About the Fund: From the Executive Director

September 2009

Dear Friends and Colleagues:

In the more than 20 years I've worked in, for, and around the nonprofit sector, there've been several occasions when a chorus of "the sky is falling" has been heard. In the past, most of us were able to skirt catastrophe, and we survived to serve our community another day. Today, we're again hearing that refrain about the falling sky, this time louder and more persistent than ever before. Unlike in past difficult periods, however, nonprofit belts are already tightened and budgets cut to the bone. At the same time, demand for many programs and services has increased.

So, is the sky really falling this time? The nonprofit sector faces deep problems and no quick fixes or magic bullets are available, philanthropic or otherwise. While I hope otherwise, I do fear that we will begin to see a number of nonprofits closing their doors in the near future; others will need to substantially restructure their operations in order to survive. While it can be argued that, in theory, a leaner nonprofit infrastructure could be a good thing for the Bay Area, the way it might unroll in this period won't necessarily result in better or more efficient organizations. In fact, we could lose a lot of important community organizations providing valuable services.

This situation will not turn around quickly. The financial stability of the nonprofit sector will likely continue to weaken over the next couple of years. The main culprits are the broad economic downturn and the statewide fiscal disaster with its local ramifications; adding to this, the formulas many foundations use to set their grant making budgets may result in fewer available grant dollars in 2010 and 2011.

Transparency here is important, so let me elaborate. Many foundations base the yearly amount they have available for grants on a percentage of the rolling average of their asset values in prior years. At the Haas Sr. Fund, we have used a 12-quarter rolling average for several years, a formula that serves to modulate market swings. [1] This means, for example, that our 2009 grants budget was based on the average value of our assets in each of the four quarters of 2006, 2007, and 2008. Because of the strength of the market in 2006 and most of 2007, our 2009 payout was relatively unchanged from 2008. In determining our 2010 payout however, the challenging quarters of 2009 replace those of 2006, lowering our 12 quarter rolling average. 2011 may demonstrate further decline, as the remaining "strong" quarters of 2007 disappear and 2010 values are added in.

In other words, even though the stock market has shown some improvement, philanthropy has yet to hit bottom. As foundation payout equations include more and more depressed quarters, the funds available for grants may shrink. Unless the economy miraculously rebounds, this will exacerbate the problem of declining revenues from government, individual donors, and corporate giving programs.

Not to be all doom and gloom, some good things can come out of this. A lot of foundations, including ours, are providing more general operating grants, realizing the importance of giving grantees more flexibility. Another outgrowth may be that funders will increase their support for meeting the infrastructure needs of their grantees, increasing the stability of the sector. There is also the potential for productive new partnerships between philanthropy and local government in order to shore up the safety net for the most vulnerable in our communities. And, some organizations may, in fact, be able to realize new efficiencies, create valuable new collaborations, and improve the overall effectiveness of their work.

The Walter & Elise Haas Fund has adopted a number of changes to better support our grantees and the nonprofit sector in these hard times. Since the onset of the economic decline, we've encouraged our grantees to be frank with us about their fiscal needs, and we have offered flexibility in revising grant objectives and budgets. As noted above, we're providing more general operating grants in this period. Additionally, we've launched an $800,000+ Safety Net Initiative to bolster access to basic community needs, such as food and shelter. A small percentage of Safety Net Initiative funding is providing strategic support to grantees and public sector allies so that they can take full advantage of federal stimulus dollars.

We recognize that many current and prospective grantees may need to restructure their organizations to ensure continuing viability. This may take many different forms, from revising business plans, to consolidating backroom functions, to considering mergers with other organizations. A few may need help in closing their doors in a responsible way. We are currently discussing how we can support these efforts most effectively. I welcome your thoughts and ideas.

In the meantime, some important reports recently have been issued about San Francisco's nonprofit community. The first is a research report on San Francisco's nonprofit sector co-authored by CompassPoint Nonprofit Services and the Institute for Nonprofit Organization Management at USF. The second is a San Francisco task force report on the nonprofit sector and its relationship to local government. A third document summarizes the conclusions of the Working Group on Community Development, an ad hoc body convened at the request of Mayor Gavin Newsom and Board of Supervisor Member John Avalos, which I had the honor of chairing. All offer distinct and valuable insights into the developing economic climate for nonprofits and the challenges they face.

As daunting as the future will be, I have tremendous confidence in the creativity and resiliency of the nonprofit sector. I look forward to working with you, grantees, colleagues, and partners to continue to serve and advance our community.

Best regards,


Pamela H. David
Executive Director


[1]* For the past few years, the Fund trustees have set a grants budget at between 5 to 6% of the 12-quarter rolling average. Even though the IRS would allow us to include administrative expenses in meeting its 5% minimum payout requirement, we don't. Thus, the Fund's 5 to 6% payout has reflected actual dollars going out the door in grants. Please note, though, that the Fund's trustees have not yet met to determine the formula that will be used for the 2010 budget.