If you're scrimping by in a nonprofit that continually needs to raise money, it's easy to imagine that foundation leaders are leading the good life, without a care in the world. After all, they're sitting on a big endowment and their chances of going bust are pretty much nil. What could they possibly get stressed out about?
If only things were so simple. In fact, foundations designed to exist in perpetuity do have to live within their means to preserve their principle, and budgeting for grantmaking every year can be harder than it looks.
A story out of Oklahoma this summer underscores that point. The City of Muskogee Foundation is a great example of a health legacy funder that looks way beyond just health with its grantmaking. Since it was established in 2008, the City of Muskogee Foundation has supported everything from education to arts and culture, community revitalization and housing. Through grants to local nonprofits, churches, schools and the city of Muskogee, it has ramped up grantmaking to hit the $1 million mark with single grants from time to time. Total grantmaking since inception exceeds $48 million. And about half of that has gone to economic development projects in town.
For example, in the funder’s most recent grant cycle, it awarded a $1 million, three-year grant aimed at sparking development in the central business district. Most of that will go toward a loft apartment incentive, while the remainder will be used to encourage local businesses to stay open after 5 p.m. In total, the foundation awarded over $3.66 million in this annual grant cycle, in mostly one-year grants. These went to groups like Muskogee Public Schools, Neighbors Building Neighborhoods, and the Oklahoma Music Hall of Fame.
But the interesting story that emerged, here, is that the funder seemed to have overshot its budget in the past year and had to apply the brakes. Last December, the board of directors approved a reduced 2017 budget, the foundation ended up denying several applications that had progressed beyond the letter of intent stage. That was surely quite frustrating to affected grantees. Meanwhile, the foundation approved other grants in lesser amounts than originally expected. Also pretty frustrating.
Frank Merrick, the executive director of the foundation, said that the finance committee decided that this would be a "good year to catch our breath and let some things roll off the books and maybe get some things paid." This hasn’t been the easiest of years for the City of Muskogee Foundation, and we have to wonder how many other health legacy foundations that experienced quick early growth are suffering a similar fate.
Many of these types of foundations have been quick to branch out beyond traditional health funding and explore other areas of need in their local communities. But is this broad expansion spreading health legacy funders too thin?
When healthcare organizations are bought and sold to create grantmaking foundations, large sums of money are there up-front and right away. It’s easy to dive right into grantmaking, but it’s also necessary to keep up that endowment to ensure sustainability over time. If, of course, that is the foundation's goal in the first place.
Since most of the health legacy funders we’ve been reporting on lately are in their first decade of operations, it’s hard to tell how sustainable they really are. But it’s definitely something to keep in mind if you’re in charge of running one of these unique places or depending on one of them for support.