The Bush Foundation is borrowing money for the first time to spend an unprecedented $100 million on addressing wealth gaps among Native Americans and African Americans.

The St. Paul-based foundation, one of the largest in Minnesota, announced Monday that it will disburse double the amount of funding it ordinarily grants each year. Not only that, it will allocate the money directly to Black and Native American individuals through community-based groups.

To do so, Bush is taking on debt — a rare move in the philanthropy world.

"Racial gaps are very, very profound … [and] new strategies are necessary," said Jackie Statum Allen, a grantmaking director who is coleading the new initiative. "This is a different approach to tackling such a profound problem."

It's part of a growing trend of foundations boosting funding in new ways for communities of color in Minnesota, amid a global movement to advance racial justice following George Floyd's death last year in Minneapolis.

As with the public and private sectors, the nonprofit sector is confronting its own shortcomings — re-examining not just how much money is given to communities of color but reforming philanthropy to ensure that granting decisions, staffing and leadership itself are inclusive.

"I just applaud them for trying something new and different and bold," said Susie Brown, president of the Minnesota Council on Foundations. "This is the time when all sectors, including philanthropy, need to really be thinking differently and trying different things."

Using 'social bonds'

While cities, counties and states often issue bonds to pay for major projects or initiatives, philanthropic nonprofits rarely borrow money. But last summer, the Ford Foundation in New York City announced it would borrow $1 billion through bonds to dramatically increase the amount of money it distributed.

Bush Foundation leaders were inspired by Ford's action to borrow through "social bonds" — money borrowed to benefit social outcomes — to ramp up giving from its usual $50 million a year and do so faster than usual while still maintaining regular grant-giving, Statum Allen said.

Brown said she's unaware of any other foundation in Minnesota that has issued bonds to pay for programs.

"It seems like they really are choosing a new and different approach … $100 million for a single strategy is a very significant amount of resources," she said.

Bush, the third largest private foundation in Minnesota in terms of the amount of money it distributes, has a $970 million endowment and draws about $80 million in revenue a year. Foundations typically must spend only about 5% of the value of their endowment annually, though nationally there's been a push to give more than that to meet growing needs amid the COVID-19 pandemic.

Bush's $100 million commitment is about 10% of the foundation's assets. But because interest rates are so low, Bush leaders said issuing debt was better than drawing down the foundation's endowment.

Last year, Bush did draw more money from its endowment and reserves for an extra $8 million on COVID-related grants in Minnesota, North Dakota and South Dakota.

And Bush will distribute the funds to individuals, not nonprofits as usual. Grantmaking director Eileen Briggs, co-leader of the initiative, said the wealth gap between whites and people of color hasn't been narrowed with grants to organizations, so more needed to be done.

"This is new for us to give such a large amount to a community-based organization that's going to steward those funds … directly to individuals," said Briggs, a member of the Cheyenne River Sioux Tribe.

By the end of the year, Bush will select two "steward organizations" that already work with Black and Native American communities to design grant requirements and distribute the money. The grants, which could be distributed as soon as 2022, will focus on education, homeownership and entrepreneurship; examples are down payment help for purchasing a home, or grants to start up small businesses.

The foundation also is planning to spend an additional $50 million over the next five years through its regular grantmaking programs to nonprofits and organizations to address racial wealth gaps.

Addressing disparities

Many foundations are intensifying their focus on racial equity in Minnesota.

In Minneapolis, the McKnight Foundation so far this year has earmarked $5.4 million for a new grant program focused on economic mobility for communities that include Native Americans and immigrants. The Miami-based John S. and James L. Knight Foundation is dedicating more than $500,000 to create more economic opportunities in St. Paul for communities of color and chart a new approach to public safety.

And last summer, Twin Cities philanthropic leaders created the Philanthropic Collective to Combat Anti-Blackness & Realize Racial Justice with the goals of reforming philanthropy, denouncing racism and raising $25 million for Black-led nonprofits and advocacy groups.

Racial disparities continue to persist in Minnesota between whites and communities of color, especially Black and Native American residents. The median household income among white Minnesotans is $78,000, compared with $55,000 for Minnesotans of color; and 77% of white Minnesotans own a house compared with 44% of Minnesotans of color, according to 2019 data.

A research project led by Professor Samuel Myers, Jr., who teaches at the University of Minnesota's Humphrey School, is evaluating the disinvestment of Black nonprofits in the Twin Cities. While nonprofits led by other communities of color and focused on their needs have seen funding increases, Black-led and Black-focused nonprofits have lagged in revenue.

At the Bush Foundation, Statum Allen said 73% of 2020 grants went toward improving racial and economic equity and 27% supported Native American communities.

"More institutions, more foundations are seeing this need," she said. "I am optimistic and I'm really hoping that it isn't a short trend but that it is the beginning of more equitable and more representative funding."

Kelly Smith • 612-673-4141