Donations to the arts by foundations also could be in jeopardy after this year’s economic downturn, although it depends on the situation. For instance, the international John D. and Catherine T. MacArthur Foundation based in Chicago announced that it would not decrease the number of monetary awards to Chicago-area grantees; it would increase them from 180 to 200. It also created a new $1 million fund to enable its Chicago grantees to increase their international connections.
The MacArthur Foundation funnels money to the Chicago arts community through two partners: the Richard H. Driehaus Foundation in Chicago for organizations that operate on $500,000 or less, and the Prince Charitable Trusts in Chicago for organizations that operate on between $500,000 and $2 million.
Smaller foundations wouldn’t be able to do that, however. Foundations are beholden to the size of their endowments. Federal law requires that they give out 5 percent of their assets, or their net worth, every year, with variations of how to meet that requirement. And when the stock market decreases, so do the endowments. When assets shrink, the amount available for grants shrinks, too.
The Driehaus Foundation meets the 5 percent requirement by averaging three years together. So while 2008 assets decreased, they increased in 2006 and 2007. The net increase will help soften the blow, says Peter Handler, program officer for the foundation. While the amount available for grants in 2009 will dip, “the decrease in our grant budget will not be as precipitous as it otherwise might be.”
But no one really knows when the other shoe will drop. Handler says the Driehaus Foundation may not know the outcome of the economic downturn for a year or two. During a previous slowdown, the foundation’s assets plummeted from about $95 million in 1999 to $44 million in 2001 and 2002, causing the amount available for grants to drop by about half in those three years, he says.
Foundations nationwide realize that they likely will have to change their strategies this time around. The Foundation Center, a philanthropy think tank based in New York, issued a research advisory after the banking crisis peaked in September that says the outlook for foundation giving may not be as bleak as some fear. According to Steven Lawrence, senior director of research, foundation giving historically has remained stable during previous recessions and economic crises.
Benne Wilde, managing director of Prince Charitable Trusts in Chicago, says one idea is to change the way in which the foundation helps local arts organizations. Because cash flow can challenge arts organizations — they have to pay for shows before the ticket sales roll in — they often use lines of credit to help finance productions. “It’s possible that some foundations could set up loan funds for cash flow problems,” she says, although she doesn’t think that’s something Prince Charitable Trusts would do.
The foundation is considering helping the entire sector by creating a collaborative Web site, where all types of arts organizations could publicize their performances or galleries or community events. Audiences would have a one-stop shop to book their entertainment, helping them decrease their marketing costs.
While foundations and arts have survived previous economic depressions, recessions and everything in between, the banking crisis this past fall is a new kind of storm. This year’s economic downturn is so complicated and deep-rooted that grant makers nationwide are putting their heads together to figure out how to approach 2009.
“We’re all thinking about it,” Wilde says. “We’re all trying to figure out: What is the most valuable role that foundations can play here? We can’t solve all the problems. We can’t replace all the money that’s lost, but we certainly can try to be as strategic as we possibly can and work together, try to minimize the effect.”
Handler says one message to grantees is: Don’t stop asking for money.
Another silver lining for the Chicago arts community is that at least one corporate sponsor is unlikely to decrease the amount of money it gives to arts and culture. The worldwide Boeing Co., which manufactures jetliners and military aircraft, operates a “global corporate citizenship” program that donates through grants, volunteerism, service on local advisory boards and sponsorship of events. It’s contributed an average of $10 million since the Fortune 500 firm established its headquarters in Chicago about seven years ago.
Part of Boeing’s financial giving comes from its profits. Another part comes from employee donations. The corporation in the past has not decreased its monetary giving during economic downturns, not even when profits sunk after the 9/11 terrorist attacks, says Angel Ysaguirre, Boeing’s director of global community investing.
“That’s probably not going to change. What might change is the way we might look at those organizations. The question is not necessarily whether we give to the arts, but how do we give to the arts?”
Hypothetically, Ysaguirre says, that could include giving $10,000 to an event to help pay for operating costs rather than buying a table at that event. “That way, the organization doesn’t spend $1,000 of that $10,000 by feeding us at an event. So, it’s a way that we can still use the resources that we have but tweak it in a different way so that the organization sees some benefits to their overhead costs, which are obviously going to be important costs for them to think about.”
Regardless of the economic climate, however, Boeing always considers ways to partner with local organizations to meet their needs, says Nora Moreno Cargie, Boeing’s director of global corporate citizenship in Chicago. The current economic downturn simply requires more creativity. “Part of our role right now is to be good listeners,” she says.
Bethany Jaeger can be reached at email@example.com.
Illinois Issues, December 2008