As federal funding cuts take effect and political attacks on marginalized communities intensify, foundations across the country are asking themselves whether business-as-usual grantmaking can meet the urgency of this moment. Many foundations are grappling with a fundamental question: Should they spend more of their assets now to address urgent crises or preserve resources for the long haul?
The spend-down versus perpetuity debate often presents a false dichotomy that obscures creative alternatives foundations can employ to respond to current challenges while maintaining long-term staying power.
As a practitioner and a researcher active in the spend-down foundation community — Zev leads a spend-down foundation and Elizabeth is a leading researcher and facilitator in this space — here are five values-aligned alternatives that funders can use as a middle path to provide crucial support to nonprofits regardless of where they come down on the question of their own institutional lifespans.
Alternative approaches: finding the middle ground while making change
1. Increasing payout during crisis periods
Foundations — both spend-down and perpetual — can temporarily increase their annual payout rates without committing to a full spend-down. The Hill-Snowdon Foundation, a progressive funder that has not announced an intention to spend down, announced its Protect, Block, & Build Fund earlier this year, increasing the foundation’s payout to 15% for the next four years. The MacArthur Foundation announced in March that it would raise its base payout to 6% for two years in response to urgent social needs, while maintaining its perpetual structure, and encouraged others to do the same with their “Set it at Six” framing. Given that foundation investments often return upward of 5%, they often have the flexibility to increase payouts without depleting their endowments.
2. Leveraging assets for creative financing
Foundations can also use their assets to provide low-interest loans, loan guarantees, or other financial tools beyond traditional grants. In 2023, when interest rates skyrocketed, Tikkun Olam Foundation, Inc. designated a small portion of its endowment to serve as a low- or no-interest line of credit for grantee organizations that required bridge loans or needed funds to invest in mission-aligned, revenue-generating activities. Tikkun Olam Foundation, Inc. does not expect these funds to yield any growth for the foundation’s endowment; the foundation has balanced the rest of its investment portfolio accordingly.
3. Building grantee sustainability
Rather than focusing solely on their own spending strategy, foundations can help grantees develop sustainable models and organizational infrastructure.
After the Fred and Barbara Erb Family Foundation publicly announced their spend-down in 2024, they launched a new grant program to strengthen the organizations they already support, providing funding for leadership coaching, scenario planning, board development and other capacity-building needs, and accept proposals on a rolling basis to deploy funds quickly.
Other strategies include making final “parting grants” large enough for grantees to create their own endowments, supporting the purchase of buildings or income-generating assets that provide long-term revenue or cost savings, and not requiring that all granted funds be spent in the same year they’re received to allow organizations to deploy resources as they see fit.
Finally, funding intermediaries — including public foundations that raise and disburse funds, nonprofits that regrant, or pooled funds — as well as technical assistance providers and field-building organizations, can create lasting impact beyond the life of any individual foundation.
4. Community-driven decision making
Foundations can move funding decisions to the community through advisory or participatory groups, as well as through grantmaking to intermediaries. These approaches ensure that even if the foundation maintains a perpetual structure, its grantmaking reflects community priorities rather than solely channeling trustee or family preferences.
The Environmental Justice Resourcing Collective (EJRC) at the Kataly Foundation engaged in such a participatory process to set funding priorities and grantmaking strategy, and make decisions about grantees.
Acknowledging how institutional philanthropy can be out of touch with the lives of marginalized people, Libra Foundation increased its funding of intermediaries that are accountable to their communities and that rely on participatory grantmaking structures.
5. Long-term general operating support
Foundations can also make long-term general operating funding commitments of five, seven, or even 10 years. The Marguerite Casey Foundation, which is granting more than five times its typical grantmaking budget in 2025, follows a general practice of frontloading five-year, unrestricted grants by providing 70% of committed funds to organizations in their first year of grantmaking. This approach provides nonprofits with the stability and flexibility to weather changing political environments while allowing foundations to maintain their long-term presence.
Spend-down and perpetuity: context-sensitive decisions
The binary framing of “spend-down versus perpetuity” obscures many creative options foundations have at their disposal. The decision to spend down or exist in perpetuity has no universal answer, and must be guided by mission, issue area, external context and organizational values. Whether choosing to spend down or maintain perpetuity, foundations must prioritize transparency, grantee partnerships and strategic clarity. Both approaches can be responsible and impactful when implemented with intention and humility.
In moments of crisis like today — with federal funding cuts, political attacks on marginalized communities, and fundamental threats to nonprofit work — the most important question is not whether to spend down, but how to deploy all available resources — financial, relational and reputational — to create a more just and equitable society, both now and in the future.
Elizabeth Dale, Ph.D. is the Frey Foundation Chair for Family Philanthropy at the Dorothy A. Johnson Center for Philanthropy at Grand Valley State University. Zev Lowe is Executive Director of Tikkun Olam Foundation, Inc., a foundation in the process of spending down.
Related Inside Philanthropy Resources:
For Subscribers Only
