More Minnesota foundation dollars are going to Florida and other states

More Minnesota foundations are shifting their money to organizations outside the state, supporting causes nationwide from Florida to New York and causing some experts to worry that may mean less money for financially struggling local nonprofits.

Steve Paprocki, whose Minneapolis consulting firm, Access Philanthropy, works with nonprofits on fundraising, said more Minnesota executives and donors likely are shifting their philanthropy to Florida and other states where they retire or vacation.

"Smaller organizations ... are suffering from this move of money from Minnesota to Florida," Paprocki said. "They're losing funders. When you lose a funder, it usually means you've lost a funder forever."

Overall, Minnesota foundations still mostly support local nonprofits. But according to a new report by the Minnesota Council on Foundations, publicly supported community foundations sent 22% of their funds outside Minnesota in 2021, up from 13.6% in 2019, as donors directed their dollars all over the country — from Wisconsin and neighboring states to Naples, Fla.

"We always approach this conversation from a deficit mentality like it's either us or them, which is not good for philanthropy," said Jeremy Wells, senior vice president of philanthropic services at the St. Paul & Minnesota Foundation. "I think we need to act out of a spirit of abundance and say it's wonderful that people from Minnesota also want to support other places around the country they care about."

Out-of-state giving at the St. Paul & Minnesota Foundation hasn't changed significantly over the years, increasing slightly from 14% in 2021 to 18% in 2022. That's due to a few grants to a donor's alma mater and southern Florida organizations after Hurricane Ian in 2022, Wells said.

Donors may want to contribute to causes in places where they grew up or keep second homes and that's OK, Wells said. He gives money to his alma mater in North Dakota and lent support to Maui after the Hawaiian wildfires this year. But he said most of his charitable giving stays in state.

"It's not a fixed pie," Wells said. "How can we just figure out how to make the pie bigger?"

While out-of-state giving by community foundations has increased, overall grant amounts from Minnesota foundations also have increased, so Minnesota nonprofits may be receiving more money as well. Foundations distributed $2.9 billion in 2021 — a 38% increase from 2019 — while Minnesotans donated $5.61 billion, up 7.3% from 2019, according to the Minnesota Council on Foundations' new report analyzing most recent tax data.

Private foundations, usually funded by a single wealthy benefactor or entity, give roughly half their money to organizations outside the state and the other half to Minnesota organizations, according to the Council on Foundations report.

Of all foundations, corporate foundations set up by Minnesota-based companies give the most money outside the state — likely because they do business or have offices in other places. Minnesota corporate foundations sent two-thirds of their money elsewhere in 2021, though it's less a portion of their funding than in 2019, according to the report.

Unlike private and corporate foundations, community foundations that get public donations have seen a dramatic increase in the amount of donor-advised funds — often likened to charitable checking accounts, where individuals or foundations can donate cash, stocks or assets to get an immediate tax deduction even if the money doesn't go out right away.

For instance, at the St. Paul & Minnesota Foundation, donor-advised funds make up about half of its assets — about $700 million — and about 14% of that money is paid out each year. As a result, about four out of every five dollars the foundation gives out in a year are directed by donors and not the foundation, Wells said.

What's unclear is whether foundations based outside Minnesota are funneling more money to Minnesota nonprofits since that data isn't tracked.

In 2020, global attention turned to Minnesota after the murder of George Floyd by Minneapolis police set off civil unrest and sparked a racial reckoning. Donors across the U.S. and around the world flooded Minnesota nonprofits and racial justice groups with millions of dollars.

That same year, the Minneapolis Foundation also boosted its share of money going to Minnesota groups, keeping 76% of its money in the state and 80% in 2021. The portion of in-state funding dropped back to 67% in 2023, a more typical amount.

All of the money the foundation controls goes to Minnesota causes, said R.T. Rybak, CEO of the Minneapolis Foundation. But donors can send their money elsewhere, such as universities or for global disaster relief.

"As a community foundation, we're really a philanthropic co-op, so we hold funds for hundreds of individuals who each get to recommend where their own dollars go," Rybak said. "We also make a strong case to invest here."

The Minneapolis Foundation holds annual meetings with donors in Florida and Arizona to specifically pitch the work of Minnesota charities and causes, Rybak said. And, he added, the overall amount of dollars to Minnesota organizations has increased as the foundation's grantmaking has doubled in the past decade to nearly $100 million a year.

Paprocki recently analyzed 1,100 small private family foundations in Minnesota — those that give $1 million or less a year — and found that they increased grants to Florida organizations by $35 million a year during the last four years. His analysis focused only on Florida, he said, because of Minnesota's strong connection with the state for snowbirds and second homes.

One Twin Cities nonprofit he worked with lost five grants last year that it had previously received. Paprocki said all five of the foundations gave more or most of their money to Florida organizations.

"They will be hurting," he said of small neighborhood organizations that rely on foundation grants.

One large family foundation, started by former Best Buy CEO Richard Schulze, also is giving more to Florida causes. The billionaire founder of the Minnesota-based retailer started the Richard M. Schulze Family Foundation in 2004 specifically to help Florida and Minnesota causes.

A handful of grants went to Florida then, but over the years the percentage of grants to Florida has grown to about 40% of its funding, Schulze Foundation CEO Mark Dienhart said. Dienhart said the overall amount of money to Minnesota organizations has grown as Schulze has significantly increased his philanthropy here and in Florida, where he now lives.

This year, the foundation gave a record $25 million to Allina Health in Minnesota and $20 million to NCH Healthcare System in Florida, its largest gift to an organization in Naples.

"There isn't a goal to somehow replace giving in Minnesota with giving in Florida," Dienhart said. "It's a matter of where the opportunities exist."