A free-falling economy, a skittish legal community, and soft funding support did not deter the Columbus (Ohio) Bar Foundation from spending $27,000 this spring in a place that needed help: a shopworn waiting room used by alleged victims of domestic violence and their families.
Economic woe could have easily served as an excuse for the foundation to forgo refurbishing the room, says Marion Smithberger, the foundation’s executive director. Smarting from investment losses and lower dona-tions, the foundation instead chose to make a statement in the Columbus community.
“We wanted to send a steady message and not portray a crisis,” he says. “When you’re in a down cycle, you can’t stop helping.”
Tales of dramatically lower fundraising totals, endowments battered by the plunging stock market, slashed grants, and layoffs have permeated the foundations community over the last several months. The CBF, like many others, has not been spared, as the foundation raised about 10 percent less in 2008, compared with a year earlier. Even harder hit are foundations and programs funded primarily by IOLTA, which have seen funding declines of
70 to 80 percent in some states (see “IOLTA foundations struggle to avoid free fall,” page 10).
And to make matters more worrisome, many of the access to justice programs often aided by bar foundations are seeing the demand for services swell as more people in need are affected by foreclosure, unemployment, and other economy-related issues. In short, these are some of the most challenging times foundations have ever faced.
While the future of some bar foundations and the programs they support might seem murky, the CBF and others are retrenching in hopes of surviving the economic downturn. Maintaining public visibility, continuing fundraising efforts, and refocusing on core missions are just some of the approaches bar foundations are using to stay at or near the status quo—and they’re seeing some success.
But the biggest fear for many foundations is the unknown: How long will this economic malaise last? Will it have a long-lasting impact on how foundations do business?
They are difficult questions at a time when there appear to be no easy answers.
Inside the crisis
Some of the statistics compiled by the Arlington, Va.-based Council on Foundations—which represents some 2,000 foundations and grantmaking organizations—are sobering. In a survey of more than 400 members issued in March, the council reported that:
| Three out of four foundations saw their assets decline by 25 percent or more by the end of 2008. A stagger-ing $200 billion in foundation assets were wiped away by the market decline. | About half (48 percent) of foundations said that they will reduce the value of their total grantmaking for 2009 by 10 percent or more. | About 45 percent of foundations eliminated salary increases, while another 27 percent instituted hiring freezes, 16 percent eliminated positions, and 6 percent laid off staff.
“[Foundations] are cutting travel, they’re cutting professional development, they’re reducing staff, and they’re cutting grantmaking,” says Janne Gallagher, general counsel for the Council on Foundations. “You see people look-ing more at pooling grantmaking to try and triage need. I think everyone is struggling about what to do with a situa-tion that is so immense.”
What has startled so many foundations, Gallagher and others say, has been the swift and deep economic decline that doesn’t look the same as previously predictable boom-and-bust economic cycles.
“We thought December was our bottom, and then the January numbers came in,” says Amy Sings in the Timber, executive director of the Montana Justice Foundation. “We’ve seen a tiny bump up in February and March—not much. Some people are talking two or three years before things turn around.”
The MJF receives the bulk of its funds via IOLTA, Sings in the Timber says, and in a two-month span (October to December), the average interest rate offered by participating Montana banks plunged from 1.25 percent to .05 percent.
The economic collapse was also evident in Columbus in late 2008 and early 2009 as plans were made for the foundation’s annual major fundraising gala in April. The 2008 event sold nearly 300 tickets and drew three Platinum Sponsors ($7,500 each) and 16 Gold Sponsors ($5,000 each) from among the city’s top law firms and other organi-zations, Smithberger says.
The 2009 gala had no Platinum Sponsors and 10 Gold Sponsors and sold about 250 tickets.
The Allegheny County (Pa.) Bar Foundation recently lost a sponsor for one of its largest fundraisers, and a $1 million, five-year capital campaign due to conclude in 2010 might need to be extended to allow for more time to collect on previously pledged funds, says Lorrie Albert, director of the foundation.
While West Virginia has not seen as deep an economic downturn as other states—it’s one of just seven states without a budget deficit this year—attendance was off by 25 percent at this year’s West Virginia Bar Foundation Bar Fellows Dinner, according to Tom Tinder, the foundation’s executive director. Tinder attributes much of the drop to an unusually small number of new fellows but says there is little doubt that the slumping economy also played a role. “Everybody is in the same boat,” he says.
At the same time that bar foundations are battling to maintain revenue, the organizations that rely the most on foundation grants are being stretched in the other direction with increasing demands for service.
The Montana Legal Services Association has seen the number of new callers on its statewide help line jump from 420 per month in 2007 to more than 500 per month in 2008, with another increase likely this year, Amy Sings in the Timber says. An informal survey conducted by the San Diego County (Calif.) Bar Foundation found that some of the access to justice organizations it supports have seen the demand for their services double, according to Briana Wagner, the foundation’s executive director.
“Foundations have to decide carefully how they’ll respond,” says Wagner, who is also the president of the Na-tional Conference of Bar Foundations. “The current phrase out there is, ‘Level [funding] is the new up.’ ”
Cutting, but cautiously
While there might be some budgetary fat to trim from some of the nation’s largest foundations—which often have dozens of staff members and healthy development budgets—most bar foundations have few dedicated staffers, lim-ited resources, and already “run pretty lean,” Wagner says.
That leaves limited opportunities for bar foundations to cope with shrinking donations and greater demand for help. Among the targets, Wagner says: sending fewer staffers and members to conferences, freezing salaries, and cutting or shifting grants to the organizations they serve.
Small bar foundations in particular are looking more closely at measures such as eliminating support staff and combining more functions with bar associations, says Kim McKelvey, executive director of ALPS Foundation Ser-vices, a consulting firm focused on bar foundations. Understandable as it is, McKelvey believes this cost-cutting move is not the best idea.
“If you remove the admin staff, you’re left with an executive director who’s performing administrative functions, and that takes [development] time away,” she explains. “It has the potential of compounding the problem, instead of helping it.”
One trend that has emerged in this era of challenged fundraising is more careful analysis of where funds are go-ing, McKelvey and others say. “There’s a focus right now on basic human needs,” McKelvey notes. “This is a great opportunity for foundations to talk about how they meet those needs.”
The San Diego County Bar Foundation’s board of directors, for example, took a closer look at its resources and the needs of its grantees during its most recent round of funding, Wagner says, and “we decided that delivery of le-gal services [to the poor] was our most critical work, so we decided that we would give those organizations more.”
As in San Diego County, the chilling economic climate led Columbus Bar Foundation board members to talk more intently about the foundation’s core mission. That, in turn, led to warnings to the foundation’s grantees that funding could be cut.
“We told them, ‘Things have changed. We have to look at things differently now,’ ” Smithberger says. “We have close relations [with grantees], so we could have candid discussions with them and manage expectations.”
Similar board discussions were held by the Chicago Bar Foundation in the face of a 10 percent decline in fund-raising, according to Bob Glaves, the foundation’s executive director. “We asked ourselves, ‘What is our mission? What are we trying to accomplish, as opposed to what is achievable in the short term?’ ” That analysis led to the decision to eliminate a planned staff position, while scaling back the foundation’s recently stated goal of doubling its grants by 2011.
Foundations are also responding in different approaches to fundraising. The Philadelphia Bar Foundation’s an-nual Andrew Hamilton Gala was a social highlight for Philadelphia lawyers—as well as a major fundraiser, says Amy Ginensky, the foundation’s president. But as planning for this November’s gala began in earnest earlier this year, questions quickly arose.
“I thought, ‘Are firms willing to spend $350 a head this year?’ ” Ginensky says. “Some people were saying, ‘How can you have this big, fancy party when lawyers are getting laid off?’ ”
The result, she says, is that the gala will instead be a “benefit” this year—complete with more casual dress—and the ticket price has been cut from $350 to $175. The foundation hopes to make up for some of the per-ticket revenue loss by marketing the benefit more aggressively to increase attendance, and by focusing its marketing more toward individual lawyers, and less toward revenue-strapped law firms.
And to meet the increased demand for service among the foundation’s grantees, the foundation is tapping its smaller, but still sizeable, endowment. “That’s our mission,” Ginensky says. “We felt like we should not retreat.”
The Allegheny County Bar Foundation’s major fundraiser last year featured a paid speaker from out of town, Al-bert says. This year’s event will feature a local speaker who will receive no fee and incur no travel costs. “We’re being more conservative with our spending,” Albert notes.
Making noise, staying visible
Carefully watching spending is vital for foundations as they ride out the economic storm, foundation leaders say. That does not mean, however, that foundations need to stay on the sidelines in the legal, philanthropic, and general communities where they operate.
“Everybody is cutting back, but we still have to make noise,” Albert says. “It’s important to stay busy.”
An increasingly important aspect of Marion Smithberger’s job is to encourage the foundation’s volunteer fund-raisers who are finding trepidation and outright fear among donors.
“I try to manage expectations,” he says. “I tell them that a lot of their visits aren’t going to end up in a gift right away. Several donors have told us, ‘I’ll give you half now, and the other half next year.’ ”
Glaves says it’s a critical time for bar foundations not to back away from providing grants, for two chief reasons: It keeps the foundation’s name in people’s minds for future giving, and it fulfills the foundation’s core mission to help.
“These are times when we as a legal community need to step up,” he says. “We don’t want to compromise our ability to be there [for legal services organizations]—and not just with the money we give. You have to be out there saying that the need is even greater.”
The Chicago Bar Foundation recently hired several new people with the chief goal of doubling the foundation’s grants, and while the foundation has scaled back some short-term goals, Glaves says, the foundation remains com-mitted to meeting its long-term goal without cutting staff.
McKelvey agrees that cutting staff is dangerous and says studies show eliminating development positions leads directly to decreased revenue. She fears that small bar foundations in particular, with little or no reserves, will make quick decisions to cut staff budgets, undoing years of work spent building them.
Her advice to foundation directors: “Market the work that you do more than you ever have before.”
Hope for the future
Many bar foundation directors and observers agree that, in many ways, the economic gloom surrounding the current climate for giving is warranted, and seems unlikely to lift any time soon. Yet, many agree that there are signs of hope that point toward better times ahead.
Among the positive findings in the recent Council of Foundations survey: Contributions to foundations increased 3 percent in 2008, and more than 80 percent of foundations say they will maintain or increase the amount they grant.
“People are frightened, but they’re also concerned about other people,” Wagner says. “We’re exploring a special campaign, and I think we could see other bar foundations doing the same thing.”
Ginensky adds that today’s tough times have inspired many foundation volunteers to offer their services and to work harder to help those who are worse off.
Smithberger and others say it is more important than ever for foundations to focus on those core missions and show the entire community that the legal community is committed to helping, even when things seem at their worst. That’s why the Columbus Bar Foundation’s commitment to alleged domestic violence victims and their families was so important to maintain, he says.
“Foundations have to be part of the vision of hope for the future,” Smithberger explains. “It’s our job to always have a vision of what can be in our community.”
IOLTA foundations fight to avoid free fall
Amy Sings in the Timber knows about the highs and lows of IOLTA funding. In 2007-08, the Montana Justice Foundation brought in a record $778,000 from IOLTA funds to be distributed to legal organizations helping the poor.
The amount for 2008-09? $420,000. The projection for 2009-10? Just $300,000.
The results were immediately felt by the foundation’s grantees, such as the Montana Legal Services Association, which provides civil legal assistance to the poor. The association closed two outreach offices in the sprawling state and eliminated 10 positions, including six full-time lawyers.
“We had to go back and take a look at why we were established,” Sings in the Timber says. “This requires rally-ing the support of every attorney in Montana to save this. The average person just doesn’t understand what civil le-gal aid is.”
A powerful combination of rapidly falling interest rates on lawyer trust accounts and an economy-fueled drop in funds going into those accounts has left many IOLTA-funded state foundations reeling. The decline has led to ser-vice and grant cuts and prompted IOLTA recipients to scramble to find solutions to prevent even deeper declines.
“This is deep, this is long, and it will hurt everybody,” says Jon Asher, director of Colorado Legal Services and chair of the ABA Commission on IOLTA. “It’s hard to generalize, because IOLTA is so state-specific, but it ain’t good.”
Different state laws about what funds go into an IOLTA fund and how much interest it can garner contribute to the uneven effects the economy is currently having in each state. In Montana, for example, banks face no require-ments and are currently paying interest rates in fractions of a percent. Other states have rules that require banks to pay a minimum interest rate or to offer other account options that can return more on investments.
The rapid economic changes and ways to respond to them have generated a greater interest in the work of the ABA Commission on IOLTA, Asher says. The commission provides information, advice, and training related to IOLTA. Further information can be found on the ABA Web site at: www.abanet.org/legalservices/iolta/.
Such information might prove helpful in Montana, where Sings in the Timber is preparing an effort to encourage state lawmakers to require banks to provide a minimum interest rate on IOLTA funds—or floor—that would be higher than the current fractional interest rates.
Asher adds that other state legislative initiatives nationwide, such as court-related surcharges and filing fees, might also play a role in funneling more funds into programs aimed at providing civil legal assistance to the poor. He says lawyers are key to the survival of such vital programs that are now threatened.
“We need a combination of the profession stepping up and lawmakers stepping up,” he says. “Civil justice is a responsibility of the broader general public.”