(Illustration by Peter Grant)
In a moment of dramatic threat to our work and our communities, giving must be driven by the needs of the moment—not by the performance of our assets. If we in the philanthropic sector are committed to giving our partners the support they need, we cannot cleave to a traditional 5 percent payout.
In many ways, the threat we face now is unprecedented: The current US administration has shown it will wield funding and nonprofit tax status as compliance weapons against everyone from research institutions to immigrant-rights groups. We have already lost critical work and resources.
But we do not have to look far back in time to find a helpful analogue. At the onset of the COVID-19 pandemic, funders were faced with the challenge of supporting ongoing priorities in combination with a destabilizing crisis that urgently demanded new interventions. In response, we at Woods Fund Chicago made two radical changes to the way we resourced our partners: We shifted to a model of trust-based philanthropy, and we significantly increased our payout.
An Ethic of Fiscal Responsibility
When COVID began to take hold, we recognized that the community organizing and public policy ecosystem that we fund was going to need even more financial support. Community organizing and policy advocacy are historically underfunded, receiving less than 3 percent of philanthropic spending. In the pandemic, these organizations took on the additional labor of leading mutual aid efforts in their communities even as they—like the rest of us—scrambled to adapt to a new landscape of risk and remote work. It was clear that we could not adequately support our partners without increasing our giving.
Like many foundations, our investment policy statement (IPS) directed our investment managers to maintain our assets in perpetuity. Historically, that meant we were a foundation that paid out at 6 percent annually. But in 2020, our board decided to operate outside the IPS and to begin increasing our payout. We increased to 7 percent in 2020, 7.5 in 2021, 8 in 2022, 11 in 2023, 13 in 2024, and 14 in 2025.
Fiduciary responsibility has long been used to ensure protection of a foundation’s endowment, with an explicit goal of perpetuity. But in a crisis, how can we justify perpetuity as a guiding star? The narrow definition of fiduciary responsibility that guides most of our investment policy statements comes at the cost of a broader ethic of fiscal responsibility—one that means showing up when it matters most and not pulling back, and one that strengthens communities by putting endowments to work now, rather than saving them for some uncertain future.
We shifted our focus to strengthening the organizing and advocacy ecosystem, embracing a new framework for what it means to be fiduciarily responsible. We increased grants to existing partners from $15,000 to $35,000 and from $35,000 to $50,000, and we began implementing multiyear grants. We also expanded our portfolio with a focus on our funding gaps, increasing funding for Black-led and Indigenous-led organizing. Instead of maintaining and growing our endowment into perpetuity, we are putting it to work now in service of our fiduciary and ethical responsibility to communities of color in Chicago.
How have we afforded to do this? In 2020, our board decided to invest the total returns of our assets in our partners, rather than reinvesting a portion of them to grow our endowment. That yielded a flexible approach as conditions change: In 2027, we will return to an 11 percent payout. Because we knew we had flexibility, our 14 percent payout this year has allowed us to stand firm in our commitments and to provide critical support to our grantee
partners facing government cutbacks.
This process of reframing does demand a looser hold on an organization’s perpetuity, but sustainability and bold giving are not mutually exclusive—we’ve proven they can go hand in hand. As we structured stepping up our payout and making multiyear grants, we pushed out our financial map, creating longer-term forecasts to ensure we could hold firm to our commitments.
Embracing Trust
The second major action we took was to deepen our commitment to trust-based philanthropy.
Woods Fund Chicago recognizes the critical movement building that grassroots organizations do, and that knowledge shapes our commitment to trust-based philanthropy and capacity building. Increasing our payout has enabled us to be responsive to grantee-partner needs and to the needs of the larger organizing and advocacy ecosystem in Chicago. Critically, we have shifted 95 percent of our portfolio to multiyear general operating grants.
These shifts to disrupt the long-standing power dynamic between philanthropy and our grantee partners have made our giving more effective. General operating funds allow the nonprofits we support to remain nimble in the face of changing terrain. During COVID, our community-organizing partners shifted universally toward mutual aid, going where the need was; they were hamstrung by funding that lagged behind their work.
As a former nonprofit leader, I know all too well the anxiety of worrying about whether your funding will be renewed. Multiyear grants allow grantee partners to plan and commit, rather than forcing their work into a cycle of requests and reports. And shifting to multiyear grants—and a single annual grant cycle—allowed our team to deepen their relationships with the grantee partners in their portfolios, taking on the work of due diligence that previously fell to our grantee partners. Instead of spending time reading renewal applications and conducting site visits, our program officers have check-in conversations with grantee partners. These conversations give us much deeper insight into the actual challenges and barriers encountered not only by individual organizations but by the entire ecosystem, giving us the data we need to inform additional mechanisms of support.
Acting With Courage
The crisis is here: About 25 percent of Woods Fund Chicago grantees have already lost federal funding and had to shrink services this year. Yet even that statistic belies the broader impacts of both expired COVID-era funding—which has affected the majority of our partners—and cascading harm as funders reallocate resources: Another 25 percent of our grantee partners have been told foundations are restricting funds or shifting priorities. Our partners and communities need bold support for both emergency interventions and long-term base building. To meet this moment, we must increase our giving and reject a narrow definition of fiduciary responsibility.
After decades of divestment in national well-being, nonprofits have become the American safety net. Under a federal government that has withdrawn from its obligations to our country’s most vulnerable, it is our nonprofit sector that works to ensure our communities can thrive and that has taken up the mantle of justice for all.
As our most vulnerable neighbors are being targeted, the organizations best equipped to support them are being forced to cut back or even close their doors. If we believe in our partners, we cannot preserve our endowments at the cost of their survival. If we do not act with courage now, we must ask ourselves, What principles are we serving?
This series appeared in SSIR’s Fall 2025 Issue, including a new follow-up essay from MacArthur Foundation President John Palfrey.
Read more stories by Michelle Morales.