Gates Foundation pruning grant growth

The Bill & Melinda Gates Foundation is scaling back planned growth in its grant making next year in response to the economic downturn, Chief Executive Jeff Raikes said Friday.

In an open letter posted on its Web site, Raikes said the Gates Foundation would increase its payout by about 10 percent over 2008, but that growth is less than what it originally planned before the financial crisis. The foundation projects it will make about $2.8 billion in grants in 2008, according to the foundation. Payouts are slightly higher because they include administrative costs.

The foundation had previously projected it would give away $3.2 billion a year by 2009, thanks to a gift distributed annually by investor Warren Buffett. As a nonprofit foundation, it's required to give away at least 5 percent of its assets a year, but the Gates Foundation typically pays out slightly more than that.

Neither Buffett nor foundation co-chair Bill Gates, the world's two richest men, has been immune to the economic crisis. The Gates Foundation's endowment dropped by $800 million between June and October. The value of the endowment was $35.1 billion in Oct. 1, down from $35.9 billion in June, according to the organization's Web site. In July, the foundation received an installment of $1.8 billion from Buffett. The gift comes in the form of Berkshire Hathaway B shares. On Friday, those shares were down by about 35 percent from the same time last year.

One of Raikes' first tasks since taking the helm in September was to address the impact of the downturn on the foundation and its work.

"The financial crisis is affecting everyone, from our foundation to our partners," Raikes said in his letter. "We know that it has hit our grantees, and the people they're trying to help, especially hard.

"Nonprofit groups rely on steady funding to carry out their work, but with an uncertain economy and a volatile stock market, funders are having an increasingly difficult time meeting their commitments."

Raikes stressed the importance of staying focused on foundation goals of increasing opportunities in the United States through education and improving health and fighting extreme poverty in developing countries.

He also said he asked employees to reduce expenses to keep operating costs low.

The foundation will encourage others, including governments, businesses and foundations, to continue funding toward those goals, even in tough times, he said.

"When government officials write next year's budgets, it may be tempting to cut back on the very programs our grantees care most about," Raikes said.

Kristi Heim: 206-464-2718 or kheim@seattletimes.com