Last month, the Amherst Wilder Foundation announced that over the next two years it would cut program funding by 35 percent or more than $20 million and trim 200 of its 525 full-time equivalent staff. While a surprise to most, at Wilder’s top levels, this decision had been gathering momentum for months.
President Tom Kingston said the turning point happened about a year ago. Wilder’s financial advisors delivered the bad news. The foundation historically had budgeted a 10.5 percent annual return on its investments, but for the next few decades they said it should plan to get only 8 percent a year.
Wilder’s endowment investments already were dropping. Plus, for the past five years, the foundation overspent the endowment trying to keep programs afloat waiting for an economic rebound. Wilder also had a defined-benefit pension. As those investments fell, it needed more money to keep them fully funded. (Wilder now is moving aggressively to 401(k) plans.) Compounding the problem, the foundation had built a large human service network by leveraging government and other outside revenue sources. That money was flat or declining.
The changing investment assumptions undercut any cushion Wilder had to maintain the status quo. Leadership wanted to preserve its core investments to serve future generations. It needed to make big cuts.
“We were operating on the model of the Great Society. The Great Society is no longer,” Kingston said. “You look at the national debt and what pressure that is going to play on human services. It is common sense-it is going to have to be taken out on the backs of these discretionary programs.”
There are many similar stories in the nonprofit (and for-profit) world.
In the end, Wilder cut a signature program serving children with severe attachment disorders, an employment program for those leaving prison, housing management work and more. In the weeks leading up to the announcement, Wilder was scrambling.
Kingston and Communications Director Teri Davids sat down with the Daily Planet to discuss the process.
Just like any organization going through tough decisions, Wilder had to think of key stakeholders-staff, clients, funders and others-and how to break the news to them. For months, Wilder’s Board reviewed cutting scenarios. It made its final decision in September. It started confidential meetings with potential partners that might pick up some of the dropped services.
Wilder planned a public announcement for 5 p.m. Wednesday, October 14. The preceding Monday, leaders began making phone calls to key supporters to let them know of the pending cuts. That same day, Wilder had background meetings with Star Tribune and Pioneer Press editorial boards.
Many of Wilder’s program managers knew big cuts were coming, but they didn’t get details until Tuesday.
Staff and clients got the news Wednesday. Wilder pre-mailed letters to clients, such as those in Wilder-managed housing. The children in the residential treatment programs got a phone call letting them know the news. (Kingston said the transition would allow children already in the programs to finish the programs.)
“Within two to three days, we notified over 10,000 people,” Davids said. “They either got a phone call, a letter or an e-mail from us informing them of the changes.”
One glitch: Wilder had e-mails programmed to go announcing the change and because of computer servicing issues, many media didn’t get it.
Wilder held many individual meetings with staff at its 70 programs. Top leadership didn’t know how workers would react, so they had contingency plans to staff programs in case some people were so overwhelmed that they couldn’t make it to work the next day.
Wilder did not need its contingency plan, Davids said. She acknowledges the foundation is asking a lot. “We are saying your job will be ending but we don’t know when for sure. We are asking everybody to stay on until the clients are transitioned. It has been incredibly impressive how the staff have responded.”
What to cut
Wilder asked several key questions in deciding on cuts: Is the program a distinctive contribution? Can someone else do it as well? Is the business viable in the long run? Kingston said Wilder’s endowment is restricted to serving the east metro. Some of its programming had migrated to a regional level. That affected decisions, too.
“Our mission is to serve the most vulnerable,” he said. “We want to do it where our key competencies are. We don’t want to be chasing money.”
Here is Wilder’s rationale for making the cuts it did.
Children’s services: Wilder runs residential programs for children with severe attachment disorders. It has 58 beds, and the program has psychiatric and school components. This was the toughest cut to make, Kingston said.
But the program cost $100,000 per child, he said. Other payers were refusing to cover the increases. Wilder was spending $1.2 million a year from its endowment with no relief in site. Because it is a specialized need, Wilder had become a statewide center. It was serving a lot of kids outside of the east metro.
Wilder has set aside $400,000 to develop an alternative, more financially viable model, he said.
Home health care: Wilder runs home health care and homemaker services, primarily for the elderly. Kingston said Wilder could not afford to $1 million from the endowment to meet gaps in care. Thirty-five different home health agencies serve the St. Paul area, he said. They might not do it as in depth as Wilder, but they do it well. By law, clients have the right to choose what home health agency they want. Wilder is helping clients transition to new providers.
Housing management: Wilder manages six housing properties and owns six properties. It spends more than $1 million a year from its endowment on management services. The foundation was the first in St. Paul to build congregate apartments, Kingston said. Since then, government and other agencies such as Common Bond, Project for Pride in Living and Aeon have gotten involved. “It raises the question, why should we be doing it?” he said.
Wilder will transition its properties and contracts to providers who have a stronger housing management focus.
Employment services: Wilder had developed employment services because of its work with supportive housing. It eventually got a state contract to work with correctional facilities. The state contracts cover the cost of services; this cut doesn’t save Wilder any endowment money. But it is a statewide program, not aligned with Wilder’s core competencies. “It can be done taking our staff and housing it an organization more oriented to employment or corrections business,” Kingston said.
Leadership: Wilder will continue doing leadership programming, but it lost outside funding for the Neighborhood Leadership Program. It got cut.
Wilder also is cutting $1.5 million of endowment spending on administration, Kingston said.