The challenges created by a capricious and morally untethered federal government haven’t abated, and every day nonprofits are adapting to step into the breach. They’re redesigning food distribution networks, organizing responses to new immigration policies and actions, sustaining crisis services despite funding cuts, and finding new ways to make public media resilient.
Across the sector, nonprofits are adapting with urgency and creativity to do the important work that people of all ideological perspectives and parties need them to do. Those efforts are ready for, and need, funding, and while funders of all types have a role to play, the long time horizons of perpetual foundations in particular should allow them to be a counter cyclical force, as others have argued. So, the question now is whether institutional philanthropy will move quickly enough to support nonprofits. That will require more foundations to consider stepping up from default payout levels.
This should be possible even without meaningfully threatening the long-term power of perpetual foundation endowments. Foundation assets have continued to grow, often faster than giving. According to Giving USA, giving in 2025 from foundations was up by about 3% in inflation adjusted terms compared to 2024 — about $117 billion vs. $114 billion. This is an important increase after two years of no meaningful growth in giving, but it’s much smaller than, for example, S&P growth of double digits in each of the last three years.
Make the Payout Conversation Concrete
It can be hard to make payout conversations feel real to a board that often has them on the backs of seemingly objective financial analysis and recommendations from self-confident investment advisors whose incentives naturally emphasize preserving assets. So, I’d suggest shaking things up by holding an actual board debate with sides assigned and argued out.
After all, the assets are the means, not the end. The duties of care and loyalty call on board members to steward a foundation’s assets in ways that best advance its charitable mission.
This debate could engage two key questions:
- What’s our best approach to setting payout now given our assets in light of nonprofit opportunities and needs?
- How could increased giving be most effectively used, if it were available?
Deciding to step up giving from somewhere close to the mandated 5% floor is unlikely to be a simple decision, so it helps to have peer leaders practically demonstrating the way. John Palfrey at perpetuity-focused MacArthur Foundation, in particular, has been outspoken on the need for funders to increase payout. MacArthur’s 2025 payout rate landed at 7.1% and $190 million more than anticipated at their original payout target. Let’s be clear. The additional $190 million wasn’t money added to a balance sheet somewhere else. It became meals served, journalism protected, energy systems strengthened, and countless other public goods. MacArthur joins with 48 other funders in signing the Change Philanthropy “Level Up Pledge” to increase giving, and I know there are others that quietly are giving more.
But not enough are doing so yet. The most recent data from Candid suggests most funders have not increased their payout, and data from upcoming CEP research shows that the overwhelming majority have a grant payout level that is typical relative to past years.
Guiding Questions for a Mission-Focused Debate
Perpetuity is a strategy, not a mission. So, as boards hold the mission-focused board debate about payout that I’d propose, I’m sure board members will want to grapple with at least two questions. (I’m going to provide a starting point answer for the increase payout side of the argument because, given funder behavior, I don’t think the other side needs much help.)
Question 1: “If we step up now in response to this crisis, won’t we have less to give in the future?”
Answer: The evidence suggests it’s possible to step up meaningfully, at least for while, and still maintain or even grow assets over time — even if investment consultants and chief investment officers are urging to you take a “prudent” approach in an uncertain environment.
Sure, if the goal is simply to maximize the sheer number of future dollars available, then every funder would always opt for something close to the legally minimum payout. But “not maximizing future assets” isn’t the fear I hear discussed most often. The real concern, often sounds somewhat different: “If we give more now, we might shrink.” But the data doesn’t seem to bear that out.
To get a sense of this, the pandemic can serve as an object lesson. It was the exact kind of moment that drives this shrinkage worry. In fact, at the time, some funders were very publicly making arguments about not “locking in losses” and avoiding “selling while down.” Nonetheless, many large funders that are managing themselves for perpetuity and grappling with complex illiquid assets did step up their giving even in the face of incredible financial uncertainty and volatility.
In looking at the 990-PFs of 10 of the largest perpetuity-focused funders without living donors, all had nominal asset increases between 2019 and today. Most had inflation-adjusted asset increases, even as many also surged giving during the pandemic. Cumulatively, they’re now giving more than $1 billion more annually than they were in 2019. This is far from shrinking and it suggests they could have increased payout even more … and that they likely could do so now.
The experience of these large funders mirrors a broader trend. From 2015 to 2025, aggregate foundation assets as tracked by the Federal Reserve have grown at least as fast as foundation giving as tracked by Giving USA. In aggregate, total foundation assets from 2019 to 2025 increased in percentage terms a little more than total foundation giving.
Question 2: “Are there effective uses for increased giving we might do?”
Answer: “Yes — but I don’t think it’s a trivial question.”
In some venues, the answer to this question gets reduced to quasi-moral terms: “Nonprofits simply deserve more money, and funders, which don’t deserve to have it, are hoarding it.” I don’t see it that way. What we as a society deserve is to have communities that thrive in a better and more just world. The collective work of funders and nonprofits are essential to achieving that goal. But not all challenges are equally important, and not all nonprofits (nor funders) are equally effective. So funders have to grapple with how to deploy resources wisely. In fact, it’s their job to imagine a future that doesn’t yet exist, to find nonprofits imagining the same, and to get resources in nonprofits’ hands to achieve it.
I think funders with an open application process have an easier answer to the question of how to effectively deploy increased giving. Given that the reason most applicants are declined is that the funder received “too many good proposals and there wasn’t enough money to go around,” then the next un-made grant probably has about the same effectiveness as the last one approved. Directing more increased giving to “good” nonprofits or projects should not be a problem.
For invitation only funders, answering this question might be more challenging, but my conversations with program officers suggest they have a next tier of organizations that fit their strategy well and from which they would have liked to invite an application.
For either type of funder, if internal capacity doesn’t exist to process fully new grantees, funders could consider unrestricted, add-on organizational effectiveness gifts, which — at least according to Grantee Perception Report (GPR) data when we see this happen from time to time — can make an immediate additive difference. After all, we know that nonprofits are hard at work adapting to ensure their programs meet this moment.
The temptation funders feel is to wait until a perfect new strategy emerges. A better approach is to capitalize the organizations already adapting and evolving — while also building new funding approaches for whatever comes next.
The question isn’t whether last year’s payout rates were high enough. The past is the past. The question is whether they’re the right rates for this moment. That’s, at the very least, a debate every board ought to have right now.
Kevin Bolduc is vice president, Assessment and Advisory Services, at CEP.
