Limited Life: Trends, Strategies and Concerns of Foundations Spending Down
Spending down, one of the hallmarks of Parker’s philanthropic manifesto, is a topic of interest among the broader philanthropic community and a trend that reaches beyond Parker’s tech mogul audience.
A 2009 study conducted by Foundation Center found in that year, 12 percent of the 1,074 foundations surveyed had plans to spend down, 63 percent banked on perpetuity and 25 percent were undecided. While 12 percent seems modest at first glance, a deeper dive reveals that foundations founded since 1980 were most likely to have plans to spend down, otherwise known as limiting life, supplying strong evidence that this trend will grow into the future as new foundations are founded. Inside Philanthropy’s profile of an emerging “army” of tech donors, following Parker’s call to spend down, certainly lends credence to this projection.
Regardless of the source of their wealth, philanthropists’ decisions to spend down are often motivated by similar considerations. Most commonly, foundation leaders are concerned with mission drift and fear that perpetuity can lead to a distortion of the founder’s intent. Limited life proponents also argue that spending down leads to greater impact; spending more money in a shorter period could be an effective way to solve urgent problems sooner. Others choose limited life in order to evade the distractions of asset growth and maintenance costs, claiming that the pressure of maintaining perpetual viability diverts substantial energy and resources from the mission.
But thought leaders also note that defining the lifespan of a foundation brings its own concerns and challenges. Proponents of perpetuity worry that spending down can cause grantees who have become dependent to flounder when the funding recedes or, in some cases, an entire field to lose support after a foundation exits the scene. There are also concerns regarding foundation staff and the difficulty of maintaining talent through the process of spending down. Many limited life foundations, like The AVI CHAI Foundation and the Atlantic Philanthropies, acknowledge these dangers and have developed exit strategies that seek to aid staff through the transition and help grantees develop independent capacity for funding.
Ultimately, it is up to each foundation and its leaders to decide what is best for the mission. Moving forward, as foundations continue to consider spending down, perpetuity may cease to be the default model of philanthropy, producing substantial implications for the landscape of grant-making and grant-seeking in the American nonprofit community.