We’re rapidly approaching the close of what has been a tumultuous year. In 2016, the USA experienced an unusually bitter presidential campaign culminating in the unexpected election of Donald Trump. In the UK, voters chose to exit the European Union; the surprise Brexit vote sent shockwaves around the globe. The civil war in Syria continued to spin out of control resulting in a massive wave of refugees. Terrorism continued to be an international problem.
Uncertainty, fear, and stress are all words that one might use to describe the atmosphere in 2016 given much of the news. However, at least for fundraising professionals, there has also been much good news:
• The third-quarter 2016 annualized Gross Domestic Product growth rate is 3.5 percent, according to the US Commerce Department’s Bureau of Economic Analysis. This is important because philanthropy closely correlates to GDP with overall giving being approximately two percent of GDP.
• Personal income has modestly increased in 2016, according to the BEA. Individual giving correlates to personal income at the rate of about two percent.
• The stock market has been achieving new record highs since the election with the Dow approaching 20,000. Increased stock values mean foundations will have more money to grant and individuals will have more appreciated securities they can donate.
• The price of crude oil is the lowest it’s been in more than a decade, according to Macrotrends. This means lower gasoline and heating oil prices for consumers thereby providing them with more disposable income.
• Third-quarter 2016 corporate profits were up, rising to the highest level since the first-quarter of 2015, according to Trading Economics and the US Bureau of Economics Analysis.
• The nonprofit sector saw #GivingTuesday philanthropic support worldwide grow at the rate of 44 percent, reports NonProfitPRO. While this might not reflect an increase in philanthropy, it does reveal the public’s philanthropic spirit at a time of year historically defined by commercialism.
• Blackbaud, which analyzes more than $18 billion in charitable giving, sees a 3.5 percent increase in donations in 2016 compared with 2015, reports MarketWatch. You can read my comments in the article as well as additional information from Blackbaud.
• Some progressive charities have seen dramatic increases in philanthropic support since the election, reports MarketWatch. It remains to be seen whether this represents an increase in philanthropy or merely a shift in giving priorities. In any case, it reveals that contributions are often driven by philanthropic passions.
• In a Harris Poll survey for CARE USA, 15 percent of respondents say they have or will increase their charitable giving in 2016. While I have a number of problems with the survey methodology, the results are nevertheless somewhat hopeful.
Taking all of the positive news together, we can expect to see that philanthropic giving has increased in 2016. To learn how much growth we have experienced, we’ll need to wait until all of the data has been compiled and analyzed. While I don’t expect a massive growth rate, I do expect good growth. Furthermore, I expect the good news to continue into 2017:
• Mega-brokerage firm Goldman Sachs predicts a pickup in economic growth in 2017. Goldman Sachs believes that in the USA 2016 GDP growth will be 1.6 percent and 2.4 percent in 2017. While this is a modest improvement, it represents growth that is likely to positively influence charitable giving.
• Some sort of tax reform proposal will likely be adopted in 2017. While the federal government will look at changes to both personal and corporate tax policy, Goldman Sachs believes changes to corporate policy are more likely in 2017 with changes to personal taxes to follow. Jan Hatzius, Chief Economist and Head of Global Economics and Markets Research at Goldman Sachs says:
Our expectations for economic policy under the Trump Administration and under unified Republican control… are that there will be tax reform coupled with some fiscal easing and also some increase in infrastructure spending. And we do expect that to provide a positive impulse to economic growth.”
• Stock values are expected to continue their rise in 2017 though not at the rapid pace we’ve seen in the last several weeks, according to the Goldman Sachs 2017 Macroeconomic Forecast.
While it’s dangerous to predict what will happen in 2017, there are hopeful signs that philanthropic giving will continue to grow. Nevertheless, there are risks that could change the outlook:
• Oil prices are likely to rise.
• Full employment in the USA along with other factors could result in increased inflation.
• Healthcare reforms could raise or lower costs.
• Trump Administration tax and trade policies could have either a positive or negative impact on the economy and charitable giving. We’ll need to remain vigilant and engaged.
• The Trump Administration also plans major deregulation efforts. Depending on the changes that are adopted, we could see further economic growth or fragility.
• The Trump Administration may seek significant budget cuts to the nonprofit sector. This will put greater pressure on charities to offset these cuts with philanthropic and earned revenue.
• International events could change everything. Wars, terrorism, trade conflicts, natural disasters, and other global events could significantly affect the economy and, therefore, charitable giving.
In a phrase, this is a time for cautious optimism. However, with so many variables at play and so many unknowns, it’s also a time for planning, flexibility, relationship building, and philanthropic diversification.
So, has your organization seen an increase in giving in 2016? What do you think 2017 will be like for your nonprofit?
That’s what Michael Rosen says… What do you say?