Philanthropic giving in the USA increased for the third straight year in 2012, but only modestly.
Overall giving in 2012 totaled $316.23 billion, an increase in current dollars of 3.5 percent over 2011. Adjusted for inflation, the increase is just 1.5 percent. That’s the finding presented in Giving USA 2013, the report researched and written by the Indiana University Lilly Family School of Philanthropy and just released by the Giving USA Foundation™.
I had a chance to sit down and talk with Dr. Patrick M. Rooney, Associate Dean for Academic Affairs and Research at the Lilly Family School of Philanthropy. He asserts that, at current growth rates, it would take at least six years for a return to pre-recession giving when adjusted for inflation. He anticipates growth will indeed continue to be slow since the overall economic recovery is slow.
For more than half-a-century, giving has hovered at two percent of Gross Domestic Product. When GDP grows strongly, giving is robust. When GDP growth is sluggish, so is philanthropy. With many economists predicting 2013 GDP growth of just 1.9 percent, Rooney’s prediction seems entirely reasonable.
Here are some highlights from the report:
–2012 saw marked year-over-year growth in corporate giving (12.2 percent in current dollars), which is strongly linked to companies’ profits. For 2012, corporate pre-tax profits surged upward 16.6 percent, according to the Bureau of Economic Analysis.
–Uncertainty fueled by mixed economic indicators may have moderated giving by individuals, who historically account for the largest percentage of total giving. Positive trends, such as the 13.4 percent increase in the Standard and Poor’s 500 Index between 2011 and 2012, the slight rise in home values, and overall lower unemployment rates and fuel costs, were combined with budget concerns and tax reform discussions. In addition, personal disposable income rose 3.3 percent and personal consumption expenditures rose 3.6 percent last year, virtually mirroring the growth in individual giving (3.9 percent in current dollars).
–Giving by individuals rose to $228.93 billion in 2012, an estimated 3.9 percent increase (1.9 percent adjusted for inflation). Income and wealth are key drivers of household giving, as is a sense of financial security. Giving by taxpayers who itemize their gifts represented 81 percent of the total donated by individuals in 2012.
–Giving by bequest decreased an estimated 7.0 percent in 2012 (8.9 percent adjusted for inflation) to $23.41 billion. Itemizing estates contributed 78 percent of the total, or $18.31 billion. Bequest giving tends to be volatile from year to year, as it is highly influenced by very large gifts from estates that closed during that year. For example, Rooney explains that if we remove one exceptionally large bequest from the 2011 numbers, we find that bequest giving was close to the same in 2012 and 2011 when adjusted for inflation. So, the big dip in 2012 should not set off alarm bells. With real estate values and stock portfolios rebounding, the future for bequest giving is encouraging.
–Giving by corporations rose 12.2 percent in 2012 (9.9 percent adjusted for inflation), to an estimated $18.15 billion, including gifts from both corporations and their foundations. The two entities provide cash, in-kind donations and grants. Increasing the 2012 total was the estimated $131 million corporations gave to nonprofits working on relief efforts in the aftermath of Hurricane Sandy.
–Giving by foundations increased 4.4 percent (2.3 percent adjusted for inflation) to an estimated $45.74 billion in 2012, according to figures provided by the Foundation Center. Giving by community foundations grew 9.1 percent last year, which helped to bolster the total. Operating and independent foundations increased grant making by 3.5 percent and 3.9 percent, respectively. While stock values increased in 2012, foundations often use a multi-year rolling average when valuing their portfolios. Therefore, as stock values continue to climb, we should see stronger future growth in foundation giving.
–Looking at foundation giving, 45 percent comes from family foundations where a member of the family continues to be actively involved in running the foundation. In a sense, these organizations blur the line between foundation and individual giving. Giving by family foundations can often be very relationship driven as with individual giving.
While the data provides a number of interesting insights about the charitable behavior of Americans, it also hints at serious warnings, according to a panel of experts that gathered in Philadelphia to present the Giving USA findings. The panelists included Jon Biedermann, Vice President of DonorPerfect; Robert Evans, Founder and Managing Director of The EHL Consulting Group; Eileen R. Heisman, ACFRE, President and CEO of the National Philanthropic Trust; and Rooney. Here are their warnings:
1. As church, synagogue, mosque, and temple attendance decline, so has giving to Religion in recent years. Research shows that those who attend religious services tend to be more philanthropic overall than those who do not. While this has obvious implications for religious institutions, it might also have a long-term impact on overall philanthropy, according to Rooney. Evans shares Rooney’s concern. In other words, a decline in religious engagement might result in a decline in both religious and secular philanthropy. We may be witnessing the very early years of a negative trend.
2. When government focuses more resources on a particular sector, private giving to that sector tends to decrease. As Obamacare roles out, this may have implications for Health related charities. This will be something to watch in the coming years, advises Rooney.
3. The Obama Administration and Congress continue to consider additional tax increases on the one hand, and a cap on charitable deductions on the other. When people have less money to give, they give less. A tax increase would leave some people with less money. A cap on the deduction for charitable giving will make giving more expensive and, therefore, will result in a decline in giving. Evans suggests that the nonprofit sector is not doing enough to advocate for the sector. The result might be that nonprofit organizations will be left to cope with new government policies that are detrimental to philanthropy.
4. Donor retention is a worsening problem for the nonprofit sector, according to Biedermann. In 2011, half of first-time donors to a charity could be counted on to make a second gift. As bad as that retention rate was, it dropped to 49 percent in 2012. Given the high-cost to acquire a donor and the need for charities to develop sustainable support, this is a significant problem and bad downward tick.
5. The sluggish economic recovery leads many nonprofit organizations to be overly cautious when fundraising. Biedermann suggests that organizations need to keep asking if they want to raise money.
6. The panel asserted that the challenging economic environment requires organizations to think more creatively. Tired, vague approaches will yield lackluster results. Development professionals must build a strong case for support and demonstrate outcomes if they want to raise more money.
While some nonprofit organizations have seen donations decrease, stagnate, or increase only modestly, smart organizations have done much better.
In the Human Services arena, giving in 2012 totaled $40.40 billion. This is a 3.8 percent increase over 2011 (1.8 percent adjusted for inflation). It includes $223 million given to support organizations working on Hurricane Sandy relief and recovery efforts. However, some savvy organizations, even those not involved in Sandy relief efforts, saw substantial gains.
Consider the case 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. In total private support, PCA raised $475,321 in Fiscal Year 2011, $543,984 in Fiscal Year 2012 (14.4 percent increase), and $608,484 so far in Fiscal Year 2013 (11.9 percent increase so far).
PCA’s fundraising results have dramatically outpaced the performance of the Human Services sector. Big increases are possible.
Jan Hatchard, PCA’s Director of Development, explains:
During the past several years, we have been deliberately building our development effort. The Board set some pretty aggressive goals. Once we put a plan together and began working the plan, we started to see immediate progress. We have focused on building relationships, and we have diversified, adding the Corporate 20 recognition program, strengthening our foundation fundraising by hiring a great grant writer, putting more structure and planning into the Bear Affair [special event], and we have taken advantage of all the opportunities that have arisen from the variety of partnerships realized through the Bridge to Healing initiative and our special events in order to build all areas of development.
We have added donors every year, and stemmed the tide of lapsed donors by improving our communication with donors overall. We are retaining donors and re-engaging donors at a good rate.
Communication is key in that once we sharpened our message and began to share it in many different ways – social media, in particular – we have given our already caring donors the information and confidence they need to not only support our work themselves but to bring awareness of our work to others.”
As the Giving USA panelists suggested, PCA built an inspiring case for support, designed communications that are more effective, focused on building relationships and retaining donors, and asked more often. The result has been well above average performance.
For information about how other charities have outperformed the averages and to learn more about Giving USA 2013, click here to read a worthwhile article from The Chronicle of Philanthropy.
For a free executive summary, Giving USA Highlights, or to purchase the full report ($89.95), click here.
So, is your organization performing at an above average level? If so, what’s your secret?
That’s what Michael Rosen says… What do you say?