As it did for so many fields, the pandemic revealed the many ways funding norms in the arts and culture world often serve its institutions poorly. In several cases, grantmakers did improve their practices in response. Having benefited from grantmakers’ pandemic-era pivot, organizations are surely crossing their fingers in hopes that plentiful general operating support continues to flow, for example.
As they look to emerge from the crisis stronger than before, another funding reform that ranks high on grantees’ wish lists is a more dependable endowment. The pandemic presented an existential threat to organizations that lacked enough cash in the bank to navigate the lockdown. But almost two years into the pandemic, many arts nonprofits still do not have an endowment, making them susceptible to what Jim Boyle, vice president of programs and communications at the Ralph C. Wilson, Jr. Foundation, calls a “boom-and-bust cycle.”
The Wilson Foundation took a unique approach in its response to this challenge. In early December, the Detroit-based grantmaker announced a $200 million commitment to support 24 arts and culture communities in its two geographic regions, southeast Michigan and western New York.
More than half of the commitment—$117.5 million over 10 years—has been earmarked to establish two endowments at the Community Foundation for Southeast Michigan and the Community Foundation for Greater Buffalo that will provide ongoing support for 24 of the regions’ arts and culture institutions. Organizations won’t be able to access this support until 2031, so the foundation also earmarked $3 million in annual unrestricted support to be distributed to all 24 organizations over the next nine years.
What makes this news even more interesting is the fact that the Wilson Foundation—which is scheduled to sunset in 2035—does not explicitly support the arts. It does, however, support economic development, and its leaders intuitively grasped how a thriving arts ecosystem benefits regional economies. “Looking at arts and culture through the lens of economic development outcomes is really the core of this gift for us,” Boyle told me.
“We can make a unique contribution”
Ralph C. Wilson, Jr. was a businessman, investor and sports executive who founded and owned the Buffalo Bills. When Wilson passed in 2014, the Bills were sold for $1.4 billion. Wilson had instructed that the bulk of that sum go to his posthumous philanthropy and the $5 million foundation suddenly became one with approximately $1.2 billion in assets.
Since its inception in 2015, the Wilson Foundation has paid out more than $540 million in grants, including nearly $100 million within its Entrepreneurship and Economic Development program. Click on the “Our Focus” page on the Wilson Foundation’s site and you’ll see other focus areas—but nothing resembling arts and culture. So how did the foundation end up supporting the field to the tune of $200 million?
Boyle told me that before the pandemic struck, the foundation had been receiving capital requests from the region’s arts organizations. In response, the board hired the nonprofit management consulting firm TDC and explored the possibility of branching out into the field. When COVID-19 hit, the foundation put the issue on the back burner, only to revisit it once the impact on organizations became painfully clear. “We really started to look at how we could help these organizations strengthen their operational position,” Boyle said.
Not all board members were immediately on board. But with help from TDC, leaders approached the issue through the lens of its Entrepreneurship and Economic Development program. The arts, they concluded, were an integral part of the two regions’ economic recovery and sustainability.
Starting with a $50 million baseline, conversations initially focused on capital support, before pivoting to endowment funding. “We know our communities,” Boyle said, “and it’s often talked about how organizations in Southeast Michigan and Buffalo are under-endowed. And we thought, ‘This is where we can make a unique contribution as a limited-life foundation.’”
One board member suggested the foundation double the commitment to generate a higher return on its endowment investment. Then, two days later, another trustee argued that the board needed to double it again. “We went from $50 to $100 to $200 million for the total commitment,” Boyle said.
“The benefit of endowment dollars”
Funders, of course, know that endowments help organizations build financial resiliency. And yet, from an anecdotal perspective, I can’t say that the issue has reached critical mass across the funding community—at least when compared to the persistent buzz surrounding general operating support.
Of course, the two issues are linked, since organizations can use general operating support to build endowments. For the sake of argument, let’s (quixotically?) assume funders will keep the spigot of general operating support open for the indeterminate future. While that’s clearly a good thing, some nonprofit leaders may think twice about earmarking finite dollars for endowment purposes, since more urgent operational matters demand their attention.
Consider the case of the Motown Museum. It was founded in 1985 and has received support from funders like the DTE Energy, Kresge and W.K. Kellogg foundations, as well as the record label’s founder, Berry Gordy, who made a $4 million gift a few years back toward the museum’s $50 million expansion campaign.
Despite the foundation’s track record of raking in restricted gifts, it had never “enjoyed the benefit of endowment dollars to support our operations,” said Chairwoman and CEO Robin Terry—until just recently, when the Wilson Foundation named it one of the institutions that will receive funding. “This important gift—the first of its kind for our museum—is an investment in the future sustainability of our organization, and of Detroit,” Terry said.
As noted, organizations can begin tapping endowment funding in 2031, which explains why the foundation provided funding for community foundations to get money out the door in 2022. “We didn’t want the organizations to have to wait 10 years to get a grant,” Boyle said.
Boyle provided the following example illustrating how the process will play out. The Motown Museum will receive $200,000 annually until 2031. If by 2031, the Community Foundation for Southeast Michigan endowment has generated sufficient funds, the museum will receive a percentage of distributions from the endowment in that year—and potentially beyond. Boyle noted that donors can make additional contributions to boost the endowments’ value and sustainability.
The Wilson Foundation is also dedicating $500,000 annually in each region to support mostly small to medium-sized organizations, plus $250,000 in annual funding to help both community foundations manage endowments and grant programs.
“A valid and important narrative”
The foundation’s $200 million arts commitment was over two years in the making. Given the amount of work involved, Boyle said we shouldn’t expect another similarly huge announcement in the immediate future.
That said, the foundation still plans to turn off the lights in 2035, so it’s only a matter of time before we hear about other grantmaking developments across its key focus areas, which include caring for younger adults, green infrastructure projects, career training and workforce development, encouraging youth participation in sports and recreation, and of course, entrepreneurship and economic development. The foundation will continue to lean heavily on intermediary funders like community foundations throughout this process.
As for any advice he’d give to other nonprofit arts leaders, Boyle said they “shouldn’t shy away from touting their economic development impacts on their communities. That is a valid and important narrative that I would lift up as they talk to other funders.”