Giving USA 2011: Good News or More Bad News?

Giving USA 2011 reports that charitable giving in the United States increased by 2.1 percent in 2010 compared to 2009, when adjusting for inflation. So, is this good news or bad news?

Edith H. Falk, Chair of the Giving USA Foundation; Thomas W. Mesaros, CFRE, Chair of the Giving Institute; and Patrick M. Rooney, PhD, Executive Director of The Center on Philanthropy at Indiana University all clearly think the increase in philanthropy is good news. In the Foreword to the Executive Summary of Giving USA 2011, they wrote:

We believe the numbers underscore the fact that giving remains a core American value. Over the past decade, philanthropy has held its own in spite of two recessions, terrorism, wars, and a series of devastating natural and man-made disasters. Adjusted for inflation, total giving exceeded $280 billion a year every year for the past decade and surpassed $290 billion in six of the last seven years. This tells us that despite personal and economic hardship, Americans remain steadfastly committed to each other and their communities. Philanthropy is at the heart of who we are as a society, and it is undeterred, if occasionally deferred, by hardship.

However, others see only more bad news in the report. For example, Ruth McCambridge and Rick Cohen at The Nonprofit Quarterly, were almost hysterical in their pessimism:

What the Giving USA numbers suggest is not only a crisis of declining charitable giving reaching human services or social safety net groups, but a class divide where the groups that do well in charitable solicitations are those with connections, with the social class interrelationships that give them automatic access. Meanwhile, charitable giving for human services is very much the province of the less moneyed donors, the payroll deduction donors, the people who volunteer at the shelter or food pantry or clinic because they know the tangible importance of those institutions to their communities.

I suggest that the good folks at Giving USA are the ones who have it right. While the report does not present great news, it does certainly present good news. Charitable giving is up. Furthermore, despite the ravages of the Great Recession, giving has remained at 2 percent of Gross Domestic Product. Since data has been collected, philanthropy as a percentage of GDP has hovered between 1.7 percent and 2.3 percent.

I also want to point out another piece of good news in the Giving USA report. Of all philanthropic revenue streams, bequest giving saw the largest turn around. Bequest giving increased 16.9 percent in 2010 despite the continued depression of the housing market. While bequest giving took a huge hit of 38.5 percent in 2009, Giving USA attributes that to unusually large bequests that were recorded in 2008. Bequest revenue accounted for 8 percent of philanthropy in 2010.

While it is true that giving has not yet recovered to a pre-recession level, giving was up in 2010 following a two-year decline. The modest up-tick in charitable giving in 2010 is consistent with other immediate post-recession periods.

The overall giving number is not really surprising. While not necessarily representing a causal relationship, we have always seen that when the economy grows, so does philanthropy; and, when the economy shrinks, giving declines. Looking ahead, if the economy continues to grow, so will giving. On the other hand, if the recovery stalls or if we enter a double-dip recession, tougher days for fundraising will lie ahead.

Laura Tyson, of the Haas School of Business at the University of California–Berkeley, says that we can expect that GDP will not exceed 3 percent for the next few years. Growth must exceed 2.5 percent for the economy to add jobs in significant numbers. Since the recession officially ended in June 2009, GDP has averaged growth of 2.8 percent. The Federal Reserve predicts 2011 growth of 2.7 percent to 2.9 percent. It also said 2012 growth should be between 3.3 percent and 3.7 percent. So, if the predictions are correct, we can expect continued slow economic growth over the next few years with sluggish job creation in the short term. This will likely mean we can expect only moderate philanthropic growth. Again, while this news is not great, it is undeniably good.

Despite the good news, the folks at The Nonprofit Quarterly see a “crisis.” Specifically, they are concerned about “declining charitable giving reaching human services or social safety net groups.” They’ve even wrung their hands over the belief that human service organizations do not have the interrelationships to give them access to money the way that other types of nonprofits do such as universities.

First, the data does not support the claim of “crisis.” Yes, last year, inflation-adjusted giving to human service organizations dropped 1.5 percent compared to the prior year. However, that follows a positive change of 2.6 percent between 2008 and 2009, when adjusted for inflation. So, there has not been a consistent downward trend. And, while no one wants to see any drop, the 2010 dip is not a huge decline.

Second, whose fault is it if human service charities have not developed relationships that lead to philanthropic support? We can argue all day about whether they should or should not have to develop those relationships. But, the reality is that they do have to, and it is their responsibility to do so. Building relationships is what development work is all about.

For human service organizations that understand development, the past few years have actually not been a crisis. I serve on the board of the Philadelphia Children’s Alliance, an organization that brings justice and healing to the victims of child sex abuse which affects one in four girls and one in six boys nationally. PCA made a commitment to expand its services so that it could help every child in need in Philadelphia. When the recession hit, the board discussed putting this ambitious plan on hold, but ultimately decided to march forward. With a detailed strategic plan in place, with a meaningful case for support, and with additional professional development staff, PCA has indeed marched onward and upward. We did this as a small human service agency without “automatic” moneyed contacts.

As the recession began in December 2007, PCA was in the middle of its best fundraising year ever. In 2008-09, PCA took a big philanthropic hit of 14 percent due exclusively to a drop in foundation support during the depths of the recession. However, the organization remained determined and began to further diversify its sources of support. In 2009-10, PCA saw an increase in philanthropic support of 8.5 percent compared with 2008-09, and an increase of 16 percent compared with the pre-recession fiscal year of 2006-07. This fiscal year, we are on track to raise 13 percent more than last which would be 31 percent more than 2006-07. If we hit our projections, as we believe we will, 2010-11 will be our best fundraising year ever. By the way, my figures do NOT include any government funding figures.

I’m greatly encouraged by all that we are accomplishing at PCA. We did not retreat. We did not sit around and whine. And, we most certainly did not generate support through “automatic” relationships. Instead, the board made a commitment to the children of Philadelphia. Then, staff and volunteers went to work to do the heavy lifting necessary to produce results.

Many human service agencies rely entirely too much on government funding and foundation support along with, to a somewhat lesser degree, corporate contributions. The recession has certainly negatively impacted foundation giving. So, I’m not surprised that many human service agencies are hurting. However, for organizations like PCA that have committed to a detailed strategic plan, have invested in professional staff, have set a dramatic service goal, have built a strong case for support, and have sought to diversify their funding base, things have not been terrible. Does PCA still need to raise more to meet its service goals: yes! Do we need to further diversify our funding streams so we are less dependent on government sources: yes! But, we’re well on our way. Before others start looking at systemic problems facing human service charities, those organizations should first look inward.

This economy is tough on most of us. It is particularly hard on organizations that are simply making excuses rather than doing their jobs. Today, there are 48 percent more 501(c)3 organizations than there were in 2001. Competition for philanthropic dollars has become more fierce. The Great Recession has further increased the fundraising challenge. To be successful in this environment, nonprofit organizations must master the fundamentals and exercise creativity. I’m very proud to be on the board of one organization that gets it.

That’s what Michael Rosen Says… What do you say?

__________

Update:

KYW Newsradio named Chris Kirchner, Executive Director of the Philadelphia’s Children’s Alliance, as one of the 2011 Women of Achievement Award recipients. The award was presented on June 29 at a special award ceremony. For a news report about the event including sound bites from it, please visit: http://tinyurl.com/3pgcrb3.

 

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8 Responses to “Giving USA 2011: Good News or More Bad News?”

  1. Fundraising is a competitive business. My experience with too many social service oriented charities is that they rely solely on a compelling story to raise funds and do not acknowledge the business part of fundraising. Business plans, startegies, best practices, etc. are part of a successful plan. The competition for a limited philanthropic dollar is fierce and more and more sophisticated. Become a part of the business or be lost in the dust.

    • T Zajac, thanks for sharing your thoughts. While I don’t necessarily agree that there are “too many social service oriented charities,” I do completely agree on the importance of sound planning. In the example I provided involving the Philadelphia Children’s Alliance, our fundraising efforts really began to gain traction after we completed a development audit, created a multi-year strategic plan, and crafted a development plan. We’re now in the final stages of writing our next multi-year strategic plan. I cannot overstate the importance of good planning. For PCA, it’s making all the difference.

  2. Sorry Michael… you misread my comment. I did not mean there are “too many social service oriented charities” but that too many of the charities whose work is in the social service arena tend to be less business oriented in their approach to fundraising than other nonprofit sectors such as healthcare and higher ed. They rightly concentrate on their mission but too often miss the need to conduct fundraising in a businesslike manner.

  3. Hi Michael, I’m confused about the revisions from previous years. In the Giving USA 2010 report, bequests were listed at $23.8bil, 8% of all giving. So, when the numbers were subsequently adjusted, was it still 8% of all giving? Was bequest giving revised to a lower number? What’s reality here?

    • Lorri, thanks for the excellent questions. I wish I had an answer for you. Frankly, I’ve been so focused on the most recent numbers and where we are headed that I haven’t spent much time looking at the revised figures. However, this is something that should be examined. I’ll see what I can find out.

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