After foundations increased their grants to charities by double digit percentages for two years, most are now settling back to pre-pandemic giving increases, and a growing number plan to give less this year, according to a survey released Thursday.
Last year foundations made $26.1 billion in grants, a gain of 3 percent, according to a survey of 557 private, community, and corporate grant makers conducted by Candid, an organization that researches foundation practices.
This comes after grant-making budgets grew amid the economic and health needs prompted by the pandemic and calls for racial justice that began in 2020 and continued into 2021. In 2020, grant totals surged by 24 percent, and the following year they increased by 12 percent, said Grace Sato, director of research at Candid.
The more modest gains weren’t enough to keep up with inflation, which increased at an 8 percent clip last year. About four in 10 foundations increased their giving by at least that amount. The eroding value of foundation grants made it hard for many grantees to cover their costs, Sato said.
“The value of the dollar that had been donated declined even while their own expenses increased,” she said. “It has really put a strain on nonprofits.”
In what Sato called a “striking” response, more foundations (27 percent) reported that they expected their grant making totals to decrease than those that expected an increase (23 percent). The other 50 percent predicted no change in grant totals. Sato said it was the first time in the seven years Candid has conducted the survey that more foundations expected a decline than an increase.
Assets Drop
Some written responses accompanying the survey pegged the pessimism about this year’s grant making to reduced asset values and more grim assessments of stock-market performance.
In 2022, the median payout rate for private foundations was 5 percent — the exact proportion of their assets they are required to make in charitable disbursements each year under federal law. About half of the private foundations surveyed kept their 2022 payout rate the same as the previous year, and 22 percent cut their payout rate.
Corporate foundations registered the biggest gains in 2022, with grant totals increasing nearly 12 percent. Grants from community foundations increased 4 percent, and those from private foundation grew by just under 2 percent.
Sato said she hesitates to draw any major conclusions about the relative gains made by different foundation types. She called the survey an early indicator of foundation activity last year and noted there weren’t enough foundations in the sample to make concrete statistical observations.
The foundations that participated in the survey represent an estimated 15 to 20 percent of foundation giving. Candid plans to follow up in the coming months with additional survey data on foundation grants for general operating support and the impact of inflation on foundation grants.
