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Check-Up Clinic: Giving Trends

Posted: 6/22/2020

Click here to read on the Chronicle of Philanthropy

How the 2.4% Gain in Giving Last Year Points to What Will Happen in 2020

By Emily Haynes and Michael Theis

Just how much fundraising will be hurt this year because of the coronavirus crisis and the recession is unclear, but now we know more about how full charity fundraising coffers were as they entered 2020: Giving rose 2.4 percent last year after inflation, to $449.6 billion,according to the new edition of "Giving USA" released Tuesday.

That is below the typical 2.8 percent annual rate of growth in donations since 1979, according to the researchers at Indiana University's Lilly Family School of Philanthropy, which produces research for the Giving USA Foundation, an organization of fundraising consultants.

Still, some types of nonprofits — largely those that depend on America's wealthiest — did extraordinarily well, raising 10 percent or more than in 2018, including donor-advised funds, arts groups, and educational organizations.

Recessions typically trigger a drop in giving, with year-over-year declines seen in the wake of every recession in the past 40 years, with the exception of 1982, when giving increased by less than 1 percent.

Rick Dunham, a fundraising consultant who is chair of the Giving USA Foundation, said he thinks the most important indicator of how nonprofits will fare at year's end will come in the fourth quarter.

"If the stock market rebounds or goes beyond that, it would be an indicator that charitable giving in 2020 should maintain, or even grow." He said he thinks the turbulent stock market in the last quarter of 2019 was also a big reason giving didn't grow faster.

Looking ahead, nonprofits are concerned about the high unemployment rate: Average annual charitable contributions grow by only 2.4 percent in years in which unemployment exceeds 6.2 percent, according to an analysis of federal unemployment data and "Giving USA" charitable-giving data.

While the unemployment rate has marginally improved since its high of 14.7 percent in April, government officials and others say it's possible it could still be at 9 percent by year's end.

Here are some key things to know about how giving trends last year are likely to affect what nonprofits can expect in the year ahead:

Despite a growth year, charities saw backsliding even before Covid-19 upended everything.

Charitable donations last year were slightly lower than in 2017 after inflation. What's more, 2018 turned out to be worse than "Giving USA" had forecast.

Last year, the report projected a 1.7 percent decline in giving from 2017 into 2018. This year's report revised the 2018 decline to 2.5 percent. Such changes occur because "Giving USA" is a projection based on economic modeling that allows it to estimate giving; as data from the Internal Revenue Service and elsewhere comes in, it adjusts its previous-year figures to be more precise.

Colleges, arts groups, and some other types of nonprofits chalked up gains of 10 percent or more ahead of the downturn. Now that cushion really matters.

Wealthy donors, feeling flush from the strong economy and the stock market, powered giving to education and cultural organizations, said Una Osili, who oversaw the "Giving USA" research and who is an associate dean for research at Indiana University's Lilly school.

Last year's fundraising gains will probably be needed to help these organizations as they endure hits to other revenue this year. Museums and theaters missed out on ticket and membership revenue when they closed their doors, and schools and universities forfeited revenue from room and board and athletics when they sent students home.

Arts organizations raised 10.6 percent more last year, or $21.6 billion, Giving USA says. (As with all the figures from "Giving USA," the Chronicle is using inflation-adjusted numbers.)

Among the organizations that had a strong year: the Oakland Museum of California. But 2020 has been very different since museums and other organizations closed because of Covid. This was to be the fifth and final year of the museum's campaign to raise $85 million for operating support, endowment, and capital improvements. The museum has achieved about 90 percent of that goal — it is now at the $75 million mark.

"We had had some really strong successes with fundraising in these last few years, including in 2019," said Lori Fogarty, the museum's CEO.

But months of closures have led the museum to project declines in giving and other income of 25 percent in 2020.

The museum has seen some foundations and big donors step up to help the institution navigate the economic crisis, but it's unlikely they'll make up for all the losses.

"We know a lot of our donors will face financial hardship as well, so we're not bullish on contributed revenue," she said, "but we're buoyed by seeing some of our donors be very generous in their response."

Education groups raised 10 percent more last year, collecting a total of $64.1 billion. That came after a tough 2018, when giving dropped by 0.5 percent. But some college fundraisers are bracing for a steep decline this fiscal year.

More than 40 percent of development leaders said they expected a double-digit percentage drop in fundraising revenue by the end of fiscal 2020, according to a recent survey of 110 college fundraisers.That drop-off would be in line with trends during the recent recession. In 2009, college fundraising hit a record low, when giving fell 11.9 percent from the previous year's level, according to the Council for Aid to Education.

Before Covid-19 closed college campuses and made in-person meetings with big donors nearly impossible, fundraisers at Duke University were about 20 percent ahead of their annual goal for new pledges. But by early June, it had slipped to roughly 16 percent ahead of the yearly goal.

While it's promising that new donors are still willing to give to Duke, the bulk of these new commitments will take years to realize in full. Fundraisers need to balance long-term gifts with cash on hand.

That is causing a cash-flow issue for some colleges — especially those lacking big endowments that have had to refund room-and-board payments, forfeit revenue from athletics, and cancel fundraising events like reunions.

"It's virtually impossible for the fundraisers to shoulder the load of making up for all of that lost revenue," said Stephen Bayer, associate vice president for university development at Duke. Rather, he said, fundraisers should focus on the basics: keeping in touch with loyal donors and bringing new ones into the fold.

But those basics are harder now. In most cases, fundraisers can't invite prospective donors to tour the campus or meet for lunch. While that may change in the coming months, fundraisers will have to make up for a lot of lost face time with new donors.

"It's much easier for our frontline fundraisers to have a Zoom call with someone they know really well than it is to qualify a new prospect for fundraising purposes," Bayer said. "If this continues over a long period of time, and if we're not able to travel and get in front of people, that's the piece that might start to wane."

Those barriers to building ties with new donors are a significant challenge as Duke readies for its next capital campaign, slated to launch in three years.

"Nothing, ultimately, can usurp the power of having a meal with somebody or sitting in their office or in their living room," said Bayer. "That's a powerful, relationship-building experience."

International-affairs groups were the only type of nonprofit to suffer a decline last year. Now those groups face extraordinary needs at a time when the recession, the health crisis, and racial-equity issues have donors focused on causes close to home.

Giving to international-affairs charities shrank by 2.2 percent

The slowdown comes after more than a decade of growth. Since 2009, international-affairs giving has grown from $19.5 billion to $28.9 billion, a span that included several years of double-digit rates of growth.

Among the reasons that was hard to sustain last year: Fewer big-scale disasters outside the United States captured widespread media attention.

Compassion International, a Christian international relief agency, said its total revenue grew by nearly 8 percent last year, mostly thanks to child sponsorships. But it started seeing signs of trouble as soon as Covid-19 hit. It still hopes to end fiscal year 2020 with an increase, though.

"This pandemic is taking an enormous toll on the developing world," said Tim Glenn, communications principal for Compassion International, in an email. "When the pandemic first hit, we revised our FY 20 projections down, but the revised projection still showed us growing slightly from FY 19."

Nonprofit hospitals and health charities had a pretty good year, but now the economy's shutdown is challenging charities not dealing directly with Covid-19.

Giving to health groups, a category that includes nonprofit hospitals as well as health advocacy groups, increased 4.9 percent over 2018 to $41.5 billion in 2019, more than "Giving USA" has seen for those groups in the past.

Julia Fitzgerald, chief marketing officer at the American Lung Association, said her group saw single-digit percent increases last year in every type of fundraising it does. Social-media fundraising and in-person events did especially well, she said.

This year, "it's definitely a mixed picture," said Fitzgerald. The group expects to see a decline in contributions raised from events, most of which it will conduct online instead of in person. Other types of online giving are on the rise, though, she said.

"What is unclear is what portion of the population will feel economically secure enough to keep donating at the levels they have historically donated," said Fitzgerald. "For us, that remains an open question — and probably not just for the American Lung Association but for everyone across the board."

The American Cancer Society has also struggled to adjust its event-heavy fundraising strategy to a socially distant world. Its largest event, Relay for Life, raised nearly $162 million in donations from friends and relatives of event participants in 2019. This year, those fundraising drives moved online.

Transitioning to virtual events amid widespread economic uncertainty has been challenging, and the group anticipates falling at least $200 million short of its budget this year. It has already had to lay off about 1,000 employees and dock executive pay.

The charity has focused on reconnecting with its past donors, but it expects some of those donors will no longer be able to afford to give, said Maria Clark, senior vice president for volunteer events. Fundraisers hope big gifts from wealthy individuals and corporations can help make up for those lost funds.

Religious organizations chalked up the smallest percentage gain and continued to shrink as a share of overall giving.

While religion still gets the biggest share of contributions from Americans, it has been on a long-term slide. Last year donations grew just 0.5 percent after inflation, reaching a total of $128.2 billion.

Religion accounts for 28.5 percent of giving. In 2009, religious groups attracted 36.2 percent of all giving.

Donor-advised funds accounted for a big part of the 11.1 percent increase in contributions to so-called public society benefit groups, so their coffers are full enough to make a difference to many nonprofits.

Public-society benefit groups more than made up for the ground they lost in 2018, jumping 11.1 percent in 2019. This is a broad category, including umbrella groups like United Ways, advocacy organizations, and donor-advised funds. In all, $37.2 billion was raised by groups in this category.

Most of the gains, however, came as donations flowed to donor-advised funds. Some of that money is now going out the door to help charities working on the Covid crisis.

In just the first four months of the year, donors gave $2.5 billion to nonprofits from donor-advised funds held by Fidelity Charitable — 18 percent more than the grants made during that same period in 2019. More than $236 million of those dollars went toward combating the coronavirus.

But nonprofit leaders hope more donor-advised-fund holders will channel the money in their accounts to a broad range of charities serving those hurt by the recession and suffering other challenges because of the health and economic crises.

"One of the things that we would like to see more with DAFs is making sure that those dollars are getting to those who need it most," said Tolli Love, chief investor relations officer at United Way Worldwide.

This year, United Way Worldwide has been working with community foundations that hold donor-advised funds to channel that money into special Covid-19 response funds. But typically United Ways depend on gifts from middle-class and affluent individuals. United Way's U.S. affiliates received $3.42 billion in fiscal 2019, a slight decline from the $3.7 billion the group reported in 2018.


"United Ways, in particular, depend on more everyday donors, and so they have not seen quite the same growth like donor-advised funds have experienced," said Osili.

Read more: How to Land Donor-Advised Funds

Big gifts from the wealthy pumped up the total value of what individuals give, underscoring their role in helping nonprofits recover.

Of the nearly $450 billion in total giving, 79 percent — or nearly $353 billion — came from individual donors. That share, which includes bequests, grew nearly 2.3 percent from the 2018 total.

Individual giving has increased in four of the past five years. But even in years when the share of individual donors grows, that doesn't represent a universal jump in donations from households.

"There are some concerns about the distribution of American philanthropy," said Osili, pointing to the Indiana University Philanthropy Panel Study, which found a 13 percent decline in the share of American families who gave charitably from 2000 to 2016.

The proportion of households that give has been shrinking as the country's biggest donors have made record-setting contributions. Charities may need to rely on major donors even more now that the country is in a recession and middle- and lower-income donors will likely tighten their belts.

What's more, the shrinking pool of donors was already working to make up for lost ground before the pandemic hit.

Last year, charities tried to recover from a 3.3 percent decline in donations from individuals in 2018. And while donations from individuals grew in 2019 to $353 billion, it was still 1.1 percent below 2017, when individuals donated $356.9 billion.

Some fundraisers expect that this year's economic upheaval will force even more small-dollar donors to stop giving.

Tracey Vranich, interim senior vice president for university advancement at the University of Southern California, said she thinks the institution will see a fall in the share of alumni who give because some will probably lose jobs or income in the recession. "The smaller donors are where we're going to lose some things," she said.

Next year, USC hopes to make inroads with new major donors who work in technology, medicine, and other arenas that have been insulated from the downturn, even the household cleaning-products industry. Fundraisers are reviewing records of alumni, parents, and other supporters, asking, "Who do we have in the C-suites of those areas?"

Other charities see the same pattern. Frank Stasio, deputy director of development at the Los Angeles LGBT Center, a social-service charity, said, "We did see a drop-off in our annual-giving donors, but that was mostly the lower level. Those are the people who got hit the hardest financially."

But as monthly donors canceled their gifts and other small-dollar donors skipped their annual contributions, Stasio said, the charity's wealthy donors "made extra gifts to help cover what we were losing."

Read more: Winning Big Gifts – From a Distance

Foundations didn't see a major influx of assets last year from donors, so that could be trouble as their endowments take a hit.

Foundations are an important source of giving, providing $75.7 billion or nearly 17 percent of all charitable dollars given last year. That was basically flat compared with 2018, with growth of 0.7 percent.

Giving to foundations also stayed flat last year. In all, foundation received $53.5 billion in 2019, a hair above the $53.2 billion they received in 2018. That flat giving comes on the heels of a down year in 2018, when giving to foundations slid 2.7 percent.

Big swings are common in foundation giving, but experts think the popularity of donor-advised funds could be a reason fewer assets are going to foundations.

Last year's small increase in assets flowing to foundations surprised John Seitz, chief executive of FoundationMark, which tracks foundation asset information.

"Typically when you have good years in the stock market, you get big incoming contributions, and foundation assets in 2019 were up significantly." he notes.

Henry Berman, chief executive of Exponent Philanthropy, a member organization of small foundations, said if giving to foundations had grown in 2018, last year's grant making would likely have been higher.

This year, however, even though the sums flowing to foundations didn't grow, grant makers seem poised to do more, as a survey by Exponent found.

Some nonprofits say foundations that have given generously have made all the difference in their survival. "There was a huge uptick in private foundation grants once the pandemic hit," said Stasio of the Los Angeles LGBT Center.

These grants, which included gifts from corporate foundations, helped the nonprofit beat its yearly goals for private grant making, even as donations from individuals faltered.

Berman said he hopes foundations of all sizes will keep giving generously. "This is the rainy day," he said. "If we're not spending our money now, I'm not sure when we will."

Corporate giving surged as profits rose last year, and signs of generosity abound for now.

Propelled by strong profits, corporate giving soared 11.4 percent from 2018 to 2019, says "Giving USA."

Companies provided nearly 5 percent of charitable contributions last year, roughly $21.1 billion, according to "Giving USA."

But nobody expects companies to do well in 2020 because of the recession. According to the federal government's Bureau of Economic Analysis, corporate profits plunged $295.4 billion, or 13.9 percent, in the first quarter of this year, compared with an increase of $53 billion, or 2.6 percent, in the fourth quarter of 2019.

Early signs, however, suggest that a big swath of companies have no plans yet to curtail giving. Chief Executives for Corporate Purpose, a coalition of corporate leaders who push for big companies to spend on social causes, conducted a survey of large companies from April 27 to May 5 that found that 65 percent of companies expect their giving to remain the same from 2020 to 2021, said André Solórzano, who oversaw the research. About 20 percent predicted a decrease, and 15 percent expected an increase, he said.

"CECP has heard anecdotally from companies that they are sticking by their grant-making commitments, being flexible, responsive, and adaptive to their partners' needs," Solórzano said.

"Giving USA" calculated that corporate giving as a percentage of pre-tax profits would be 1.02 percent.

Walmart typically gives about $1 billion annually in goods and services, plus about $400 million in cash, either directly or through its corporate foundation, said Tricia Moriarty, director of global communications. Moriarty said she wasn't sure how the company's financial performance might affect its giving this year or next year, although she noted that the company establishes its giving plans far in advance and generally sticks to them.

She noted that Walmart recently announced a five-year, $100 million cash commitment to fight systemic racism, and about half of that amount will be in addition to its previous giving plans.

Other companies are also giving big in response to the coronavirus and to advance economic justice.

Bank of America in March pledged $100 million "to support critical needs of local communities as a result of the coronavirus." Liz Wright, a spokeswoman, said the $100 million will be used to address food insecurity, medical response, and access to education in the United States and abroad.

And some companies are also doing more to match contributions from employees in response to the crises that have unfolded in recent months.

Kristina Mangelsdorf, head of community programs at Visa, said the company matches employee giving dollar for dollar up to $10,000 per employee, and it offers a two-for-one match for certain other types of giving, depending on current circumstances, including racial-justice efforts and Covid relief.

In the first nine months of the company's current fiscal year, which began in October, total corporate giving through the employee match program was up 35 percent compared with the entire previous fiscal year, Mangelsdorf said.

She said she expects Visa's overall corporate giving to increase slightly this year, although she declined to provide specific figures.

Dan Parks and Eden Stiffman contributed to this article.

Corrections: A previous version of this article said that Compassion international's revenue grew last year mostly thanks to corporate sponsorships instead of child sponsorships. That version also said giving has declined year over year in every recession in the past 40 years. An exception was 1982, when giving increased by less than 1 percent. In addition, it said that giving to education in 2008 dropped 3.4 percent instead of 0.5 percent and that bequests grew 2.8 percent from 2018 to 2019 instead of 2.3 percent. The numbers have also been corrected in the chart titled "Giving by the Wealthy to Foundations Stagnates."

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