“Ask Yourself Those Hard Questions.” How — and Why — a Regional Funder Plans to Sunset
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Downtown sacramento, California. Matthew Corley/shutterstock
As philanthropy attempts to find its post-2020 footing, I’ve noticed how issues that were top of mind for leaders throughout that tumultuous year and its immediate aftermath have quietly receded to the background. The first is the push for greater general operating support. The second is the question of whether to exceed the 5% distribution rule to unlock additional funding for beleaguered front-line organizations.
Given that the pandemic underscored many organizations’ precarious hand-to-mouth existence, foundations had an opportunity to help them achieve financial sustainability by providing larger grants to set up endowments or fortify cash reserves. While there have been some notable outliers — and efforts to find a middle ground between minimum payout and spending down — most trustees appear to be sticking to the 5% benchmark, presumably out of the fear that an uptick would erode long-term earnings or threaten their ability to exist in perpetuity.
Priscilla Enriquez, CEO of the James B. McClatchy Foundation, observes that fellow leaders have been tempted to push the envelope, only to pull back and re-embrace the status quo. “I’ve spent decades in philanthropy, and when you’re sitting on this largesse, you think, ‘Wow, we could do so much good.’ But the mindset is, you can only grant out up to 5%. It’s this tug of war that is artificially created.”
In 2016, its board rendered the 5% debate moot by voting to sunset by 2030. Over the following years, its leaders tackled an array of related action items, such as introducing itself to grassroots organizations throughout California’s Central Valley and bracing staff for eventual unemployment. This work culminated yesterday when the Sacramento-based foundation announced its Sunrise Plan — “sunrise” is meant to convey optimism and renewal, rather than an ending — laying out its three overarching goals: supporting multilingual learners and their families, advancing a diverse and sustainable local journalism ecosystem, and cultivating inclusive leadership.
For Enriquez, the JBMF’s plan to move $50 million out the door in seven years is a bold commitment for a region that receives less than 6% of statewide philanthropic resources. But it also challenges the conventional wisdom that philanthropy can advance change by slow-dripping support, when larger investments to a broader set of grantees could move the dial more effectively — and create a healthier nonprofit ecosystem.
“We funders create this starvation-abundance cycle with nonprofit organizations and the competition that exists for them,” Enriquez told me. “It’s not right and it’s not fair.”
A “jewel” for the Central Valley
Born in Sacramento in 1920, James B. McClatchy was a journalist at McClatchy Company newspapers, including The Fresno Bee and The Sacramento Bee, and McClatchy’s publisher from 1987 to 2005. In 1994, he and his wife Susan founded the Central Valley Foundation (which would later be renamed JBMF), focusing on education and civic participation. “I don’t think they knew whether the foundation would be around forever,” Enriquez said.
James McClatchy passed away in 2006. Ten years later, leadership broached the idea of sunsetting. There was tremendous need throughout the Central Valley, and Susan, who serves as the board’s vice chair, “wanted to see a lot of change happen in her lifetime,” Enriquez said. And so the board signed off on the plan. “I see the sunrise as a fulfillment of the dreams James and I had for the foundation,” Susan says on the JBMF website. “The needs of the Central Valley are so great and the solutions to address them should come from the people who live there.”
In 2019, Enriquez joined the foundation as its first full-time CEO after spending 11 years with the Sacramento Region Community Foundation. She noted that while the Central Valley Foundation had made significant investments in its core focus areas, it was hamstrung by the fact that its staff worked on a part-time basis. Meanwhile, its corpus had grown substantially since 1994. “I realized what a jewel the foundation could be for the Central Valley in sunsetting mode,” she said. “And so my job was to activate the grantmaking.”
Laying the groundwork
The board’s decision to sunset meant that as the foundation set out to substantially increase its grantmaking, it had an obligation to reach beyond its existing networks and engage nonprofits serving over 2 million people dispersed across nearly 18,000 square miles. “CVF was a small organization,” Enriquez said. Foundation leaders “really didn’t know many organizations in the Valley, and folks in the Valley really didn’t know the foundation.”
One of Enriquez’s first moves was hiring staff to build out the foundation’s capacity. She also realized that the Central Valley Foundation sounded a lot like Fresno’s Central Valley Community Foundation. As a result, in 2019, the CVF board voted to change its name to the James B. McClatchy Foundation. Enriquez said the name change “helped the foundation become more visible and have an identity related to Jim and Susan.” (The foundation is not affiliated with the McClatchy Company or McClatchy publications.)
It was also in 2019 that the JBMF kicked off a series of “listening sessions” with community members. Enriquez and her team found that many organizations were led by BIPOC individuals, women and volunteers who were “trying to make change while being unpaid.” This takeaway reinforced leadership’s commitment to building out a strong nonprofit regional infrastructure. “We know there is immense talent there, they just need to be given the resources.”
For Enriquez, this lack of support reflected a broader “disparity in power” across the Central Valley, which is responsible for 8% of the country’s agricultural output and produces 25% of its food. “There is great wealth in the valley, but if you look at how that infrastructure was created, it was on the backs of immigrants and migrant workers, many whom did not have any many rights, and that continues to this day,” she said. “We asked ourselves, ‘How do we lift up the people who live there, who work the land, so they’re part of that power infrastructure?’”
Staff wellness and the inevitable pink slip
The listening sessions continued throughout the pandemic and the foundation set up pilot grant programs in 2020. The following year, it disbursed another slate of grants and committed $1 million to seed the Central Valley Journalism Collaborative, which seeks to cultivate a sustainable journalism ecosystem throughout the region. “We want that organization to be here forever,” Enriquez said.
In 2022, the board approved a sunrise strategy centered on English language learner education and First Amendment protections of free speech, free expression and a free press as part of a multiracial democracy. In April, the JBMF announced its first sunrise grants, totaling more than $10 million to 31 organizations, with its press release noting that the grants “purposefully exceed the 5% minimum giving that governs nonprofit foundations.”
Ever since she assumed the CEO position in 2019, Enriquez understood that if not properly designed, the foundation’s plan could exact an adverse physical and psychological toll on her staff. “We all know that after the pandemic and George Floyd racial reckoning that there’s a greater and rightful sensitivity to everyone's wellness,” she said. To minimize the risk of burnout, the foundation hired consultants to “divide and conquer” the work. The JBMF also embraced what Enriquez called a “narrow and deep” approach focused on identifying values-aligned “anchor institutions” led by strong leaders. The JBMF provides these organizations with what Enriquez called “bigger grants to sustain operational capacity.”
Then there was the small detail that Enriquez and her staff would be out of a job in seven years. Presiding over a sunsetting foundation “gives you permission to be transparent,” Enriquez said. “We talk about salary, we talk about how long you want to stay, we talk about professional development and what they want to do next.” In a strange way, she found it all quite refreshing. “When you’re in perpetuity, there’s sometimes this weird atmosphere where folks are reluctant to talk openly about these things,” she said.
Next steps
Our conversation concluded by addressing the elephant in the room — why so many foundations remain wedded to the 5% payout. “Imagine if a foundation increased their giving by 1%, or even half a percent?” Enriquez posed. “Would that really damage the corpus? I mean, come on.”
The answer to that question hinges on one’s definition of “damage.” We know that an uptick of even a half-percent is a bridge too far for many trustees who, in addition to being cognizant of future needs, are hesitant to dilute what AmbitioUS Program Director Cate Fox calls the “prestige that comes with having a big endowment.” On the other hand, leaders who’ve gone above 5% understand that this unlocked money flows to organizations tackling urgent challenges in the here and now. They’ve made peace with this trade-off, even if it means its endowment could be short a few million dollars — or even tens of millions, depending on the payout rate — over the course of 30 years.
All of which brings us back to JBMF’s recently published Sunrise Plan. In the document, the foundation explores economic disparities across the Central Valley, reflects on its commitment to trust-based philanthropy and lays out projected milestones between 2023 and 2030. Enriquez and her team will revisit the plan and make changes as needed. For example, next summer, the foundation will convene leaders from April’s round of grants to glean insights, feedback and needs moving forward.
Now that the plan is public, Enriquez will devote a substantial portion of her time working with the board to generate support from other funders. She’ll also continue to share her sunsetting “lessons learned” as co-chair of 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.
Enriquez is clear-eyed enough to recognize that many trustees will be unable or reluctant to sunset themselves and their staff out of existence. But at the very least, she hopes they revisit the 5% payout to get more money in the hands of organizations grappling with unprecedented need.
“I think there’s a tendency to get stuck in what we’re used to doing,” she said. “But you have to give yourself permission to ask yourself those hard questions if you really want to make change.”
