From the biggest of corporate foundations to the smallest of family philanthropies, 2008 was a bear of a year for endowment investment earnings -- and 2009 isn't looking any better.

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A dismal stock market performance means many of the Pittsburgh region's foundations could be forced to give out less money and approve fewer grants. Foundations that were praying for an early-year turnaround are instead heading into the first of their 2009 quarterly meetings with difficult decisions to make: Where to cut back? And by how much?

"It's going to be difficult for us," said Elizabeth Tata, vice president of the Laurel Foundation. "There's going to be a lot of organizations we have to cut back, or not fund."

Smaller philanthropies especially will have to focus on core missions -- arts, for example, or the environment -- and reduce gifts to pet causes or organizations that don't reflect the foundation's primary funding interests.

The philanthropic universe, here and nationally, is dealing with the upheaval on Wall Street and a Dow Jones industrial average that has dropped about a quarter of its value since 2009 began and half of its value since January 2008.

Endowments that were worth $100 million just a year ago might be worth half of that now. In 2008 alone, large foundation assets dropped an average of 28 percent, according to The Chronicle of Philanthropy.

Since most foundations plan their gifts months, or a full year, in advance, the full impact of the market swoon won't be felt until this calendar year.

A March 2009 report from the Foundation Center, which tracks philanthropies, reflects that not all of them were forced to scale back funding in 2008. But of the top 100 U.S. foundations, only two have plans to increase funding levels in 2009.

One of those was the Bill & Melinda Gates Foundation, which lost 20 percent of its book assets in 2008. If a foundation loses money but wants to increase its giving, that means it must increase its "payout rate" -- the share of assets that it doles out each year. To remain tax-exempt, a foundation must hand out at least 5 percent of its assets each year.

And these days, 5 percent isn't going nearly as far as it used to, especially when larger foundations are watching millions evaporate from their endowments each week.

"We're down by 23 percent" from December 2007 through the end of 2008, said Doug Root, communications director for The Heinz Endowments, and the endowment fund has likely shrunk even more since the beginning of 2009.

Previous, multi-year funding commitments will be honored, but for the year ahead, "we have a budget now that is basically 15 percent lower," he said.

The Heinz Endowments does not plan to increase its payout rate, he said. Nor does The Pittsburgh Foundation, though that shouldn't impact its giving level in 2009.

"It's tempting in this environment to drop our giving more quickly, but we don't think that makes sense, given the community need," said foundation CEO Grant Oliphant. Still, "in 2010, it will likely decline, fairly significantly."

The Pittsburgh Foundation's assets were down 30 percent last year. "It's been a very painful environment to operate in," Mr. Oliphant said. "Our assets are going down at the very time that the demand for our resources is going up."

If the stock market weren't enough to worry about, the philanthropic world has been buzzing about news that President Barack Obama's upcoming budget plan may reduce tax deductions for charitable donations by Americans in the top income brackets. So instead of a 33 percent to 35 percent deduction for a charitable contribution, the wealthiest Americans would be able to write off only 28 percent.

Democrats and Republicans alike have speculated that tweaking the deduction rate will give America's wealthy less incentive to give to foundations, but Bea Carter doesn't see it that way.

"Most large donors give because of their desire to help, not because of the tax consequences," said Ms. Carter, executive director of Pittsburgh's Roy A. Hunt Foundation.

There's good news and bad news for Pittsburgh.

Good news: Because Pittsburgh is one of the cradles of American philanthropy with a legacy of industrial and banking wealth that dates back generations, the region has more foundation activity than most cities its size. There's still old money to go around and Pittsburgh is insulated from the Wall Street tumble in ways that other mid-sized cities, or even large cities, can't claim.

The bad news: With so many philanthropies, a disproportionate number of arts, health and social service organizations rely on those philanthropies for funding each year.

In other words, there might be more money to go around but there are also more organizations applying for that money every year.

"The foundation community in Pittsburgh takes very seriously that it's a primary resource for improving the quality of life in the region," Mr. Root said.

Pittsburgh, he noted, ranks fourth (as of 2006) among major metropolitan areas in total philanthropic giving per capita. "That statistic certainly demonstrates what people have come to expect in that region."