The amount of money area foundations are able to give away this year won’t change much, if at all, but 2021 could see some level of decreases depending on what happens with the stock market in subsequent quarters.
That’s according to Mike Goorhouse, president and CEO of the Community Foundation of the Holland/Zeeland Area, who said “from a dollars and cents standpoint, the short answer is ‘no’ to any changes in giving levels” for his organization this year.
“This is not me punting, but it’s too early to tell because of the weird dynamic,” he told MiBiz. “A month ago, the markets were at 28,000. Obviously, we know it tanked, but how much we give away is determined by calculations that look back three years.”
Foundation leaders will look at those 12 quarters to see how many end up significantly lower and how low they may be, Goorhouse said.
“March will be significantly lower, but the second quarter ends in June and we’ll see how much lower that is,” he said. “We’re hopeful, but we know that this first quarter number is going to be bad. If we can bounce back part way by the second quarter and even more by the third quarter, by the time we do the calculations for 2021, it might not impact us as much.”
However, if the market remains as low as it has been for the remainder of the calendar year, and three or four of the quarters remain suppressed, it will have a more meaningful effect on how much the foundation is able to give in 2021.
“We’ll be looking at how long it stays low and how this will impact 2021,” Goorhouse said. “The markets being cyclically down are not helpful, but they’re not impacting what we give away in 2020. Back in 2008/2009 following the recession, the markets bounced back fairly quickly.”
The Grand Rapids Community Foundation also is expressing cautious optimism about its giving levels going forward.
“Obviously this virus, like a lot of things that come along, was unexpected and unprecedented, but through its 100-year history, our foundation has proven to be a source of consistent support for our community,” said Stan Vander Roest, CFO of the Grand Rapids Community Foundation.
“We want to make sure our community can thrive and grow,” he said. “We have financial policies and procedures and funds invested to provide stability and consistency during market volatility that we are now seeing. We have a spending policy that helps to guide the foundation and its fundholders in the distribution of funds we pay out each year.”
The GRCF’s spending rule is 5 percent of the average fair market value for the past 16 quarters based on its fiscal year, which ends June 30.
“We monitor and benchmark that on a regular basis and that policy is the same one used at many foundations,” Vander Roest said. “We manage payouts in the type of market volatility we are now experiencing. We average it to provide stability of payouts over a longer period of time.”
That policy is completed at the end of the fiscal year and does not change. Every July, GRCF looks back at the last 16 quarters, does an average and calculates 5 percent to determine the funds available for payout, Vander Roest said.
The foundation’s current budget calculation was completed in July 2019.
“The market volatility we’re currently experiencing has no impact,” Vander Roest said.
This may not be the case when calculations are done for 2021. That payout will likely be affected because the quarters ending in March and June of this year will have been affected by the volatility in the markets. However, Vander Roest said he does not expect the effect to be “significant” for GRCF.
While he said he doesn’t know what’s going to happen with the markets as businesses and organizations navigate their way through shutdowns as part of efforts to contain the spread of the coronavirus, he said there will be short-term implications. As well, the foundation has the ability to make any necessary changes in the long term.
“Most of our funds are invested in a balanced plus-pool, which is a very widely diversified group of investments, assets, stocks, bonds, and hedge funds,” Vander Roest said. “This will help to limit the volatility of the funds. We are more diversified than just stocks and bonds in our portfolio.”
He credits the depth and breadth of knowledge that members of his investment review committee bring to the table for the foundation’s ability to get through tough times.
“We’ve weathered through a lot of stuff, but this being a medical issue makes it even more complex. I’m not going to tell you there’s not concerns from a financial side,” Vander Roest said. “While we’re always concerned when the market drops as quickly as it has been, we have a really amazing investment review committee that manages our investments and assets.”
Concerns for vulnerable populations
Aside from the effect that the coronavirus could have on future philanthropic giving, Goorhouse expressed deep concerns for members of the community who are facing financial instability because of layoffs and a lack of access to critical services because of the state-mandated stay-home order that began March 23.
“All of these things hit the most vulnerable the most. They miss two paychecks and they’re in trouble,” he said. “It could be that they’re not able to pay the rent or a mortgage or buy food. You combine that with schools being closed and kids in our community are in homes that are not safe because of physical or emotional abuse.
“If school was a respite for you or if work was a place where adults got away from abusive home situations and now you’re at home for four weeks and you’re not really allowed to go anywhere, that’s a problem.”
He also cited mental health, which may likely become more of an issue because of the coronavirus.
“Even the most stable of stable people right now are struggling with the uncertainty, and this time we’re in is not helping,” Goorhouse said.
But his foundation, like so many others throughout the state of Michigan, created an emergency fund because they wanted to do what they could in the moment.
The day after statewide school closures were announced on March 12, as part of the state’s effort to stem the spread of the coronavirus, a coalition of the Community Foundation of the Holland/Zeeland Area, the Grand Haven Area Community Foundation and the Greater Ottawa County United Way came together. Each entity contributed money to the newly created Emergency Human Needs Fund, which began with a total of $85,000. The group gave away $40,000 on March 13.
The coalition then began seeking contributions from third-party donors and has collected a total of $400,000. As of last week, 15 Ottawa County nonprofits have received more than $120,000 in emergency grants. They include Barnabas Ministries, City on a Hill, Community Action House, Coopersville Cares, Four Pointes Center for Successful Aging, Good Samaritan Ministries, Harvest Stand Ministries, Holland Rescue Mission, Kids’ Food Basket, Love in Action, Love Inc. Allendale, Love Inc. Hudsonville, Resilience, The People Center and The Salvation Army.
Serving immediate needs
As committed dollars are received, the coalition is working quickly to distribute the funds to the greatest need.
“Local nonprofit agencies are facing unique challenges in providing services due to the social distancing mandates — now further compounded by the Stay Home, Stay Safe shelter-in-place order signed by Governor Whitmer,” Goorhouse said in a statement announcing the coalition. “These agencies have committed to keeping local citizens housed, fed and healthy, but need additional support from the community. Monies from the Emergency Human Needs Fund are distributed in real-time to help these hardworking agencies manage the unexpected financial costs caused by the pandemic.”
He acknowledged that this is a very different process from what community foundations typically go through, but the needs are immediate and the financial resources need to be in place quickly. He and coalition members talk every Tuesday and Friday for about 30 minutes by phone, discuss the needs, determine the money raised and send it out.
“There’s no time to convene a big community process,” Goorhouse said. “Each of us will eventually decide what to do with our regular grant-making processes. This rapid response makes us act very differently to make decisions quickly and get things out the door.”
Likewise, Vander Roest said the GRCF has partnered with Heart of West Michigan United Way on the Kent County Coronavirus Fund and is working extensively with partners in the community.
“In addition to immediate needs, there will be long-term impacts and this is the best thing we can do to respond to those long- and short-term needs,” he said. “We are actively working with all of our community partners to assess what the needs are on a short- and longer-term basis.”
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