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Fundraising Outlook Depends on Vaccines, Stimulus, Equity, and Other Variables

Posted: 1/30/2021

Click here to read on The Chronicle of Philanthropy

by Eden Stiffman

If 2020 taught us anything, it's that projections are hard to make.

Individual nonprofits and experts who study donors are still collecting data on how they gave during the last calendar year. Giving was almost certainly better than anyone had projected, bolstered by a surging stock market, a slew of mega-gifts, and a swell of grassroots support for needs exposed and intensified by the pandemic.

Around this time of year, researchers at the Indiana University Lilly Family School of Philanthropy and consultants at Marts & Lundy would typically release a report to forecast the giving landscape for the year ahead. That report took into account a broad range of economic indicators including the stock market, job growth, wage growth, gross domestic product, and federal tax law.

But a few weeks into 2021, there's more variability and disruption than ever before, says Phil Hills, president of Marts & Lundy, and the giving experts are skipping the report.

"We don't want to mislead our clients or the sector saying we know where we're going," he says. "I don't think anybody could reliably say that they have an idea of where things really are going to go."

With that uncertainty in mind, the Chronicle spoke with Hills and other giving experts about their expectations — and advice — for giving and fundraising in the year ahead.

Vaccines and Recovery

The big variable continues to be public health, says Una Osili, associate dean for research and international programs at the Lilly Family School of Philanthropy. "The overall pace of that recovery will depend on how quickly people are able to go back to work and regular patterns of consumption," she says.

"There will be some economic recovery in 2021, and that does bode well for philanthropy over all at least keeping pace with 2020," she says. But the shape of the economic recovery is going to depend on the rollout of the vaccines in the coming months.

Some people were able to save more money this year by staying home, not traveling or commuting, and not spending money on entertainment. That may have left them with more disposable income for philanthropy.

The pandemic created a "shock" to normal patterns of giving, which could disrupt — at least temporarily — the long-term trend of fewer Americans' giving, Osili says. If and when people start going back to familiar patterns of consumption in 2021, she says, many households form giving habits when they learn about and get involved in particular issues or causes.

"For nonprofits, the message is to continue to engage those donors," Osili says. "Some may be in a position to continue to give."

Focus on Retention

Data from the Fundraising Effectiveness Project found that just 14.2 percent of donors who supported an organization for the first time in 2019 gave to that organization again in 2020.

If it's true that a larger share of households gave in 2020, it's now up to nonprofits to do a stellar job of keeping those donors in the fold, says Laura MacDonald, principal of the Benefactor Group consultancy and chair of the Giving USA Foundation.

"What I'd love to see is a concerted effort across the nonprofit community to really up the game when it comes to donor retention," MacDonald says.

Organizations should think about what they can do to increase the likelihood that a donor will be thanked appropriately and promptly, she says. Give donors accurate information about the impact of their gifts. Then, at an appropriate time, when the organization asks them to give again, ask that they consider becoming a monthly or sustaining donor.

Strong Stock Market

"Even though the circumstances of 2020 did help to democratize philanthropy — even decolonize philanthropy to some extent — we're still reliant on those bigger gifts," MacDonald says.

Unemployment hit record highs in 2020, and the gross domestic product had its sharpest contraction in modern American history. Meanwhile, despite volatility early in the pandemic, the stock market had an exceptionally strong year. The S&P 500 index and Dow Jones Industrial Average ended 2020 with record highs, and the Nasdaq composite had its best annual gain since 2009. Even in the wake of the attempted insurrection at the U.S. Capitol, the markets have remained largely unfazed.

"The upside of the market and the overall economic growth for certain individuals made it possible for a lot of really big gifts to go through in 2020," Hills says.

Of course, those mega-gifts might paint a rosier picture for overall 2020 giving than many nonprofits experienced. It's an open question whether big donors will keep up the same pace in 2021. "Is that bump repeatable? Probably not." Hills says. "Is it abnormal? Probably is."

MacDonald urges fundraisers to exercise caution as they pursue the largest gifts. Some of those donors might be waiting to see how things evolve before they make that nine- or 10-figure gift to their alma mater or other organizations they've supported in the past, she says.

"Major-gift officers working with those kinds of donors may need to be patient," she says. Look at interim measures, like asking for an initial gift equivalent to a first year's pledge payment, and continue to convey to donors the impact of their giving. Strategies like challenge or matching gifts may encourage big donations.

Stimulus and Incentives

With a new administration in power and Democratic majorities in the House and Senate, further federal stimulus is likely. That could be good news for giving, Osili says.

In addition to allowing nonprofits to participate in a new loan program and draw from a $3 billion economic development fund, President Biden's $1.9 trillion stimulus proposal would provide $1,400 in direct payments to Americans. Fundraisers should take notice — some people donated portions of earlier stimulus checks to charity.

Sweeping legislative changes like big tax increases on the wealthy are unlikely given Democrats' razor-thin margin in the Senate and reduced majority in the House. But looking ahead, nonprofit advocates hope for longterm changes to the charitable deduction.

The Tax Cuts and Jobs Act of 2017 reduced the ability of Americans to benefit from their charitable contributions through the tax code. But temporary provisions in the 2020 and '21 tax years designed to encourage giving during the pandemic allow single people to deduct up to $300 and couples up to $600 in charitable gifts even if they don't itemize.

While MacDonald and others are pleased that the universal charitable deduction was extended, it may not result in a substantial increase in total giving, she says. "The benefit is that maybe it elevates the conversation about the importance and value of charitable giving."

Some high-net-worth donors are taking advantage of the ability to write off cash contributions for up to 100 percent of their adjusted gross income — a provision that was also extended for the 2021 tax year. The previous deductible limit was 60 percent of adjusted gross income.

Organizations are seeing some of their biggest donors take advantage of the opportunity, MacDonald says. Fundraisers are having targeted conversations with individual donors, board members, or campaign committees, and they are having some success when they or a trusted consultant highlight examples of donors who have taken advantage of the provision.

It's smart to discuss this option, she says, as many donors aren't aware of the change. "I've heard a lot of donors who you would imagine have sophisticated financial advisers express real disappointment that they weren't hearing this from them," she says. "They were hearing it instead from fundraising consultants and development officers."

Equity Lens

Giving with an eye toward equity — whether that's economic, gender, or racial equity — will continue to be important for corporate, foundation, and individual donors alike, experts say.

In the past, corporations haven't necessarily been at the forefront of racial and social-justice giving, Osili says. "We're seeing all of that change."

Corporate giving in the year ahead will depend on how specific industries and companies are faring in this economy. Technology as a whole has been very strong during the pandemic, for example, while sectors like transportation haven't done as well.

"Fundraisers are going to need to be very well informed about the impact of Covid on the fortunes of that particular corporation and plan their request accordingly," MacDonald says.

While racial and social-justice causes are seeing increased support now, nonprofits of all kinds should think about social and racial equity as it relates to their mission.

"It will be incumbent upon organizations to acknowledge if and where they have contributed to white privilege and then have an honest conversation with their donors about the steps that they're taking," MacDonald says.

Fundraisers would be smart to engage with affinity groups at their largest corporate donors. Those affinity groups, for Black or LGBT workers, for example, wield increasing influence in how their employers give. Corporations are likely working with staff affinity groups to think about the best ways to implement an equity lens in their giving, she says.

Planning Ahead

No one knows exactly how long it will take for the health and economic crises to subside. But nonprofits should take advantage of the current moment to prepare for the light at the end of the tunnel. "Now is a good time to do a lot of strategic planning and campaign planning as we come out this," says Hills.

Fundraising leaders should also think about how they position their staff for the future. "When will development officers be back out on the road? How quickly do you want to rehire people?" he says. Now is the perfect time to ask these questions and plan.

MacDonald expects to see an increased focus on effective diversity, equity, and inclusion efforts on fundraising teams. There might be more work-force development efforts in which organizations recruit and train young fundraisers, she says, and that can help increase diversity and retention. MacDonald also expects the pandemic's work-from-anywhere flexibility to continue.

Even with a vaccine, nonprofit staff will have to continue to make it easy for donors to give online. "We don't necessarily anticipate some of the large-scale events and fundraising activities that might have been held in the past will roll out like they had in the pre-Covid economy," she says. "Digital engagement and giving opportunities will continue to be important in 2021 and are projected to grow."

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