Foundation sets administrative budget, expects reduced revenues
As money from one source ends and interest rates remain near zero, The Florida Bar Foundation is expecting a dramatic drop in the amount of grants it makes in the 2020-21 fiscal year, according to its budget projections.
The Foundation has not yet begun taking or approving grant applications for next year, but on June 18, its board of directors approved its operating budget for 2020-21. While that approval reflects only the administration and overhead part of the budget, it also had a projection that total grants for the year will be around $8.7 million. That compares with an expected $14.1 million for the 2019-20 fiscal year.
Executive Director Donny MacKenzie said the Foundation has a budget policy that bases grant allocations on a three-year rolling average of its income and sets 80% of that amount for grants with the remainder going to reserve funds. When those reserves reach their goals, 90% can go to grants.
The policy was adopted in the wake of the Great Recession, which brought interest rates near zero and at one-point cut IOTA income about 90% from a peak of more than $70 million.
“The three-year spending average may be small but if we follow the spending reserve policy, we will never go bankrupt,” MacKenzie told the board. He added that no one foresaw the prolonged period of near-zero interest rates that have now lasted for more than a decade.
While the interest rate cuts resulting from the economic crisis brought about by the COVID-19 pandemic are expected to dramatically cut Foundation IOTA income next year, that won’t immediately affect grants. Under Foundation policies, monies collected from IOTA in one fiscal year aren’t distributed until the following fiscal year. So, the reduced revenues from 2020-21 won’t affect grants until the 2021-22 budget.
The past three-year average income, according to Foundation figures, is $9.4 million with $7.5 million available for grants next year and the remainder going into grant and other reserve funds. That $7.5 million does not count about $900,000 the Foundation has accumulated for COVID-19 relief and $282,107 left from an award stemming from a settlement reached by the Attorney General’s Office.
The Foundation board will handle grants at future meetings. At the June 18 meeting, the Board of Directors approved the operating budget, which includes administration, staff salaries, and the cost of administering various programs. That figure was projected at almost $2.9 million. MacKenzie said the operating budget for 2019-20 was originally approved at $3.2 million but is now expected to come in around $2.5 million.
Next year’s operational budget includes $1.6 million in personnel costs, $398,000 in professional services, $168,145 for office expenses, and $395,640 for facilities and equipment.
According to Foundation projections, 89% of its revenues are going to grants or reserves for 2019-20. With lower interest rates and the expiration of the award from the Attorney General’s Office ($25 million spread out over three years) that went to the Foundation, that percentage is expected to be around 75% next year.
MacKenzie likened the overhead to a gas station pump. The maintenance and operating costs will be largely fixed, he said, regardless of the amount of gas pumped.
The Foundation overhead has become an issue as the Task Force on Distribution of IOTA Funds, created by the Supreme Court last year, is working to make recommendations on how IOTA funds are collected and spent. One of its preliminary recommendations is that 95% of IOTA funds be spent in grants to legal aid agencies that either directly help low-income Floridians or support pro bono activities that help them. The tentative proposal would also amend the Bar rule that designates the Foundation as the funnel for IOTA funds and instead allow the Supreme Court to designate one or more fund administrators.
Foundation officials have said the overhead stricture would be inadequate, and noted that Foundation overhead includes administering other monies, such as the award from the Attorney General’s Office, a recent $3.1 million cy pres award from the U.S. Middle District of Florida to help Middle District low-income residents get civil representation, and donations.
