“We’ve Always Been in Spend-Down.” How a Sunsetting Family Foundation Manages the Process

Foundation staff convene grantee partners. Photo courtesy of the Rogers Family Foundation.

Eleven years ago, Rhonnel Sotelo was interviewing for the chief strategy officer position at the Rogers Family Foundation, an Oakland-based funder primarily focused on serving the city’s public schools. During the final round, he sat across the table from its founders, T. Gary Rogers and Kathleen Rogers, who informed Sotelo that the foundation — and by extension, the job in question — wasn’t designed to exist forever.

Gary and Kathleen Rogers established the foundation in 2003, a year after Nestlé paid $3.2 billion for Dreyer’s Ice Cream, which Gary and business partner Rick Cronk purchased for $1 million in 1977. From beginning, the couple told Sotelo, they envisioned that the foundation would only operate through their children’s generation. Consequently, its board “has always given more than the minimum 5% payout depending on the project and urgency,” said Sotelo, who became executive director in 2014 and CEO in 2023. “We’ve always been in spend-down.”

In October 2020, the foundation made it official. In a letter published on its website, Gary’s son and Chief Executive Officer Emeritus Brian Rogers announced it would sunset its Oakland education grantmaking and operations by the end of 2024.

Trustees overseeing perpetual foundations often discount sunsetting because they believe the grantmaker’s absence, whether in 10, 50 or 100 years, might preclude grantees from accessing a critical funding source and put staff out of work. A self-described “big proponent” of spending down, Sotelo is acutely aware of these concerns, but throughout our recent conversation, he kept returning to the idea that with enough planning and foresight, foundations can make the spend-down process as frictionless as possible for all involved parties.

“When I talk to people about running a sunsetting foundation, I describe it as working in multiple timelines,” Sotelo said. “Grantees need to know what kind of window they have to work with and staff have to market-time themselves by thinking, ‘It's probably going to take me six to nine months to land a senior job, or I could get an executive assistant job tomorrow. The most important element for everyone in this process is predictability.”

Planning for a graceful exit

The Rogers Foundation may be looking to spend itself out of existence, but its origin story, with a founder’s successful career in business, is a familiar one in the annals of philanthropy. Born in 1942 in Stockton, California, T. Gary Rogers grew up in Marin County and attended the University of California, Berkeley, and Harvard Business School. After purchasing Dreyer’s with Cronk, Rogers served as its chair and CEO for 30 years. Rogers was also the chairman of Safeway Inc., the Federal Reserve Bank of San Francisco and Levi Strauss & Co. In addition to supporting public school education, the foundation has made grants to the University of California, Bay Area hospitals and bioscience research organizations.

Gary passed away in 2017 and is survived by his wife, their four sons and 11 grandchildren. It was not long afterward, in the spring of 2019, that the foundation’s leaders started digging deeper into the sunsetting question, during what turned out to be the foundation’s final strategic planning cycle. It was also during this period that they informed staff about their intention to wind down.

Leaders dug into the numbers and recognized that the foundation’s assets included bequests that Gary had made. As a result, they subtracted the bequests from total assets and crafted a plan to spend down the difference over a three- to five-year period “so we could gracefully exit for as many grantees as possible,” Sotelo said. Moving forward, the board would annually cross-check the numbers against assets and course-correct if necessary.

The plan called on the foundation to disburse $5 to 6 million in unrestricted support annually. It had already been spending well in excess of the 5% minimum, and as a result, this was the same amount it had disbursed before the spend-down. Rather than take on new grantees, it would fund select existing partners across staggered timelines. For example, organizations in the foundation’s 2020 grant cycle received their final grants in 2022. In contrast, schools have been funded over a four- to five-year period, and the final grants are going out the door now. The timelines differ, but grantees’ experience throughout the sunsetting process has been indistinguishable from the foundation’s pre-2020 operations.

All the while, leaders have been helping grantees identify new sources of philanthropic support and build fundraising capacity. “Grantees didn’t push back” on the sunsetting plan, Sotelo said, “but they did have questions about what we can do to ease the transition to an Oakland without the Rogers Foundation.”

The foundation will sunset its Oakland education operations by 2025 and its total assets will eventually reach zero. In the interim, it will continue to make grants in support of what Sotelo called “legacy bequeathed projects in which the family has an interest,” such as its longstanding support for men’s rowing program at University of California, Berkeley, for which it made a matching $10 million commitment last September.

Addressing staff concerns

The foundation’s efforts to implement a steady, predictable sunsetting plan extended to its investment strategy. “We put ourselves on a glide path where we said, ‘We're not making more than 3.5%, and if we make more than that, we'll factor it into how much spend,’” Sotelo said.

Equally important was how to manage staff once they were informed of the wind-down. “There's an escalation of needs when it comes to staff,” Sotelo said. “Will we need all of our staff throughout this process? Can we make it predictable for them in terms of their exit strategies? Again, you’re working with people who experience the timeline very differently than, say, the board, which isn’t involved with operations on a day-to-day basis.”

Leaders stipulated that some staff would not have to depart the foundation until the end of 2023, although they naturally had the opportunity to leave earlier. The board rewarded departing staff with severance packages and provided support to help them land new jobs. 

Sotelo said the most “unforeseen” aspect of the spend-down has been fielding questions from staff about issues like career development and coaching, confidentiality and legal considerations, and health and 401(k) retirement benefits. He was generous enough to provide a full list of frequently asked questions, which included, “Between now and the time staff depart, what are the opportunities for continued growth and knowledge building?” and “How long will I have access to COBRA?”

If Sotelo couldn’t provide an answer, he’d ask around and convey it to staff as soon as possible. “If you're saying you need people to help fulfill this work, you have to be transparent and accountable to them,” he said.

Sotelo also benefited from participating in the National Center for Family Philanthropy’s Strategic Lifespan Peer Network, a resource for staff, board members and family members at family foundations who are spending down or considering doing so. (I spoke with the center’s Director of Programs Daria Teutonico about the network last year, and her team subsequently put me in touch with Sotelo and other leaders overseeing sunsetting foundations.)

Challenging the status quo

Before we signed off, I asked Sotelo, who previously served as the chief operating officer and vice president for program and operations for the San Francisco-based Stuart Foundation, for his thoughts on the issue of perpetuity. With U.S. foundation trustees overseeing $1.6 trillion in combined endowments, do they have a responsibility to open the spigot to alleviate present-day suffering, even if it threatens the foundation’s perpetual status?

“People have asked me what I want to do next, and I say, ‘I’d jump at the chance to work with a spend-down foundation,” he said. “Every foundation needs to think about if they’re in the business of hoarding wealth rather than redistributing it to those they’re partnering with.”

Funders going through that thought process should recognize that the question of perpetuity versus spend-down is itself something of a false dichotomy. As Sotelo noted, “Someone can always challenge a foundation’s board to not necessarily spend down, but to come out of their asset base.”

He provided the following hypothetical example. Imagine a $500 million foundation focused on democracy. An election is coming up in six months and the stakes couldn’t be any higher. During a board meeting, a member proposes upping the foundation’s payout to 10% so it can move an additional $50 million out the door and become a $450 million foundation. Under this plan, the board would make a bold commitment to the foundation’s core strategic issue in the short term without significantly jeopardizing its perpetuity in the long term.

Sotelo believes trustees owe it to themselves and the organizations they support to have these kinds of nuanced and disruptive conversations. “It's always challenging to change the status quo of how foundations think of themselves,” he said. “But any spark that makes foundations utilize their assets for their issue now, rather than wanting to keep going forever and ever — that’s a victory.”