In 2008, the John A. Hartford Foundation, along with the rest of the world, suffered through a devastating economic meltdown that we are still feeling to this day, three-and-a-half years later. The Foundation’s assets plummeted by a third, but we were among the lucky ones. Other foundations had to close their doors due to the meltdown and other bad investments, namely the Bernard Madoff scandal.

In order to stay afloat, Foundation staff and Trustees decided they had to take some drastic measures, which ultimately would cause much pain to our grantees in the short term but, hopefully, make them (and us) stronger in the end. While the trustees did “dip into the endowment” and raised grant payments in 2009 and 2010 beyond our standard payout, we felt that we could not weather the storm by dipping further into the endowment, particularly when many of the investments were still valued at distressed prices.

Therefore, we were forced to rescind grant awards already made, totaling in excess of $25 million over a five-year period. In a few cases grants were terminated almost immediately, but even when the reductions were more modest or over more time, they were terribly painful. But the pain to our grantees did not stop there. Even with these lowered commitments, the Foundation was still forced to defer grant payments from one year to the next, creating more hardships for our already strapped grantees. (Our only alternative to the across the board slowing of payout on these remaining commitments, would have been even further rescissions – something we wanted to avoid at all costs.)

We definitely could not have survived the downturn without the help and understanding of our grantees. By accepting deferrals on grant payments owed at the end of one calendar year to the beginning of the next, our grantees, in a sense, allowed us to “borrow” their money in order to keep the grants on our books. While it was extremely painful for the Foundation, it was even more so for our grantees. We are very grateful to them.

Thankfully, it looks as if those dark days are over; light beckons at the end of the tunnel. Our strategy seems to have worked. The Foundation’s commitments to its current grants have almost been paid in full. Although the Foundation has diminished assets and payout targets, which continue to be more than a third less than our highest, four years ago ( $760 million in assets and $30 million in grant payments per year), the Foundation is ready to ramp up its grantmaking again in the area of Aging and Health. With preexisting grant commitments diminishing each year in the future plus our obligation to pay out roughly 5 percent of the endowment in grantmaking activities each year, Foundation staff are strategizing on how best to utilize this “new” uncommitted money. Beginning in 2013, the Foundation will be able to pay out between $18 million and $19 million a year in new and existing commitments to its grantees.

I and all the Foundation staff hope we never have to experience such a dramatic downturn again. Grantmaking at the Foundation virtually came to a full stop for a three-year period (we awarded only 21 grants in the area of Aging and Health in that time) while we gave ourselves a chance to catch up to our remaining grantee commitments. Foundation staff worked tirelessly to help make this transition as easy and painless as possible for our grantees. As the Grants Manager, I guided grantees in the process of rebudgeting their decreased grant awards and getting used to the new payment structure. Program Officers helped them to regroup, restructure, strategically plan, and diversify their own portfolios by finding other sources of funding outside of Hartford, which in some cases was their only source of support. Even though the Foundation and Foundation staff had long relationships with many of our grantees and our grantees understood the dire situation that we faced, it was still a hard pill for them to swallow.

To reduce the likelihood of having such gigantic swings in payout in the future, we are using a revised calculation of our payout target for grants. In down markets this revised method will slow the reduction in our payouts while in up markets it will tend to hold back increases in payout. By reducing the volatility in our grant payout targets, we hope to be able to provide more consistent support in the future.

As Nietzsche’s saying goes, “That which does not kill you makes you stronger.” Although painful, the economic downturn in 2008 may have been a blessing in disguise. The crisis allowed the Foundation, and in turn our grantees, to regroup, refocus, and prioritize activities and strategies with fewer available resources. We now hope to emerge stronger from this crisis, better able to grow the field of geriatrics in the United States while we carry out our mission to improve health care for older adults.