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Check-Up Clinic: Context & Advice

Posted: 3/19/2020

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Philanthropy and COVID-19

Posted on March 18, 2020 by Abby Rolland

Coronavirus (COVID-19) has affected many aspects of society so far. How will it affect philanthropy? Our scholars and experts discuss the history of philanthropy and pandemics, the economy and stock market, fundraising, and how foundations can help strengthen nonprofits during an uncertain time.

Historical examples and lessons

Historian and director of graduate programs Dr. Kathi Badertscher cites several lessons from history that illustrate how Americans have generously given during previous epidemics.

The role of the American Red Cross (ARC) in the U.S. response to the 1918–1919 influenza pandemic holds important lessons for current-day pandemic response. ARC coordinated nursing for military and civilian cases; produced and procured medical supplies and food; transported patients, health workers, and bodies; and aided influenza victims' families. ARC's responses illustrate that local partnerships and advance planning exercises that include voluntary organizations could prove beneficial in current and future pandemic response.

During the 19th century, the Catholic Sisters of Charity cared for not only needy Catholics, but many others during epidemics of cholera, smallpox, typhoid, and yellow fever across dozens of U.S. cities. When a cholera epidemic struck Philadelphia in 1832 and "fear overcame every other consideration," the sisters took charge of hospital wards and stayed for almost a full year.

After the 1849 cholera epidemic, the Buffalo Medical Journal praised the sisters for dependability, patience and endurance as "a matter of astonishment." Service during epidemics was consistent with the Catholic philosophy that philanthropy was not solely denominational, but a collective contribution to the common good.

Private foundations have also played a role in combating disease. Concerned about the spread of yellow fever during the construction and after the completion of the Panama Canal in 1914, the Rockefeller Foundation became interested in eradicating the mosquito-transmitted disease.

It hired General William Gorgas, the canal supervisor who implemented anti-mosquito measures, to direct its efforts in eradication via the International Health Commission (known as the International Health Division after 1927). By 1936, Max Theiler and associates developed an effective vaccine. Afterwards, the foundation funded over 34 million vaccines before passing the program to the United States Public Health Service.

The National Foundation for Infantile Paralysis (NFIP), also known as the March of Dimes, was created on the eve of World War II to uncover a vaccine for polio and to lend a hand to Americans suffering from the disease. (Interestingly, The Fund Raising School's founder, Hank Rosso, helped arrange the inaugural Mother's March on Polio). Operated almost completely by volunteers, the grassroots movement had over 3,100 chapters across the United States. In 1953, grantee Dr. Jonas Salk, discovered a vaccine that would end the spread of polio.

Throughout history, Americans have lent a hand to others during times of infection crisis. Individuals have fundraised and given to help people at home and around the world, and combated diseases through their gifts of time, talent, and treasure.

The Economy

It is established knowledge that the stock market affects giving now, and has impacted it in in the past. So, is it important to follow day-to-day trends in the stock market, or to study in long-term?

Dr. Patrick Rooney, executive associate dean for academic programs and professor of economics and philanthropic studies, explained that both do.

"It's easier to follow day-to-day news about the economy," he said. "It's also beneficial to understand current economic trends when you're discussing giving with your donors, as the stock market can affect their lives.

"However, our research has found that the day-to-day variation in the stock market really doesn't predict changes in household giving. It's more year-end to year-end.

"Longer-term trends matter. If donors, especially high-net worth donors, do gain money through the stock market in one year and then lose it the next, they may be less comfortable making big philanthropic investments. However, even if they decrease their giving from their stock assets, they may give more aggressively out of their income."

Nonprofits and fundraisers should keep in mind that different types of donors, which include individuals, foundations, and corporations, may give differently. During the 2008 recession, the Lilly Family School of Philanthropy found that foundation giving can be counter-cyclical. In other words, foundations may actually give more during more challenging economic times. Corporate giving may vary by industry and sector. Individual giving is the most susceptible to changes in the overall economy.

In other words, donors can give out of multiple different channels. While the economy, GDP, the stock market, and tax policy play an important role in giving, they aren't the only reasons why people give.

Advice for fundraisers

Don't stop fundraising.

"People don't give unless they are asked, for the most part. So continue to ask for those donations," Dr. Rooney explained.

In addition, the Philanthropy Panel Study data from 2000-2016 demonstrated that while the percentage of households who gave declined during the Great Recession, households who continued to give, gave consistently during difficult economic conditions.

Chelsea Clark, Ph.D.

"Even though the Great Recession was the biggest economic downturn since the Great Depression, many people didn't stop giving," explained Dr. Chelsea Clark, research associate at the Lilly Family School of Philanthropy. "The dollar amount they gave may have changed, if income decreased, but most people gave a consistent percent of their income, even during hard times. Giving can become a habit. Even if the economy is hit hard, some people will not change their giving behaviors dramatically."

Maintain communications with your donors.

Bill Stanczykiewicz

"During times of economic slowdown or insecurity, nonprofits need to increase communications with their donors, who might be open to the possibility of special (additional) donations during this particular economic season," said Bill Stanczykiewicz, assistant dean for external relations and director of The Fund Raising School.

Giving may decline at the moment, but continue to make your case.

Nonprofits may be concerned that donations from households may shift toward combating COVID-19. However, the report U.S. Household Disaster Giving in 2017 and 2018 states the majority (78 percent) of disaster aid donor households reported that their disaster giving did not affect their giving to other causes. Twelve percent reported an increase in their giving to other causes.

Advice for foundations

Consider adjusting your giving to donate more during times of emergency.

Dr. Rooney and coauthors Dr. Richard Sansing and Jonathan Bergdoll conducted research that tested simulations under several scenarios to determine the effects of higher foundation payout requirements generally and/or a two percent supplemental payout during periods of economic downturns. Higher payout rates would help offset the macroeconomic and microeconomic losses during recessions.

They discovered that foundations could easily sustain themselves with a supplemental two percent payout during recessions. A permanent increase in rates would most likely lead to a decline in the value of the corpus over simulations of 50 and 100 years; however, the likelihood of closure (asset values falling below $5,000) is essentially zero for payout rates of 15 percent or less over the next 50 years and nine percent or less over the next 100 years.

In other words, foundations could consider giving more to nonprofits (many of whom provide crucial services to at-risk populations) during uncertain times, without worrying that they will completely drain their endowment.

In addition, a recent study of million dollar gifts shows that economic conditions influence different types of subsectors differently, and gifts to public society benefit and human services organizations increase significantly during periods of recession, holding other factors constant.

Stanczykiewicz noted that during times of uncertainty, philanthropic associations can provide a point of connection, a place to be known, a place to gather (within a certain distance), a place to share information, and a place to commiserate.

"The other two sectors can't provide these opportunities for association – what Robert Payton referred to as 'the gift of human presence,' " he said. "Nonprofits provide places to build social capital and to work together toward a better world."

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