The Losses Hit Home
Justifiably, greater Pittsburgh has felt fortunate to escape the brunt of this recession so far. We’ve read the stories in the national media and seen the statistics. We had no housing bubble here, so there’s no bubble to burst. Our financial institutions are comparatively strong. The healthcare, government and education sectors have softened the blows to our unemployment rate.
But what about other parts of the nonprofit sector? What about the engine that sustains nonprofits and provides the capital that undergirds most of the projects around here that have to do with progress? In short, what about the foundations?
In 2007, Pittsburgh’s 15 largest philanthropic foundations—not including corporate foundations—had combined assets of some $8.1 billion. The assets are invested in a variety of financial vehicles, the majority of which have sustained heavy losses in the last six months.
The losses vary. The largest loss in percentage terms was sustained at the McCune Foundation, which for historic reasons, was heavily invested in National City Corp. The company’s stock dropped from a 2007 high near $38 a share to below $2 before it was acquired by PNC Financial Services Group. On the more fortunate end were foundations that lost less than 25 percent of their assets.
Let’s assume that the 15 largest foundations lost an average of 30 percent across the group. With that rough calculation, the region has lost $2.4 billion in philanthropic assets.
What will that mean to Pittsburgh?
Foundations are required to spend five percent of their assets each year. While there’s variation, and some of the money goes to taxes and administration, let’s assume that five percent of that $2.4 billion would have been given out in annual grants. That translates into $120 million that will no longer be flowing to local nonprofits and into our economy.
Already, many foundations have notified nonprofits that, while they will honor the grants they have approved, they will become more selective about new grants. The spigot isn’t being turned off, but it will no longer flow freely.
Agencies that raise regional quality of life but perform purposes not deemed essential — such as small arts nonprofits — are likely to suffer first and most. Support for many arts and cultural groups long ago shifted from the government and corporations to individual and foundation donors. While they may be doing great work, these smaller groups with budgets dependent on foundation grants are among the most vulnerable, as charitable focus shifts to providing emergency human services for people who have lost their jobs, insurance or homes.
Nonprofits across the region will tighten their belts. There will probably be layoffs and a general reversion to survival of the fittest. Some of these nonprofits are on top of the situation and planning on how to adapt. They will likely differentiate themselves from others and thrive in the long term. Those in denial may wither away.
Capital and endowment campaigns of all sorts will suffer. Those already underway will likely be OK in terms of receiving foundation support. But groups just getting ready to kick off campaigns will probably have to delay and defer. Likewise, any new projects will probably be shelved until a better day.
On a larger scale, some of the region’s more ambitious long-term projects—such as building a better sewer system—will likely have to be put off. And much of the advocacy, including legal work, which prepares the region to get behind big, new projects, comes from the foundations and is likely to be scaled back.
So, for the foreseeable future, the key leadership that local foundations have provided in championing new ideas and taking risks to move Pittsburgh ahead will be diminished.
Or, to put it in the vernacular, the toughest part of our schedule lies before us, and our quarterback has hurt his shoulder. He’ll be in the lineup, but only throwing short passes. The rest of the team—a well balanced group—will have to pick up the slack, grinding it out and relying on a strong defense.