Earlier this year, with the Trump administration poised to decimate large swaths of crucial funding for the nonprofit sector, leaders at the Prebys Foundation, the largest independent private foundation in San Diego County, sensed that its grantee partners would be confronting unprecedented and potentially existential challenges.
“Life sciences and biotech were under immediate threat,” said CEO Grant Oliphant. “We quickly radiated from that to look at our work among other areas, and the arts were front and center.”
Unfortunately, we know what happened next. The National Endowment for the Arts and National Endowment for the Humanities terminated previously earmarked grants, leaving grantee leaders to contend with a gaping hole in their organizations’ revenue bases. While some philanthropies have stepped up with funding lifelines — such as the Mellon Foundation’s support for humanities councils — the situation is dire. Moreover, in San Diego, arts nonprofit leaders told Oliphant and his team they were having trouble plugging gaps because many of their donors had pivoted toward other areas that had been subjected to federal funding cuts, like housing and food security.
Oliphant and his team crunched the numbers to determine the most effective way to provide organizations with short-term assistance while preserving the foundation’s long-term grantmaking capacity. “We calculated for this year — and we believe this will be true next year as well — that we could go $25 million above and beyond our normal grantmaking,” he said, “and still preserve our assets for the long haul, for the good of San Diego.”
On September 16, the foundation announced the results of its exercise — $13.375 million in emergency funding to 61 San Diego arts and culture organizations.
At a time when countless foundation decision makers are grappling with how to respond to the administration’s cuts, the Prebys Foundation’s strategic calculus underscores how a funder can dig deep to keep grantees afloat while not jeopardizing its ability to get grants out the door long-term.
“We believe there are short-term periods where foundations, if they can, should go above and beyond to respond to the immediate needs of the moment,” Oliphant said. “And so we’ve worked really hard to try and balance that.”
A bit of background on the Prebys Foundation
Born in South Bend, Indiana, in 1933, Conrad Prebys moved to California in 1965 with $500 in his pocket. He immersed himself in San Diego’s real estate industry and accumulated a vast portfolio of properties. Named one of the 25 most generous people in the world by Business Insider in 2012, he passed away in 2016, leaving almost the entirety of his fortune to the foundation that bears his name.
The Prebys Foundation launched in 2020 and dove into its first year of extensive grantmaking in 2021. It has approximately $1.2 billion in net assets.
The foundation’s primary focus areas are medical research, healthcare, arts and culture and youth development. In addition, “we have a lot of work that we’re doing at the intersections of those things in the context of all the pressures society is under today,” Oliphant said. This work includes disbursing grants earmarked for organizations engaged in work on climate change, journalism and a culture of belonging.
Of the foundation’s $13.375 million in emergency funding to San Diego arts and culture organizations, $8.625 million came in the form of unrestricted general operating support to 22 nonprofits. The tranche also includes $4.75 million for venues and spaces funding to 39 organizations to “preserve and enhance affordable, accessible places for creativity and connection.” Recipients included cultural anchors like La Jolla Playhouse, the San Diego Museum of Art and the San Diego Symphony, as well as an array of grassroots community art groups.
“What we rolled out was 100% a result of a conversation that we had with a cross section of our grantees and our board early in the summertime,” Oliphant said. “We asked them, ‘What if you could write the ticket for what you need in this moment, understanding that it couldn’t be repeated or repeated too many times?’ And the round of funding that we rolled out was effectively designed by them in that session.”
The administration’s actions have had a chilling effect on donors
Every funding leader I’ve spoken with over the last nine months has told me that federal funding cuts have affected grantee partners across the board, and Oliphant was no exception. “We’ve had organizations all across our portfolio that have lost substantial amounts of money,” he said.
The Prebys Foundation’s conversations with its grantee partners in the arts and culture field painted a disconcerting picture. Losing funding was bad enough, but what was equally alarming was that the administration took an axe to what have been top priorities for arts funders across the last decade — diversifying audiences and boosting accessibility.
“One of the themes that emerged from our conversations with grantees was that they were losing money for any effort that was designed to diversify their audiences or attract new audiences,” Oliphant said. “Any money that had to do with community outreach and engaging the community more broadly — those funds were being cut.”
Moreover, grantees told Oliphant and his team that the hostility emanating from Washington, D.C., has had a chilling effect across its donor base.
“The other piece of this is — let me see if I can state this succinctly — fear,” Oliphant said. “I think there is a cross-current among donors who are wondering where organizations are in terms of what they’re allowed to do and what they’re allowed to say. This has been such a chilling time where there are clear efforts to intimidate organizations out of doing certain types of work, and that goes upstream to the donor community.”
The ripple effects don’t end there. The arts and culture field has always had to contend with the perception that it ranks toward the bottom of society’s hierarchy of need. But the administration’s assault on civil society has been so widespread that some donors are redirecting funding that would have normally gone to an arts organization toward affected groups in fields like food security, housing and public health.
“Donors have been hearing from organizations across the community about significant impacts on the work that is being done,” Oliphant said. “This is everything from medical research institutions that are losing hundreds of millions of dollars, down to an arts organization that lost $20,000. Each cut is significant in its own way, but if you’re a donor in the community, it’s a lot to hold in your head.”
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How the Prebys Foundation balanced short- and long-term priorities
Now we come to a particularly interesting aspect of the Prebys Foundation’s funding lifeline to arts organizations. It involves arithmetic.
If a foundation drums up funding to assist organizations reeling from federal cuts and wants to maintain its perpetuity by sticking to predetermined spending levels — which, for the sake of argument, might mirror the IRS-mandated annual payout of 5% — basic math suggests the funding can’t be a permanent line item; otherwise, the grantmaker has to cut funding elsewhere or chart a path toward spending down.
The Prebys Foundation aims to serve San Diegans for the long term, so its leaders determined that the $13.375 million in emergency funding wouldn’t jeopardize this goal as long as it was a short-term infusion. Oliphant stressed that it’s incumbent on leaders to communicate the time-limited nature of any funding lifeline to grantee partners. “You don’t want to send a jolt through the system that provides just a momentary level of support and an expectation that can’t be met in the future,” he said. “We have been very clear about the unlikelihood of this continuing for multiple years, so what we’re trying to accomplish with them is in the near term.”
With this funding making its way to San Diego’s arts and culture organizations, the Prebys Foundation has been pressing ahead on its other priority areas.
On September 25, it was joined by two of San Diego’s other largest funders — Price Philanthropies and the San Diego Foundation — in announcing an initiative, called United for San Diego, to safeguard access to food, housing and healthcare as the region braces for the loss of more than $300 million a year in government funding. The three funders pledged to increase their combined annual giving by $70 million to support the effort and called on San Diegans to contribute to the San Diego Unity Fund, housed at the San Diego Foundation, which will channel funding to front-line nonprofits.
Five days later, the Prebys Foundation and San Diego County Supervisor Terra Lawson-Remer announced a $500,000 grant to support the county’s Immigrant Legal Defense Program. Toward the end of the month, the foundation will announce a set of healthcare grants as part of its United for San Diego commitment.
“What is clear is we’re not going back in almost any area of our work to the way things, quote-unquote, ‘used to be,’” Oliphant said. “So in every one of our areas, we’re having conversations with our partners about, what does the future look like, and how do we help you get there?”
