In the first piece of this series, we introduced the tidal foundation as an alternative to the fixed choice between perpetuity or spend down. In this piece, we will get a bit more practical: How do board members and leaders decide when the tide should rise?
The conventional approach often starts with what a foundation can spend while preserving or growing its endowment. Investment advisors model returns, inflation, fees, and payout over time. Those projections are useful, but they can also turn the 5% IRS minimum into a default ceiling.
A tidal foundation asks a broader question: When do mission and changing conditions justify spending more? Fiduciary duty requires board members to consider both the foundation’s charitable purposes and its long-term financial capacity when making that decision. Boards should weigh the financial implications of higher payout alongside the risks of holding resources back when organizations face deep strain or communities have created a real opening for lasting change.
New York Foundation (NYF) and Marguerite Casey Foundation (MCF) come to this conversation from very different financial positions. NYF has an endowment of approximately $60 million. MCF’s has, at times, reached $1 billion. That difference is one reason we developed this series together. Responsive payout is not limited to foundations of a particular size. Higher spending may reduce a smaller foundation’s assets more quickly, while a much larger foundation may substantially increase grantmaking and still maintain or grow its endowment.
No universal spending rate defines responsible stewardship. Boards must understand the financial implications and governing obligations of their choices, but responsibility is not measured only by preserving assets for the future. It also requires deciding when those assets can best advance mission.
We asked Trish and Ian, the board chairs of NYF and MCF respectively, to reflect on three questions that may be useful to other board members and foundation leaders navigating these choices.
What information did your board need before deciding to spend more?
Trish Adobea Tchume: Our board needed several credible spending scenarios and a clear understanding of what each would mean for NYF’s grantmaking, operations, and long-term capacity. We have been building a stronger learning culture where trustees with varying levels of financial or field expertise can all engage meaningfully with the choices and tradeoffs. The board also needed direct insight into what grassroots organizations were experiencing, where additional funding could strengthen their work, and what opportunities might be lost if the Foundation waited.
Ian Fuller: MCF’s board needed to understand how different payout levels would interact with the size and structure of the endowment across a range of market conditions, particularly in the context of maintaining the Foundation’s ability to operate while also meeting contracted capital commitments to private investments and other obligations. We also needed to examine whether our level of giving was proportionate to the scale of the Foundation’s aspirations for mission impact relative to the resources we hold. Financial projections and scenario modeling were important, but they could not answer the essential question of whether continued endowment asset growth would more effectively advance the mission than increased grant deployment.
How did the board balance current needs with responsibility to the future?
Trish: We did not frame the choice as present versus future. We asked how NYF could provide more during a consequential period while remaining a steady, long-term funder of grassroots organizations in New York. A multiyear plan with regular opportunities to reassess gave the board confidence that increased spending could be both responsive and disciplined.
Ian: We focused on preserving the Foundation’s ability to act over time, not the oft-cited preserving the purchasing power of the endowment at a particular size. That meant establishing a meaningful level of giving, understanding how the portfolio might perform under different conditions and investment market cycles, and retaining the flexibility and understanding to adjust as circumstances warrant. We also considered whether investing more in strong organizations now could create durable benefits well into the future. Or, said in traditional fiduciary terms, what is the present value of the Foundation’s future grantmaking to our grantee partners now?
What practical advice would you give other board chairs?
Trish: Make payout a full-board strategy discussion. Investment and finance committees should test the financial assumptions, but every board member needs enough information about mission, field conditions, and grantmaking priorities to participate meaningfully. The board chair can help ensure that financial expertise informs the decision without narrowing it.
Ian: Ask advisors and committees to present more than one credible path and explain the assumptions behind each. Then ask a harder question: What level of assets does the foundation actually need to fulfill its purpose? Board chairs should ensure that board members meet their fiduciary responsibilities by weighing advancement of the organization’s charitable purpose and the interrelated responsibility of long-term financial stewardship alongside the mission rationale for deploying more, rather than complacently defaulting to the scenario that preserves the most capital.
Reading the Tide: Governance and Payout
Trish’s and Ian’s reflections point to a broader lesson: Payout decisions should not rest on one persuasive presentation, individual leader, or single board committee. They require a consistent, rigorous process for board members and staff to weigh financial capacity, mission, changing conditions, and other relevant considerations together.
Five governance practices can ensure that payout decisions are addressed through the same structured processes foundations use for other major decisions.
Make payout a full-board strategy decision: Spending decisions often sit with investment or finance committees because they are charged with evaluating endowment performance, risk, and long-term sustainability. That expertise is essential, but it should not be separated from mission, strategy, field conditions, grantmaking priorities, and operating needs. The president and board chair can work together to bring these perspectives into one process and ensure the full board owns the final decision. This brings financial expertise together with the knowledge and perspectives of other board members, allowing the full board to apply its collective judgment to how the foundation’s resources can best advance mission.
Adopt a spending policy that connects mission and finance: In 2019, NYF adopted a new spending policy, influenced in part by Dimple Abichandani’s “A ‘Balancing Test’ for Foundation Spending.” It asks board members and staff to consider financial capacity, current conditions, mission priorities, and the opportunities increased spending could advance. It establishes a spending range while allowing the board to move outside it when circumstances justify doing so.
Align the investment policy statement with the spending policy: The spending policy should guide how payout is determined, while the investment policy statement translates those choices into the return objectives, liquidity needs, risk tolerance, and asset allocation required to support them. Aligning the two institutionalizes a more responsive approach rather than requiring the board to reopen the same assumptions each time it considers spending more. It also sets clear expectations for investment advisors to model multiple payout paths, explain the assumptions and tradeoffs behind each, and adapt the portfolio to support the board’s mission and spending decisions.
Create regular, low-burden ways for the board to hear from the field: Boards should hear directly from grant recipients and field leaders about changing conditions, emerging opportunities, what additional resources could make possible, and the consequences when funding falls short. These opportunities should be designed carefully to inform board members without creating unnecessary preparation or reporting burdens for organizations. This grounds payout decisions in more than staff analysis and financial projections.
Document the rationale and revisit it regularly: Boards should record why they selected a particular payout path, what assumptions informed it, and what conditions could lead them to adjust. Revisiting that rationale over time makes spending more disciplined, transparent, and responsive rather than episodic.
The Cost of a Low Tide
The goal is not for every board member to become an investment expert. It is for every board member to understand that fulfilling fiduciary duty requires informed judgment about how the foundation’s resources are held, invested, and spent over time.
Financial risk matters, but so does the cost of waiting. When funding falls short, organizations lose staff, advocacy efforts lose momentum, and opportunities to shape policy, secure public investment, or build community power may be missed.
The question for boards is not only, “What are the long-term financial implications of higher payout?” It is also, “What becomes possible if we act now, and what may be lost if we wait?”
Carmen Rojas is president and CEO of the Marguerite Casey Foundation. Rickke Mananzala is president of the New York Foundation. Ian Fuller is chair of the Marguerite Casey Foundation Board. Trish Adobea Tchume is chair of the New York Foundation Board.
This is the second in a four-post series on the tidal foundation. On September 24, investment leaders from the New York Foundation and Marguerite Casey Foundation will explore how tidal stewardship extends beyond payout to aligning investments with mission, public purpose, and opportunities for local impact.
