At the end of February, one of the philanthrosphere’s most influential players, the John D. and Catherine T. MacArthur Foundation, announced a decision to boost its annual payout rate to “at least” 6% for the next two years. Citing “the cliff of funding from federal programs” that are being destroyed by the Trump administration and Elon Musk’s Department of Government Efficiency, MacArthur President John Palfrey highlighted the threat to “decades of work and investment” in areas from arts and culture to public safety, local media and scientific research and wrote, “The need for a surge in funding is plain. Philanthropy needs to step up. We at MacArthur believe it is time to tap our reserves to get more money flowing.”
On the same day that MacArthur announced its increased payout, the Freedom Together Foundation (formerly the JPB Foundation) announced an even larger hike: the $2.7 billion funder said that its board had decided to move 10% “or more” of its endowment.
Meanwhile, a small regional funder has been moving even larger chunks of its available funds. The Woods Fund Chicago, a $45.7 million grantmaker dedicated to promoting social, economic and racial justice, is bumping its payout rate to 14% this year and isn’t stopping there — the funder has committed to a 15% payout in 2026.
Taken in context with its smaller peers, MacArthur’s payout bump is underwhelming. As my colleague Mike Scutari reported last year, MacArthur’s payout rate was already at 5.5% over a five-year average. Half a percent isn’t that big a leap for a funder that reported $8 billion in net assets in 2023. But that isn’t the same as saying this move will have no impact. As one of the best-known U.S. foundations, MacArthur’s influence reaches well beyond its grants — as evidenced by the coverage its announcement has already received in outlets including the Associated Press, US News and World Report and Fortune. Palfrey is also a demonstrated instigator in the field who has proven his ability to bring peer funders together. MacArthur’s move may also shine a greater light on the Woods Fund and possibly other grantmakers that are taking approaches to giving that their larger peers would do well to emulate in these critical times.
Palfrey is definitely eager to have the conversation. “I believe that, at a minimum, what this should do is to prompt a serious conversation across our field to say, ‘what does it mean for us to invest more when the social return is highest?’” he said. “What does it mean to invest more when the benefit of our investment would have the greatest return for our mission, rather than saying, ‘How do we have an approach that feels like a computer is figuring out when we should spend more, because the markets have gone up.’”
At the same time, the additional money that MacArthur and Freedom Together plan to move is far from negligible. Collectively, these billion-dollar foundations will grant an estimated additional $550 million over the next two years.
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MacArthur decided on its payout bump with remarkable speed for a large legacy foundation: Palfrey said the board voted on the hike by unanimous consent via email on Feb. 18. “It was not a close call for our board to say we can and should do more,” he said.
The Woods Fund, on the other hand, has been increasing its payout since 2020, when it boosted its rate from 6% to 7%. Since then, Woods has bumped payout three more times. Its most recent increase, in 2024, set the rate at 13%. Woods Fund Chicago President Michelle Morales explained her organization’s funding increases in August of last year during Black Philanthropy Month. The Woods Fund chose this approach, Morales wrote, because the funder’s board “determined that we wanted to turn the concept of being fiduciarily responsible on its head. Traditionally, fiduciary responsibility emphasizes adherence to a minimal payout, protecting the corpus so that it can continue perpetually. At WFC, we believe we are fiduciarily responsible to the community and prioritize impact over returns.”
The Woods Fund has been able to reach a payout rate that puts its larger peers to shame by moving all of its investment returns out the door in grants rather than holding back a percentage of those returns to grow the foundation’s endowment. This approach might seem impossible for funders like MacArthur that have a perpetuity requirement written into their charters. But the Woods Fund’s experience seems to indicate that much larger payout rates are far easier to achieve than most of the philanthrosphere assumes — despite its small size, Morales wrote last August that the grantmaker hadn’t touched its corpus. (The Woods Fund isn’t alone in the double-digit payout fund club; the Gates Foundation, Simons Foundation, Bloomberg Family Foundation and Walton Family Foundation are all members.)
Freedom Together is also no stranger to higher payouts. Last year, its average payout rate over a five-year timeline was 7.4%. The foundation decided to boost that percentage again last summer because “our board determined that, regardless of the election result, the struggle to defend and expand multiracial democracy would continue to be the defining challenge of our time and that philanthropy has a crucial role to play,” said President Deepak Bhargava in a statement provided to Inside Philanthropy. Bhargava said that the additional funds will include “both rapid-response grants to communities and organizations under attack, as well as support for long-term strategies to get at the roots of the democracy crisis.”
Democracy isn’t the only thing facing a crisis as a result of the Trump administration’s slash-and-burn approach. As Inside Philanthropy has reported, federal cuts are putting nonprofits — and the communities they serve — at great risk while potentially slowing the economy (and thus, boosting the need for nonprofit services) through mass firings of government employees and probable job losses in the nonprofit sector.
In other words, the philanthrosphere isn’t facing a five-alarm fire: It’s facing multiple blazes burning at alarm rates that haven’t been invented yet. Funders have a decision to make, while they still can, in the face of these multiple, overlapping and self-reinforcing crises. “I have been challenging our sector to rethink our role as funders during a time in which federal funding is being weaponized and pulled from nonprofits doing the critical work in our communities,” the Woods Fund’s Morales said. “Do we sit aside and allow these nonprofits to close their doors or decrease their impact? Or do we release more funds — increase our payouts — so that they, and in turn our communities, continue to thrive during these unprecedented attacks? This is a less a question and more a call to action for all of us.”
