I’ve appreciated seeing CEP’s leaders contribute thoughtful viewpoints in recent weeks on some of the burning topics facing our field. I’m thinking specifically about Phil Buchanan’s column about smart approaches to perpetual funding and Kevin Bolduc’s recent article on increasing foundation payouts.
Both pieces added some needed nuance to debates in philanthropy that are at risk of being overrun by black-and-white thinking.
However, I’m concerned that both unintentionally contribute to a broader narrative that prioritizes spending more as the primary solution to our challenges, while overlooking the importance and urgency of spending better.
For context, the foundation I lead — the Michigan Health Endowment Fund — has increased our annual spending in each of the last two years in response to critical, emergent needs. We’re also set up to be a perpetual source of funding to improve the health of Michigan residents, while working in coordination with “spend-down” foundations on aligned priorities.
So, we’ve heard and answered the call to spend more, and we’ve seen first-hand the value of having a diverse philanthropic ecosystem where perpetual and spend-down foundations operate in tandem to leverage their respective strengths.
At the same time, I think foundations in this moment need to be focused more on improving the quality of their giving than they are about increasing the quantity. I believe that holding ourselves accountable to better core spending has much more potential than incremental increases.
Let’s say, for the sake of argument, that the entire U.S. philanthropic sector had increased its output by 20% in 2025, which would be unprecedented in the history of domestic foundation grant output. These new dollars would represent another $23.5 billion in giving.
However — because foundations are just one piece of a much larger philanthropic pie — in terms of total giving alongside individuals and corporations, it would represent only a 3.8% increase in total contributed income for nonprofits.
If we further estimate that this contributed income accounts for about 21% of total nonprofit income (based on Candid data that excludes hospitals and universities), this means that we’re looking at a less-than-1% increase in bottom line revenues for nonprofits.
In tumultuous times like these, any increase is a win, and that margin could be a gamechanger for some individual organizations. But in the broader context of our goals of building better systems to serve people and society, increasing nonprofits revenues by less than 1% seems like it would be helpful, but not transformative.
So what would be transformative? Coming back to my original argument, we need to focus on spending better over spending more, and then doing both together. That means every foundation should be assessing how it spends all of its grant dollars from year to year, not just the added dollars.
Here are a few things we’ve emphasized at the Michigan Health Endowment Fund to make progress toward this goal:
- Reduce transactional friction, which is a drain on capacity for nonprofits. This means making it easier for nonprofits to identify, ask for, receive, and report on grants. We periodically use CEP’s services to ask grantees how we can keep doing better.
- Increase transactional value by eliminating unnecessary grant restrictions, prioritizing time and flexibility, increasing allocations for indirect costs, or adding capacity support.
- Apply greater focus — this is the hardest and most important step. Every foundation experiences mission and subject matter creep over time, which can be attributable to the preferences of donors, board members, and staff. Diffusing our focus means diffusing our impact, and current circumstances demand the best use of ALL of our dollars. Now is the time to focus on mission, plus the immediate crises faced by those we serve.
I appreciate that Kevin’s piece touched on this need for focus in the context of increased expenditures, and would add that it’s even more important to apply the same analysis intensively to the entirety of a foundation’s long-term grantmaking portfolio.
To be clear, none of my suggestions lessen the validity of spending more. But I am concerned that the urgent and elegant calls to just spend more leave us fixated on the tip of the iceberg. This could let foundations off the hook from doing the hard work needed to find a more transformational path forward. We can all do better, so let’s get to it.
Neel Hajra is CEO of Michigan Health Endowment Fund.
