James E. Canales
President and CEO

Dear Friends,

As the global economic crisis continues to unfold, California faces ever greater fiscal challenges. To fill a budget deficit of more than $40 billion, lawmakers are contemplating cuts, such as a shorter school year, that once might have been unthinkable. Moreover, as is often the case with budget cuts, the contemplated reductions in services threaten disproportionately the very populations at the heart of the Irvine Foundation's mission: low-income and underserved Californians. If nothing else, what this recent round of budgetary wrangling makes very clear is that we not only need to address the deficit in the short term, but we also need long-term, fundamental restructuring of California's budgetary system and fiscal policies.

It is for this reason that Irvine, along with four other major California foundations, invested together more than $15 million last year to create California Forward, a bipartisan reform effort established to seek long-term solutions to the state's underlying structural problems, including its chronic financial woes. The current crisis offers a unique opportunity for reaching bipartisan accord on significant reforms. Recently, California Forward began working with lawmakers and other leaders on a set of reforms that would result in smarter fiscal decisions and greater public trust.

California Forward not only illustrates the value of philanthropic collaboration — likely to become even more important in an era of diminished resources — but it also underscores for its funders that, without systemic reform of this kind, the outcomes our foundations care about — whether in education, health care, the environment or economic development — become more elusive.

We could not have predicted just a year ago how important it would be to have an organization such as California Forward today, but the timing is certainly fortuitous. As challenging as the times are right now, if this philanthropic collaboration can play some role in helping California to identify and implement long-term solutions to these ongoing budgetary challenges, that would be a major contribution indeed.

Finally, while on the subject of the economic downturn, let me provide an update on Irvine's grantmaking plans for this year. As I wrote in my Fall letter, we seek to minimize disruptions to our grantees at a time when many of them are already experiencing reduced income from a variety of sources. Accordingly, we will honor all existing commitments and have also offered to work with grantees as necessary to ensure our grants are structured in a way that acknowledges the current challenges.

As always, I welcome your questions, comments or suggestions.

Sincerely,