Giving Compass' Take:

• Larry McGill explains how the Great Recession impacted foundation giving and what that might mean for a recession driven by COVID-19. 

• Are you prepared to maintain or increase your giving in the weeks, months, and possibly years to come? 

• Read about recession planning with grantees. 

If the world were fighting only the coronavirus (Covid-19) at the moment, that would be challenge enough. But we are not just battling a disease, we are also in the midst of a historic economic meltdown. What does this mean for the social sector?

At Candid, we’ve documented the work of institutional philanthropy across half a dozen economic recessions since 1980. And we’ve watched how the sector responded to numerous disasters dating back to 9/11. Now, we find ourselves confronting a perfect storm. So, it’s hard to predict with any confidence what exactly lies ahead for the sector.

But we’re not starting from square one. The Great Recession is still very much a living memory for most foundations and nonprofits. The sector did in fact persevere through that period, emerging stronger than ever. Although foundation giving dipped slightly in 2009 and 2010, since then it has grown from $46 billion in 2010 to more than $80 billion in 2018. This 76 percent increase doubled the GDP growth rate (37 percent) over the same period.

One foundation practice in particular made a huge difference in holding giving steady over the two rockiest years of the recession—using rolling averages of a foundation’s annual assets to set its annual grantmaking budget, rather than the size of its asset base at the end of the most recently completed fiscal year. Because assets typically increase from year to year, a foundation’s average asset level over a three- to five-year period is usually lower than its asset level for the most recently completed fiscal year. Conversely, when a foundation’s assets go down, its three- to five-year average asset level may be higher than its asset level during the most recently completed fiscal year.

Read the full article about foundation giving by Larry McGill at Candid.