It’s not necessarily the most popular take, but I am not afraid to admit it: I am a believer in long-time horizon — or perpetual — foundations. Like any category of institution, they’re not all equally effective, and I do have a request to make of them (I’ll get to that in a moment), but I think their potential to do good is high.
To be clear, I very much like, respect, and believe in spend-down foundations, too: there are great and powerful examples, from Julius Rosenwald to Irene Diamond to Chuck Feeney, of donors whose approaches to “giving while living” have been downright inspiring — and created a lasting impact. I think MacKenzie Scott is on a similar path (without a foundation in her case). I’d love to see many more follow in these donors’ footsteps.
But I also believe perpetual foundations play a distinct and crucial role. I think the “right” approach — spend down or perpetuity or wait-and-see — is dependent on a donor and foundation board’s values and specific goals. That freedom to decide what time horizon makes sense for a particular donor or board given their objectives is a good thing — it strengthens philanthropy and nonprofits.
Value of Long Time Horizon Funders
There are many who castigate foundations for “warehousing” or “hoarding” wealth, and I get the frustration, especially in the current context of dramatic challenges for nonprofits. But, as a leader of a nonprofit, I have seen the benefits of multi-decade relationships with consistent, longstanding foundation funders. I have also seen the benefits of large one-time infusions of capital from donors like Scott.
I like them both. I wouldn’t want all our funders to be on a rapid path to spend down, but I wouldn’t want only perpetual foundations as funders either. The varied approaches are a strength.
I would note, too, that some of the most powerful (and effective) voices in the foundation world in this tumultuous time have been of those running foundations that have been around for decades. The very fact of these leaders’ institutions’ longevity gives the stances of their leaders more relevance and influence.
I am talking about people on the national stage like Rich Besser of Robert Wood Johnson Foundation. I am also talking about leaders of regional foundations like Angelique Power at the Skillman Foundation in Detroit and Dr. Laura Gerald at the Kate B. Reynolds Charitable Trust in Winston-Salem, North Carolina.
These leaders have used the accumulated expertise, relationships, and reputations of their institutions — qualities that can only be developed over time — as perches from which to push back against government overreach.
Perpetual foundations, when at their best, can be pillars of our civil society and of our communities, and, at times, crucial counterweights to business and government.
All that said, I believe foundations, including those set up to exist “in perpetuity,” should follow the lead of Robert Wood Johnson Foundation, Skillman Foundation, and Kate B. Reynolds Charitable Trust (see their recent announcement and explanation), and others (including those that have signed onto this pledge) and seriously consider paying out at a significantly higher than typical rate now. As I wrote in my 2019 book, “Giving Done Right,” “endowed foundations … should be mindful of their potential to be a countercyclical force, providing support for grantees during … downturns to help offset reductions in individual contributions, government funding, or other earned revenue.”
Three Arguments for Increasing Payout
We know from research we have conducted that many CEOs at perpetual foundations are looking to persuade their boards to step up giving levels in the current moment of crisis. That effort likely feels even more uphill to some now given board members’ nervousness about equity markets that are no longer on what had seemed for a few years like an almost perpetual upswing.
As I noted in January, many boards point to their “fiduciary responsibility” as a justification for keeping payout at or near the required 5% threshold, but this misconstrues the term. It’s perfectly responsible to increase a foundation’s grantmaking in a time of great need or for some other mission-related reason.
So, acknowledging that foundation boards (barring some other limitation imposed by a donor) are free to decide what makes sense above the IRS mandated threshold, as I think they should be, I’d offer these three more specific arguments for those seeking to persuade their boards to do more.
My first argument for foundations to step up payout is perhaps the most obvious: nonprofits are reeling. All the available data, whether from CEP or from others studying what’s happening such as Urban Institute and Candid, point in the same direction. When we surveyed our representative nonprofit voice panel in August and September of 2025, 29% of CEOs had already laid off staff and another 23% thought they would. Nearly two thirds saw the current context as posing moderate to significant risk to their ability to operate.
The strongest case for increasing payout, in other words, is that your grantees — who presumably you have selected based on their ability to achieve goals that matter to you — need more support. It’s about mission.
My second argument is that it is more expensive to start over when vital nonprofits eliminate programs or cease to exist. As Gates Foundation CEO Mark Suzman put it to my co-host Grace Nicolette and me on our Giving Done Right podcast last year, “it’s much easier to lay people off than to hire them back.” It’s crucial that foundations identify grantees that are key to their goals and strategies and help them weather this storm, or they’ll be paying a higher price tag later when programs and organizations need to be built up again from scratch.
I see and hear each week about more nonprofits that are suspending operations or ceasing to exist altogether. Many more are in a sort of “pre-closure” crisis, though they may be reticent to admit it to funders for fear of scaring them off.
The current crisis facing nonprofits is unlike anything I have seen in my 25 years working in philanthropy. Nonetheless, I know foundations worry that the more they spend, the less they’ll have to give when we get through this period.
“What if we had stepped up spending more than we did in response to the pandemic, or the Great Recession?,” foundation board members have asked me. “Where would we be now? We’d have less to give.”
That’s undeniably true, but my third argument for stepping up payout is that the grantees and issues you care about aren’t just funded by you, and there is an opportunity for you to work in collaboration with other funders that share your goals. After all, foundations have much more money collectively than they did 25 years ago — and new foundations (not to mention DAFs and other philanthropic vehicles) are created every day.
In 2001, there was about $440 billion in assets in U.S. foundations and foundation giving comprised 12% of total giving in this country. By the end of last year, there were more than $1.8 trillion in foundation assets — well more than double the 2001 number even in inflation-adjusted dollars. Foundation giving is now (as of 2024, the latest available data from Giving USA) about 19% of total giving.
Urgency of the Moment
The time to act is now, for the sake of the communities that foundations and nonprofits help and the issues they address but also for the preservation of basic tenets of our democratic society that, once lost, could be very difficult or even impossible — not to mention expensive — to get back. Perpetual foundations, with their endowments and long time horizons, are especially well-positioned to act.
Foundations, after all, have become a bigger part of the charitable pie — and that slice is likely to get only bigger still given declining rates of individual giving and dire predictions about the effects of changes in tax law on future giving. Foundation boards have the power to make important choices about payout, rather than simply defaulting to the required minimum.
I really hope they make them wisely.
Phil Buchanan is president of the Center for Effective Philanthropy, author of “Giving Done Right: Effective Philanthropy and Making Every Dollar Count,” and co-host of the Giving Done Right podcast.
Disclosure: The foundations mentioned are clients of CEP’s and several of them also provide grant support to the organization.
Author’s Note: I am grateful to the CEP board members, staff, and others who gave me feedback on earlier versions of this post. That said, as always, these are my individual views and don’t necessarily reflect the views of others at CEP.
