Forged In Crisis

Forged in crisis in 1986, the Minnesota Initiative Foundations have become a model for rural philanthropy, economic development and forward thinking.

Turnout was high, and the temperature was higher, remembers Ken Trom, who drove from his home in Blooming Prairie to add his voice to a conversation taking place in coffee shops, school auditoriums and conference rooms in rural communities around the state.

The question on the table: What will it take to get Greater Minnesota working again?

While the nationwide recession was nearing its end, rural Minnesota was still reeling from almost a decade of bad news: mass layoffs in the mining industry on the Iron Range, a farm crisis that had foreclosed fifth-generation farms, major losses in manufacturing jobs and a steady migration of young people who could no longer see their future in Greater Minnesota.

From Trom’s point of view as a small town banker, “The economy was a shambles, and there was just no capital to get things going. We were educating our kids, then watching them move away to earn their living. It was all outflow.”

Minnesota’s rural areas could foresee little relief from philanthropic investments, which accounted for just 9 percent of charitable dollars contributed in the state in 1982, compared to 66 percent for the metro area. Alarmed by the growing disparities between urban and rural community assets, the Minneapolis-based McKnight Foundation, then the state’s largest philanthropic organization, set out on a series of road trips across the state, following the headlines and visiting hard-hit areas.

Using the state’s Regional Development Commission regions as a road map, McKnight Foundation CEO Russ Ewald, board chair Virginia McKnight Binger and other members of the family-led foundation “traveled around the state, hauling a trailer full of their luggage, and did a whole series of listening sessions,” said Neal Cuthbert, McKnight’s current vice president of program. After more than a year of community assessment meetings and less formal conversations with farmers, miners, civic leaders and small business owners, McKnight trustees knew a recovery plan for rural Minnesota couldn’t be driven from an office in Minneapolis. Instead, they committed to an unprecedented strategy to create six separate regional entities across the state—the Minnesota Initiative Foundations—with missions and priorities that would be set by the people they served.

At the first regional priorities meeting for what would become the Southern Minnesota Initiative Foundation, Trom remembers the heat in the second floor room was stifling—yet more than 30 stakeholders stayed through the night. “It must have been a hundred degrees up there, but that meeting started, and holy smokes, it went on all the way until morning,” he said. McKnight senior program officer Nancy Latimer led the discussion, “and we came up with a whole wall full of ideas and then we grouped them into four columns—economic development, human needs, natural resources and rural leadership,” Trom said. “Those were the four areas where we thought we could start making a difference.”

As morning came, the meeting finally broke up, but the plan the group outlined for their region felt like a turning point to Trom, who would go on to become the board’s first treasurer. “We had no idea what we were getting into, but it gave us hope,” he said. “The thing that the Minnesota Initiative Foundations brought to rural Minnesota was the empowerment of local leaders. McKnight made us feel like we already had the right answers, and with some help and encouragement, we could move mountains.”

A New Model

Decades later, the six sister Minnesota Initiative Foundations are still in the mountain-moving business, empowering rural communities with a flexible business model forged by the unique needs of each region. Referred to collectively as the “MIFs,” the Initiative Foundation, serving Central Minnesota, Northwest Minnesota Foundation, West Central Initiative, the Northland Foundation, Southwest Initiative Foundation and Southern Minnesota Initiative Foundation together have awarded nearly 32,000 grants in Greater Minnesota, leveraging nearly $190 million for everything from innovations in early childhood education, to building the capacity of regional nonprofits, to coordinating disaster relief for small towns devastated by tornados and floods.

Within just a year of their launch in 1986, the six foundations began changing the economic landscape of rural Minnesota, more than doubling charitable giving in outstate areas, an infusion fueled largely by The McKnight Foundation’s deep investment. In the years since, McKnight has invested a total of $285 million in the six regional entities, contributions that have helped leverage an additional $270 million to benefit Greater Minnesota.

The McKnight Foundation’s commitment to what was then still a “great experiment” in rural philanthropy inspired Kathy Gaalswyk, the former executive director of the Region 5 Development Commission, to apply to head up the Initiative Foundation in Little Falls—a role she’s had ever since.

“Finding a new economic model for rural Minnesota was very personal to me,” said Gaalswyk, whose husband and father-in-law were forced to shut down their multi-generation Pillager-area farm in 1993. “During those years I’d be spending my days at meetings talking about how to make rural Minnesota less dependent on agriculture, and then I’d come home at night to a kitchen table where we were trying to figure out if we could pay the bills or if we needed to give up the farm. It made the stakes very, very real.”

Sherry Ristau, long-time president of the Southwest Initiative Foundation and now the president of the Community Foundation of the Great River Bend, which serves Eastern Iowa and Western Illinois, saw the same struggle play out in her corner of the state. “In 1982, I married a guy who was destined to take over the family farm, and by 1986 his father and uncle had to sell it at auction because of the farm crisis,” she said. “We needed to diversify the economy, and the need was urgent.”

The crisis wasn’t limited to agricultural areas. Some towns in northeast Minnesota’s Iron Range suffered from unemployment rates of more than 20 percent. A billboard on Interstate 35 made the region’s pain all too clear when it asked, “Will the last one leaving Duluth please turn out the light?”

Each of the six foundations started up with two years of seed funding from The McKnight Foundation, but no prescribed plan for how to proceed. “Philanthropy didn’t have that much of a formal presence in Greater Minnesota, so there was just a lot we didn’t know,” Gaalswyk remembered. But she and other early leaders credit their lack of prior experience with charitable giving regulations for leading them toward one of the earliest and most enduring innovations—providing gap funding to small businesses and start-ups that couldn’t qualify for traditional bank loans.

“McKnight had asked us all to think about what we could do for economic development. We told them the lack of business capital was killing entrepreneurship and stifling growth and contributing to all of the social ills to go along with poverty and unemployment,” said Tom Renier, retired president of the Duluth-based Northland Foundation, which serves the seven-county Arrowhead region. “Coming up with some way to do community lending was definitely not the answer McKnight was expecting, but I’ll never forget Russ Ewald saying, ‘Well, if I didn’t want to hear the answer, I shouldn’t have asked the question.’”

McKnight and its legal team brought the idea to the IRS, making the case that community lending in stagnant rural economies with high poverty and unemployment rates qualified as a charitable activity. The federal government agreed, and authorized the six foundations to add business lending to their list of community services—an only-in-Minnesota model that continues to spark national interest.

“The community lending piece of the (Minnesota Initiative Foundation) model is so ahead of its time, and it makes a ton of sense,” said Trista Harris, president of the Minnesota Council on Foundations. To date, the six foundations have provided $200 million in business financing to 4,100 companies across Greater Minnesota. The lending activity have leveraged $1.3 billion in private investment while securing 42,000 jobs. “As far as we know, we’re the only foundations in the country that have this special IRS ruling,” Gaalswyk said. “This was new ground for community foundations.”

Foundations Without Fences

While early leaders can all remember how Russ Ewald raised his eyebrows at the idea of community lending, McKnight president Kate Wolford says it’s no surprise that Ewald went on to champion their approach with real conviction. “I would say that risk-taking has always been part of the DNA at McKnight,” she said, starting with its founder William L. McKnight, 3M’s influential CEO. “If you put fences around people, you get sheep,”Ewald used to say. “Give people the room they need.”

Wolford sees that philosophy at work today in the way each foundation has marked out its own territory and regional identity, cultivating ideas from the ground up in a style not always seen in responsive philanthropy. “One of the brilliant things in the design of the (Minnesota Initiative Foundations) is that even though their structure may be similar, there was also a real willingness to let their work reflect the particularities of a region,” she said.

From the beginning, West Central Initiative became a driving force on workforce development, moving to fill the gap left by the collapse of the area’s Regional Development Corporation, and putting dislocated farmers and agricultural workers at the center of their first programs. “We wanted to be proactive,” said Roger McCannon, who served as the director of continuing education and regional programs at the University of Minnesota, Morris, which served as West Central’s fiscal sponsor before the foundation was fully fledged. A co-chair of the planning committee behind the Minnesota Initiative Foundation movement in west central Minnesota, and later founder of the Center for Small Towns, McCannon says, “We didn’t want to be sitting in a chair at a foundation waiting for good ideas to come to us, we wanted to be out in the community.”

West Central Initiative also sounded the alarm when statewide demographic projections for the region showed a workforce shortage on the horizon. “At the time, business owners could put an ad in the paper and get 50 applications, so the projections didn’t feel real,” said former West Central CEO Nancy Straw, now the director of community and economic development at the Ford Family Foundation in Oregon. But West Central didn’t wait for the downturn, leading a Labor Force Development Council that met regularly, and launching the Workforce 2020 program to help employers invest in high-tech training for incumbent employees. “We found that companies were more willing to invest in training when they knew the employees were a good fit, and the training they got made workers more productive,” Straw said. “If your company thinks enough of you to invest in you, it also makes you more loyal. It’s an equation where everyone wins.”

“We’re the only (Minnesota Initiative Foundation) that took that approach, continually training our employees to be better, but I think our Workforce 2020 program really equipped this region for the future,” said Sandy King, West Central’s vice president of operations. “I think it shows not just in the businesses that are thriving in the region, but also in the wages our employers are paying their workers.”

The defining work of the Northland Foundation in northeast Minnesota grew from a very different landscape—one that already included established community funds that helped support the work of the region’s nonprofits. “There were already organizations serving those roles and doing it well, but we knew we had to raise a bunch of money to be successful,” said Renier, who served as Northland’s president from 1986 until his retirement in 2014. “We also knew it would be counterproductive to be knocking on the same doors as the organizations we were created to support, so I would say it became a sort of unspoken part of our mission to raise as much money as we could from outside the region and invest it back here, and by and large, we were successful.”

In fact, over the decades, nine out of 10 dollars the Northland Foundation raised came from outside the seven-county area, including major gifts from Otto Bremer Foundation and the Margaret A. Cargill Foundation as well as investments from national and state funding sources. “Our task was to convince donors and funders and the state and the federal government about the common interests we all had in making this region work,” he said.

Meanwhile in southwestern Minnesota, capturing the capital that lay in the region’s more than six million acres of farmland became a major part of the mission at Southwest Initiative Foundation, where president and CEO Diana Anderson got her start as development director. “I remember traveling around the region, and in every community I saw organizations struggling to involve farm families in charitable giving,” she said. “It’s not a lack of generosity. The reality is farmers often have assets tied up in the land and equipment. That’s what got us to thinking about finding a way to capture the philanthropic wealth of southwestern Minnesota in a more unique way.”

That idea led to one of Southwest’s signature programs, Keep It Growing, a flexible tool for rural philanthropy that makes it possible for the foundation to accept gifts of farmland without being required to sell the property. The program even allows for gift agreements that can keep tillable land in production for years to come while Southwest serves as managers and stewards of the land.

Anderson says the Keep It Growing program is a perfect reflection of Southwest’s 18-county landscape, nearly 80 percent of it farmland. “Our farmers want to keep their land legacy going, and supporting their community is a great benefit to go with it.”

Learning From Each Other

Plowing farmland into philanthropy has proven to be such a winning plan that regional versions of the strategy have sprouted up at the sister foundations, too—one of several programs that have cross-pollinated between the Minnesota Initiative Foundations thanks to their regular gatherings throughout the year.

“Another real strength of the (organizations) is that while they’re independent from one another, they’re also a cohort group that can learn with and from each other,” said Wolford. “The sense of isolation, of there not being enough people to do the work in rural Minnesota, is very real, so one thing we’ve heard over the years is how much the (foundations) value having the opportunity to network, and even do some programming together on an issue.”

One statewide issue that all of the Minnesota Initiative Foundations have embraced is early childhood education, a collective effort that Tim Penny, president and CEO of the Southern Minnesota Initiative Foundation, believes has “really moved the needle on making sure our kids are ready for school”—but from a variety of different angles. For the Southern Minnesota Initiative Foundation, early childhood efforts have had a strong emphasis on literacy, with 20 AmeriCorps Learning Early Achieves Potential (LEAP) members placed annually in early childhood settings (an effort bolstered by many local book donation partnerships), while West Central Initiative, faced with a shortage of childcare providers, launched a loan program that encourages qualified providers to train and pay for the necessary licensure to become daycare providers.

The health of children and families has become a hallmark of early childhood investments, which includes a pilot project embraced by all Minnesota Initiative Foundations called the Thrive Initiative that aims to support healthy social and emotional development of children birth to age 5 with a special emphasis on birth to age 3.

Hearing her cohorts from all six foundations weigh in at meetings with new findings and fresh angles on statewide challenges several times each year is one of the things Southwest’s Anderson likes best about the Minnesota Initiative Foundation model. “When we’re together, it’s like having a 360-degree view of Greater Minnesota,” as well as a sounding board for concerns, and a signal of things to come.

For instance, immigration has been a headline story in Central Minnesota for nearly a decade, as Somali refugees and other foreign-born immigrants began settling in and around St. Cloud, while aging communities like Long Prairie were transformed by an influx of younger hispanic families, who traveled north for jobs in the area’s meat-packing plants. As these new neighbors have settled, the Initiative Foundation has worked to ease their cultural transition, supporting local micro-loan programs to help foreign-born entrepreneurs start new businesses, and launching a new Emerging Leaders program to tap and develop the increasingly diverse talent pool poised to replace the leadership of more than 10,000 baby boomers retiring every day in the United States.

“In my region, the last big influx of immigrants arrived when my ancestors came here five generations ago,” said Nancy Vyskocil, president of the Northwest Minnesota Foundation. “So as we move into more workforce shortages and there’s a push to bring in more immigrant workers, I can really learn from my counterparts at the Initiative Foundation and in other regions who are already learning about the challenges and opportunities that go along with that kind of population change.”

A More Resilient Minnesota

Cohort learning has been a critical part of the model, one that’s rooted in a culture of Minnesota Nice. “Collegiality trumps competitiveness,” Cuthbert said. “Each one of the (foundations) has a different constellation of work, their own success stories, and a role as a real leader in rural Minnesota. They’re nonpartisan but they’re not neutral on what matters, and that’s why people trust them.”

Over the years, the unusual flexibility of the Minnesota Initiative Foundation model of rural philanthropy has attracted national notice as a strategy for pulling far-flung rural communities into a united regional force, said Janet Topolsky, the director of the Aspen Institute Community Strategies Group. “In rural places you have this phenomenon where there’s a place but there’s no overt identity,” due to competing jurisdictions, tax bases and decision-making bodies. Organizations like the Minnesota Initiative Foundations “are a natural player to pull people together and find common ground—plus on top of that they’re the most flexible form of nonprofit around,” capable of managing community funds, grant making and community lending.

As each foundation has evolved, McKnight funding has made up less and less of each organization’s operational budget, now providing for less than one-fifth of total annual revenues. “In the early years, when we were still 90 percent dependent on McKnight funding, they used to ask a lot of questions about our sustainability plan and what it would mean for us if their support went away,” said the Initiative Foundation’s Gaalswyk. “But a while ago, they stopped asking because I think it became clear that no matter what, we were here to stay.”

“McKnight could have stopped funding the (foundations) 10 years ago and they’d be fine, but we support them at this point in time because of strategy, not out of dependence,” said Cuthbert. “We have statewide concerns, and they help us meet our mission.”

While each organization can point to the direct impact of their work—from grants made to jobs retained and dollars leveraged—Cuthbert believes they also helped buffer Greater Minnesota against the 2008 recession. “If you look at the most recent recession, rural Minnesota did better than the metro by nearly all measures, and there were even some parts of the state that hardly felt the recession at all,” he said. “That’s what the (Minnesota Initiative Foundations) have been working on for 30 years, and I believe they deserve real credit for creating a more resilient Greater Minnesota.”

Over the last year, several of the foundations have welcomed new leadership—Anna Wasecha, the new CEO and President of West Central Initiative, Tony Sertich, the new president of Northland Foundation, and Diana Anderson, the new CEO and president of Southwest Initiative Foundation.

As commissioner of the Iron Range Resources and Rehabilitation Board, Sertich says he saw firsthand how an organization like the Northland Foundation acts as a conduit. “Northland has always been about nurturing relationships and facilitating collaborations to strengthen our rural communities,” he said. “The opportunity to continue building on 30 years of incredible work is once-in-a-lifetime, and I’m excited about the next 30 years.”

As these new leaders forge new paths in their regions, Renier predicts that the challenges and opportunities they face will look very different than they did decades ago, when Northland and its five sister organizations were founded. “One of the first grants we ever made was to Lutheran Social Services for a relocation fund to help move families off the Range and into the Twin Cities,” he said. “It was a painful thing for us to do, and a painful project for us to fund, but I don’t think you’re going to see that kind of exodus from rural Minnesota anymore.” In fact, as Penny points out, many pockets of small town Minnesota are enjoying a rural renaissance of sorts, with growing local food scenes, creative agribusinesses like bio fuels, and even a “brain gain” of young people choosing to return to where they were planted, starting families and new businesses closer to their roots.

Since that first community priorities meeting for the Southern Minnesota Initiative Foundation three-plus decades ago, in fact, Bryon, Minn., has more than tripled in size, with an estimated population of 5,191. When Ken Trom encounters a new business owner in his corner of southern Minnesota, “I’ll ask them if they’ve ever heard of the Minnesota Initiative Foundations, and all the time I hear people say ‘well, sure, if it weren’t for them, I wouldn’t be here.’

“It’s good to hear,” said Trom. “Because I know we made a difference.”


Excerpted from the 4th Quarter 2015 edition of IQ Magazine, a publication of the Initiative Foundation serving Central Minnesota. Ken Trom, a champion for rural Minnesota, passed away in 2023.