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Our Voice: Time-Tested Models in Regional Community Philanthropy

April 2008 - This essay by McKnight president Kate Wolford appeared in the Council on Foundation's journal Philanthropy and Rural America.

The following essay by McKnight president Kate Wolford appeared in the Council on Foundation's 2008 Philanthropy and Rural America, a journal designed to capture some of the best ideas from some of the best minds in philanthropy engaged in helping rural America. This is the first of a series of journals on relevant topics for the field of philanthropy from the Council on Foundations. 

With relatively few exceptions, philanthropic resources and direct service efforts have historically focused on the population magnets of larger cities and towns. Most foundations are based in large metropolitan areas — and many towns that lie between those metro areas also lie between our country's philanthropic cracks. Given the interconnections among urban and rural economies and issues, however, foundations are wise to consider appropriate and cost-effective ways to engage in areas beyond our immediate horizon.

I am pleased that the Council is calling for an increased philanthropic presence in rural America while also advocating that the public sector do its part to make policies and investments in support of small towns and rural communities. At the McKnight Foundation, we have experience with one such model of engagement that has worked well in Minnesota. Our experience could help others find both inspiration and practical steps to build local capacity and assets in areas other than large metropolitan centers. The McKnight-supported Minnesota Initiative Foundations present a viable, time-tested model that has provided McKnight with a great return on investment and a legacy we are proud to share.

Rural Coalitions Help Minimize Effects of Rural Collapse

Although McKnight had previously funded limited charitable programs statewide, an important evolution in our rural funding occurred 22 years ago. By the mid-1980s, economic markets in farming, mining and lumber were imploding throughout rural Minnesota. Facing unprecedented challenges statewide, McKnight's directors looked for a smart way to lend a hand. Upon visiting at length with leaders and citizens in small towns and regional centers, the board determined that the people of rural Minnesota themselves possessed the knowledge and resilience to best address their own economic and community challenges — they simply needed appropriate resources, organizational capacity and a workable system to help facilitate their efforts.

In 1984, McKnight president Russell V. Ewald spoke at a rural meeting of the state's philanthropic leaders. He explained, "The McKnight Foundation is ready to commit staff time and dollars in a process which will forge a coalition of providers and funders; governmental units consisting of representatives of the state, county and city levels; nonprofit and for-profit organizations; voluntary organizations; and citizens throughout the rural areas of the state. These coalitions would be on a regional basis, as yet undefined, and would work on solutions to the many problems that abound in our rural areas. This concept is in the idea stage and we would urge your participation in its development along with your positive response to the concept and its potential."

McKnight's board and staff were confident that such a rural coalition could do more to help Greater Minnesota than one institution could do alone. They met with dozens of Minnesota's rural leaders to consider funding structures and strategies, with an end-goal both to help minimize effects of the rural economic collapse and to better prepare for the future. The result was the 1986 founding of six regional foundations, together known as the Minnesota Initiative Foundations, or "MIFs." The MIFs were established with an initial commitment of $15 million from McKnight, joined with a $2 million investment from the State of Minnesota.

As conceived, each of the six MIFs is independent, with its own specific geographic scope, board of directors and distinct identity. The initial decision to establish six separate regional foundations — rather than one statewide foundation with a rural focus — proved to be a key element of the MIFs' long-term success. A self-determined regional focus allowed each MIF to dig in deeply into its particular context, prioritizing issues and programming accordingly.

Given the speed and severity of Minnesota's rural collapse in the '80s, it was clear that grantmaking alone couldn't turn the tide. Any full-scale solution would need to save jobs, convert entire rural economies and help new business grow and flourish. So McKnight launched the MIFs as a unique hybrid, with a dual mandate split between loans to support business and economic development, and grants and direct service to support social development — each exact balance of the two designed and implemented in response to the particular needs and issues of each MIF's region.

This was somewhat risky business, admittedly, entrusting decision making and control to newly created organizations, with untested approaches to foster both economic and social development. But the approach keyed off the Foundation's willingness — to release constraints on resources, to make a long-term commitment and to weather the inevitable bumps in the road that come with a new organization or new approach.

With self-determination on its side, each MIF customized a business development and loan program for its own region. Across the board, the six MIFs support smart entrepreneurs through business development loans and other means, fostering a healthy regional economy grown directly from regional resources. They strengthen their local communities through work in human services, employment support, leadership development and community capacity-building. Over time, several of the MIFs have chosen to incorporate elements characteristic of community foundations, such as donor-advised funds and community funds, to further increase opportunities for harnessing local philanthropy in their regions.

Though a gamble 20 years ago, the MIFs have evolved into strong and vibrant innovators and thought leaders in their respective regions. With a 20-plus year track record of measurable results, the MIFs have also established credibility as trusted local conveners, bringing together the private sector, public officials and community leaders to forge solutions to pressing issues while creating broad opportunities in their communities.

Although I wasn't around when McKnight's directors first established the MIFs, I am delighted daily to witness impacts of the relationships we have cultivated together since then. To achieve our goals, McKnight has settled into a five-year funding cycle with each of the six MIFs, with our commitments to be put toward operating expenses, programs and endowment. This stability in periodic core funding has enabled each MIF to spend time and energy strategically while remaining flexible enough to address emerging issues as needed.

Over time, McKnight's steady commitment has also provided space and confidence for relationships among us to evolve on all sides. We have been permitted to accompany the MIFs in their work, as a sounding board, as an advisor and as an invested funder. We have had opportunities to nudge as well as reward. The partnerships' longevity and effectiveness confirm the wisdom of investing in local leadership to shape local economies and communities.

During their first two decades, the MIFs received around $200 million from The McKnight Foundation. McKnight generally offers part of its funding to the MIFs as a "challenge grant," requiring each to raise additional funds before it can receive a certain portion of McKnight's grant payment.

In line with our desire to encourage local philanthropy statewide, these matching grant challenges have also helped encourage the MIFs toward more successful fundraising. From their local regions, the MIFs have raised significant funds to support programs as well as their endowments. Combined, the MIFs have converted those contributions into some 3,000 business loans statewide totaling over $130 million; 12,000-plus grants in local communities totaling nearly $100 million; 26,000 jobs across their six individual regions; plus stable endowments that currently total more than $150 million, with revolving loan assets of more than $60 million.

Minnesotans in all corners of the state benefit from capacity-building direct support services and leadership training, as well as programs to provide advocacy, resources and education in support of families and communities. Throughout the state, MIF-supported business development programs create jobs and opportunities for long-term impact and diversified economic stability. Nonprofit providers are bolstered through supportive, regionwide grants and capacity-building services. And lenders are taking advantage of investing in regional economic opportunities, with emerging fields such as renewable energy quickly entering the mix.

McKnight's staff and board are committed to our mission, and care deeply about the Foundation's impact on improving the lives of others. The MIFs' efforts in Greater Minnesota are critical to our own efforts to fulfill that mission; they go places and touch people that we couldn't even approach without their relationships and leadership. Collectively, they have played a central role forging formidable local coalitions in pursuit of statewide school readiness for all children. In their home regions, they provide loan support for entrepreneurs and entire industries, helping to transform Greater Minnesota's ingenuity and rich resources into locally produced goods and services to be shared with the state, the nation and the world.

The MIFs have had a profound impact in rural Minnesota. Throughout the U.S. today, the need for similar strategic regional planning and workforce development has never been more critical. With a longtime state-based focus, McKnight invested in direct grants to rural nonprofits for years before founding the Minnesota Initiative Foundations. But by committing to this multifaceted partnership for more than two decades so far, we have maximized returns on the investments of both McKnight and the State of Minnesota, as well as the many local communities that now support — and are, in turn, supported by — the MIFs.

Maximizing Dollars to Build Local Assets

Even from their big city bases, foundations can support rural needs in many ways. As far as I know, however, the Initiative Foundations are a unique model nationally: tied over time to a committed urban foundation partner; designed to be fully independent and increasingly self-sustaining; tapping the ideas and resources of people across rural communities to address their own local social and economic development goals.

As Russ Ewald suggested in his 1984 comments to the state's philanthropic leaders, McKnight hoped such a strategy would help encourage a more robust philanthropic and social support network across Greater Minnesota. In addition to the jobs created, loans approved, grants paid and services provided, the MIFs' combined current assets still roughly equal McKnight's long-term investment — a terrific example of how one foundation can maximize dollars to build local assets.

Guided by the expertise and foresight of excellent staffs and boards of directors, the Minnesota Initiative Foundations have increased their impact year after year, addressing emergent issues and seizing opportunities. At McKnight, we believe that investing in their establishment, development and ongoing strategic efforts has made a pivotal difference in the lives of Minnesotans statewide. For any foundation considering strategies to ensure vibrant rural communities in their own regions, we hope this proven model provides a starting point and insights into the wisdom of this type of investment.

The Minnesota Initiative Foundations

Kate Wolford became president of the McKnight Foundation in December 2006, building upon a career of establishing locally based community efforts that empower individuals to help themselves. Through grantmaking, coalition-building, and policy reform, the Minnesota-based McKnight Foundation supports children and families, the environment, community vitality, the arts, scientific research, and select efforts in Southeast Asia and Africa.

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