At the end of 2013, in response to low interest rates, the Law Foundation Board of Governors decided to reduce its grants budget. This article sets out details of the cuts and explains the process the Board went through in making these difficult decisions.
At its November 2013 meeting, the Board decided to reduce the grants budget from $19.6 million in 2013 to $16 million for 2014 and years going forward. This was a difficult decision that was made after serious discussion and consideration of the principles developed by the Board in 2012. Those principles are that the Foundation will:
- fulfill its statutory mandate,
- remain a stable and effective organization,
- produce the greatest value for the poor,
- recognize the importance of delivering services to disadvantaged people,
- give a direct benefit to the public of Foundation funding,
- provide maximum benefit to British Columbia,
- minimize harm to grantees as much as possible, and
- take into account alternate funding that may be available to grantees.
Recognizing the need for ongoing work in the community in our five statutory mandated areas, the Law Foundation continues to do its best to give priority to ongoing programs and services in the face of persistent financial constraints. Nonetheless, the Law Foundation has had to make significant reductions to funding for continuing programs, and to project funding.
The Foundation worked hard to be strategic in its approach and, accordingly, made the following budget reductions, which will take effect in the next funding cycle (i.e. 2014 and beyond). While final decisions remain to be made by the Board, affected programs have been advised to apply for less money in their next application.
- Budgets for project funding and professional education were decreased significantly at least, in part, because cuts in this area did not result in a loss of existing staff positions.
- The overall funding strategy was also informed by the reviews of work being done in the mandate areas of legal research, public legal education, public interest law and professional legal education.
- There was some rationalization of funding amounts for a few advocacy programs but often these budgets were already very limited so cuts in this area were limited.
- In reviewing the funding of several of the largest groups funded by the Law Foundation (Legal Services Society, Courthouse Libraries BC, CBA, Law Society) the Board made reductions of approximately 18% in each group’s budget, a percentage amount equal to the percentage reduction of the total grants budget.
- In keeping with the Foundation’s mission statement “to advance and promote a just society governed by the rule of law through leadership, innovation and collaboration,” both the Foundation’s Strategic Initiatives Fund and a project fund were retained to ensure that the best new, innovative project ideas can be advanced. These funds, however, were significantly reduced from previous levels.
- The Law Foundation, adhering to the 10 per cent administrative costs guideline that it applies to grantees, reduced its own administration budget and cut two staff positions in 2013.
It should be borne in mind that the funding reductions described above are not expected to be temporary or one year measures. The annual grants budget of $16 million is based on what the Law Foundation believes to be a sustainable funding level, taking into account both periods of low income and high income. The Board has no desire to engage in such a significant budget cutting process again in the near future, so it has worked hard to achieve a level of funding that will hopefully provide stability to grantees for some time to come.
Specifics of grants made in 2013 are set out in the list of “Grants Approved” on the Law Foundation website.
Given the cyclical nature of interest rate income, the Board has pursued a strategy of accumulating any income in excess of the grants and administration expenses in a Grant Stabilization Fund, with the expectation of drawing down the Fund during lower income years. For each of the last six years, the Law Foundation has drawn down the Fund to meet the shortfall between our income and our annual grants budget. Over the past 5 years the Fund has been reduced from $42 million to $27.8 million. The drawdown on the Fund for 2013 was approximately $4 million.
In 2014, the Board is prepared to use the Fund in order to continue to support the important work done by our grantees. The Law Foundation anticipates that, even with a reduced grants budget of $16 million, it may be required to draw down the Fund by up to $5 million. This is primarily due to ongoing low interest rates, which are expected to remain low throughout 2014. Even when interest rates do begin to rise, an increase of close to 0.5% in the prime rate would be required in order for the Law Foundation to “break even” at its new, reduced funding level. As well, any economic slowdown in British Columbia could result in declining trust balances, which would also adversely affect the income of the Law Foundation. Even when revenue increases, an immediate priority for the Law Foundation will likely be the replenishment of the Grant Stabilization Fund.
While it is difficult to predict the future, particularly when dealing with interest rates, based on current economic predictions the Law Foundation does not expect to reduce its grants budget below $16 million in 2015. Law Foundation governors and staff will continue to work hard to ensure that the Law Foundation is receiving the income it should, at the best rate of return possible. Other ongoing work will look into possible new income sources. The Foundation will also foster collaborative work among grantees to make the best use of resources.
In 2013, the Law Foundation funded programs that:
- provided advocacy services to over 89,000 people,
- completed over 100 test cases or regulatory hearings,
- contributed to training almost 1,000 law students,
- produced over 126,000 copies of legal education resources,
- did significant law reform and research work, and
- supported law libraries and PLEI collections throughout BC.
The Foundation appreciates the work of all grantees this year to help Law Foundation governors and staff to make informed decisions about funding and to make the best use of limited resources to support access to justice for the people of British Columbia.