious with democracy and capitalism, which they believed led to their shattered dreams. It's possible that the downturn will produce a profusion of Hugo Chavezes. It's possible that the Obama administration will spend much of its time battling a global protest movement that doesn't yet exist....

In this country, we've already seen the populist backlash Brooks alludes to in the outraged public response to Hank Paulsen's original Wall Street bailout proposal and widespread anger over sky-is-the-limit executive compensation packages. Expect more outrage as the recession drags on and unemployment rises.

Brooks isn't the only pundit who has peered into a crystal ball and seen a gathering storm. Doug Kass, a generally bearish trader and market commentator for The Street.com, weighed in with a similar dystopian view earlier this month. Kass argues that the next three to five years will be a period of economic uncertainty, rising populism, and muted expectations, and makes the following predictions:

We will see a behavioral revolution and changes to the social fabric. The financial meltdown and attendant wealth destruction is not just a financial event; it will contribute to cultural and social change. New trends, most of them centered around downsizing, will emerge. Young adults will be living with their parents for longer periods of time, and consumers will be trading down from well-known (and more expensive) branded products to cheaper generics. Generally speaking, future expectations of all sorts will be reduced, and learning to live within one's means will become increasingly commonplace. 

Our educational system faces upheaval. Expensive private institutions will face a sharp falloff in admissions, while state institutions will flourish and admissions will grow more competitive. Losses in university endowments will result in larger classrooms and layoffs in personnel.

Municipalities will offer fewer services, and our military will be downsized. Sanitation, post office, fire, police departments, and our armed forces will contract in size, and less will be expected of them.

Populism will rise. It is said that when the individual feels, the community reels. An understandable distrust toward government and economic institutions (especially of a financial industry kind) will create a fundamental backlash that favors the consumer over the corporation. This will have a significant impact on corporate tax rates (higher) and middle-class tax rates (lower).

Isolationism will make a comeback. Our economic woes are simply too large and most pundits too optimistic about the U.S. rejoining the world community. The need to turn inward and deal with our domestic financial problems will trump other priorities over the next few years.

In addition to the above, Kass has interesting things to say about regulation, credit, home prices, and changes in investor psychology.

What do you think? Are we on the cusp of the kind of economic event that changes behavior and reshapes expectations? How bad could it get? And what will it mean for philanthropy and the nonprofit sector? We want to hear your thoughts....

-- Mitch Nauffts

MacArthur Foundation Statement in Response to Crisis

Jonathan Fanton, president of the Chicago-based John D. and Catherine T. MacArthur Foundation, is the latest executive of a major foundation to release a statement in response to the economic crisis. Here, in its entirety, is the statement:

The MacArthur Foundation understands the importance of philanthropy in difficult economic times. While our endowment has declined this year, along with those of other major institutions, we remain committed to being a long-term, steady funder.

In past recessions, we maintained our grantmaking level and we intend to do so again now. Our total philanthropy is increasing from 2007 to 2008. We also expect to maintain or increase our grantmaking in 2009, despite the performance of the market to date.

We are in close contact with our grantees to learn how they are faring. Many have told us about significant losses to their own endowments, the challenging fundraising environment they face, and the impact of currency fluctuations for international organizations.

Even before the economic downturn, arts and culture organizations in the Chicago area saw cutbacks in public funding. More recently, they are reporting reduced ticket sales and increased costs for local groups that go on tour.

Given the significant needs of these organizations, we increased our annual operating support for arts and culture groups from $5.5 million to $7 million earlier this year.

Our $68 million foreclosure prevention and mitigation initiative comes out of our long-standing support for community and economic development in Chicago neighborhoods. This work also responds to local needs resulting from the economic crisis, which threatens to disrupt hard-won progress in some of the city’s most challenging, but promising, neighborhoods.

For 30 years, the MacArthur Foundation and its dedicated grantees have been working to build a more just, verdant, and peaceful world in Chicago, across the nation, and in 60 countries around the world. Despite the downturn in the economy, this important work must continue and it will.

-- Mitch Nauffts

State Budgets in Trouble (Part Two)

Last month, we noted that new gaps had opened in the budgets of at least fifteen states and the District of Columbia just two months after those states struggled to close the largest budget shortfalls seen since the recession of 2001.

This morning's New York Times reports ("Facing Deficits, States Get Out Sharper Knives," Jennifer Steinhauer) that at least 37 states and the District of Columbia have faced or are facing budget gaps totaling $66 billion in the 2009 fiscal year. The Times' article includes a nice map that compares the shortfalls on a state-by-state per-capita basis and as a percentage of each state's general fund, as well as changes in state tax revenue collection from 2007 to 2008. As we said back in October, fasten your seat belts; it's going to be a bumpy ride.

(click here for interactive version)

 

-- Mitch Nauffts