Posts tagged ‘GDP’

August 3, 2018

Fantastic News and Opportunity for the Nonprofit Sector!

The nonprofit sector received a major piece of good news at the end of July. American Gross Domestic Product in the second quarter of 2018 grew at the annualized rate of 4.1 percent. This represents the economy’s fastest growth rate since 2014. GDP growth in the first-quarter was a healthy, though unremarkable, 2.2 percent.

I don’t really care if you love or hate President Donald Trump. I’m not making a political statement. I’m simply reporting on an economic fact that has profound implications for nonprofit organizations.

The news is fantastic for charities because overall-philanthropy correlates with GDP. For more than four decades, philanthropy has been between 1.6 and 2.2 percent of GDP. In 2017, philanthropy was once again at 2.1 percent (Giving USA). This means that when the economy grows, we can expect growth in charitable giving.

Think of it this way: For more than 40 years, the nonprofit sector has received about a two percent slice of the economic pie. It’s safe to say that that approximate proportion will continue. So, if the economic pie becomes larger, that two percent slice becomes larger as well.

While I’m oversimplifying, my fundamental point is sound: When the economy grows, so does philanthropy.

Some economists and commentators believe the robust GDP growth rate is not sustainable. However, if the impressive economic growth continues, or even if growth continues at a more moderate pace, we can still expect 2018 to be a good year for charitable fundraising.

Given the positive economic environment, you have an opportunity to successfully raise money for your organization. But, it’s up to you to seize that opportunity while the positive economic environment lasts.

Here are 10 things you can do to raise more money while the economy is good:

1. Hug your donors. Ok, maybe not literally. However, you do need to let your donors know you love and appreciate them. Do you quickly acknowledge gifts? You should do so within 48 hours. Do you effectively thank donors? You should do so in at least seven different ways. You should review your thank-you letters to ensure they are heartfelt, meaningful, and effective. Have board members call donors to thank them in addition to your standard thank-you letter.

2. Tell donors about the impact of their gifts. Donors want to know that their giving is making a difference. If their giving isn’t making a difference or they aren’t sure, they’re more likely to give elsewhere. So, report to your donors. Tell them what their giving is achieving and that their support is being used efficiently.

3. Start a new recognition program. One small nonprofit organization I know started a new, special corporate giving club. CEOs of the corporate members are placed on an advisory board, receive special recognition, and are provided with networking opportunities. This new recognition program generated over $50,000 in just a few months. While enhancing existing recognition efforts is beneficial, starting a new recognition program can yield significant results.

4. Ask. Your organization is providing important services. It needs money. Give people the opportunity to support your worthy mission. When you ask for support, just be certain not to limit the ask to cash gifts. Research shows that organizations that receive non-monetary donations (e.g., stocks, bonds, personal property, real estate, etc.) grow significantly more than organizations that receive only cash contributions. Partly as a result of the new income tax code, the number of Donor-Advised Funds has grown significantly. So, make it easy for your supporters to give from their DAFs.

read more »

Advertisements
April 13, 2018

Why are Fundraising Results Missing the Mark?

The nonprofit sector has an unfortunate secret. While not a well-kept secret, it is nevertheless something that receives too little attention. So, let’s take a moment to shine a spotlight on the issue.

Overall, American philanthropy has remained at approximately two percent of Gross Domestic Product for over six decades, with the percentage bouncing between 1.6 and 2.3 percent, according to Giving USA. Every year when the amount of money donated to charities goes up, the nonprofit sector pats itself on the back even though it is merely keeping pace with GDP.

Despite the massive growth in the number of nonprofit organizations, the significant increase in availability of educational materials, the production of helpful research, the professionalization of the fundraising field, and the rise of new technologies, the nonprofit sector has failed to budge philanthropy relative to GDP.

Now, as a committee convened by The Giving Institute begins to consider ways to grow philanthropy beyond the two-percent-of-GDP mark, I’ve written an article for the Association of Fundraising Professionals magazine, Advancing Philanthropy, that explores the challenge: “What Will It Take to Dramatically Increase Philanthropy?”

To answer that question, we need to understand how and why past attempts to do so have come up short, such as the insightful work of the Commission on Private Philanthropy and Public Needs in the 1970s.

We also need to understand the broad societal cultural factors that are affecting philanthropy so that we can develop strategies for inspiring cultural change and/or adapt to factors beyond our control (e.g., decline in religious affiliation, erosion of social capital, drop in volunteerism, etc.). Furthermore, we need to understand the cultural issues within the nonprofit sector that block change and, ultimately, greater success.

We also must set a realistic, consensus goal for moving the philanthropic needle. While that goal should be bold, it should also be based on something other than a dream. A credible target mark will give us all something to shoot for.

As Henry David Thoreau once wrote:

In the long-run, [people] hit only what they aim at.”

While it will likely take at least a couple of years for The Giving Institute’s commission to do its work, you and I do not need to wait. There are things we can do now to begin to move closer to a more vital philanthropic mark, something greater than two percent of GDP:

read more »

January 5, 2018

How Bad is the New Tax Code for Your Charity?

If you’ve been reading the mainstream press, or even some of the industry media, you might believe that the future is all doom and gloom for charitable giving thanks to the Tax Cut and Jobs Act. But, how bad will things really be for you and your nonprofit organization?

As a former newspaper editor, I know that the media lives by the axiom: If it bleeds, it leads. In other words, negativity attracts readers and viewers, which in turn attracts advertising dollars. So, it’s no surprise that the media have put the new tax code in the most negative light when it comes to charitable giving.

Fortunately, reality is something quite a bit different. Let me explain, using figures from 2016 (the most current numbers available).

Overall, charitable giving totaled $390.05 billion. US Gross Domestic Product totaled $18.6 trillion. Therefore, total philanthropy in 2016 equaled 2.1 percent of GDP.

As a result of the new tax code, charitable giving could decline by approximately $21 billion, according to Patrick Rooney, PhD, Executive Associate Dean for Academic Programs and Professor of Economics and Philanthropic Studies at Indiana University-Purdue University.

However, is that number accurate? Unfortunately, we have no way of truly knowing as Rooney himself states.

For example, the estimated philanthropic decline of $21 billion does not take into account the impact of a likely increase in Gross Domestic Product.

Because philanthropy closely correlates to GDP at the rate of approximately two percent, we can expect a rise in GDP to result in a rise in giving.

So, how much will GDP rise? Again, no one knows for certain. The estimates vary greatly from 0.08 to 0.35 percentage points. The Tax Foundation provided the latter estimate. Applying that percentage to the 2016 GDP, we would see GDP increase by $651 billion. If two percent of that increase goes to charitable giving, that would be approximately $13 billion. So, Rooney’s prediction of a $21 billion decline in philanthropy could be mitigated partially by GDP growth resulting in just an $8 billion drop in giving. However, even that number could be further offset by growth in foundation giving resulting from robust growth in the stock market.

Simply put, the new tax code could increase GDP and stock values leading to more charitable giving that could, at least partially, offset any potential decline in giving resulting from the new tax policy.

For the sake of discussion, however, let’s assume a $21 billion drop in giving, as Rooney outlined. That would take philanthropy as a percentage of GDP from 2.1 percent to 1.9 percent, using 2016 numbers. This is still within the 40+ year historical range.

The bottom line is that the new tax law could result in a decline in charitable giving. However, we don’t know for certain if that will be the case and, if it is, how much the dip will be. Even if there is a dip, giving will still remain at historically typical levels, around two percent of GDP. Furthermore, there is the possibility that the pundits are mistaken and that charitable giving will actually increase. Time will tell.

While the new tax code may change how and when people donate, history teaches us that changes in the tax code have only a short-term impact on the amount of giving though the methods and timing may vary. For example, the Reagan tax cuts resulted in greater year-end giving in 1986 before giving normalized thereafter. Furthermore, while a dip of billions of dollars is a big number, the reality is that it is not massive in the context of overall philanthropy.

Here are some of the relevant items you need to know from the 500+ page Tax Cut and Jobs Act signed into law on December 22, 2017 by President Donald Trump:

read more »

June 14, 2016

Happy Days are Here Again … for Now

Charitable giving in the USA reached a record high for the second year in a row, according to the newly released Giving USA 2016: The Annual Report on Philanthropy for the Year 2015, a publication of Giving USA Foundation, researched and written by the Indiana University Lilly Family School of Philanthropy.

While the news is good, storm clouds are gathering on the horizon. You need to hear both the good and the troubling news. I’ve tried to distill the most relevant, overarching information for you and provide you with some tips to help you be more successful moving forward. While I would normally advise against sharing lots of statistics, I nevertheless think you’ll appreciate these numbers.

Source Pie Chart_June 13 2016Researchers estimate that giving totaled $373.25 billion in 2015.

That new peak in contributions represents a record level whether measured in current or inflation-adjusted dollars. In 2015, total giving grew 4.1 percent in current dollars (4.0 percent when adjusted for inflation) over 2014.

The revised inflation-adjusted estimate for total giving in 2014 was $359.04 billion, with current-dollar growth of 7.8 percent, and an inflation-adjusted increase of 6.1 percent.

Charitable contributions from all four sources — individuals, charitable bequests, corporations, foundations — went up in 2015, with those from individuals once again leading the way in terms of total dollar amount, at $264.58 billion. This follows the historical pattern seen over more than six decades.

Giving to eight of the nine nonprofit categories studied grew with only giving to foundations declining (down 3.8 percent in current dollars, down 4.0 percent adjusted for inflation).

Giving to the category of International Affairs — $15.75 billion — grew the most (up 17.5 percent in current dollars, up 17.4 percent adjusted for inflation).

Giving to the category Arts/Culture/Humanities — $17.07 billion — grew the second most (up 7.0 percent in current dollars, up 6.8 percent adjusted for inflation).

While the numbers are terrific, the story is really about more than that. Giving USA Foundation Chair W. Keith Curtis, president of the nonprofit consulting firm The Curtis Group, says:

If you look at total giving by two-year time spans, the combined growth for 2014 and 2015 hit double digits, reaching 10.1 percent when calculated using inflation-adjusted dollars. But, these findings embody more than numbers — they also are a symbol of the American spirit. It’s heartening that people really do want to make a difference, and they’re supporting the causes that matter to them. Americans are embracing philanthropy at a higher level than ever before.”

While the 2015 giving news is certainly positive, there are four points that indicate that the good news might be short lived:

read more »

May 25, 2015

Discover 5 of the Latest Trends Affecting Your Fundraising

Leading up to the 2015 Association of Fundraising Professionals International Fundraising Conference, a number of my readers contacted me to request that I gather information about emerging fundraising trends. (Yes, I take requests, so feel free to make one.)

It’s not surprising that development professionals understand the need to stay on top of the evolution that takes place in the world of philanthropy. After all, as Benjamin Disraeli has said:

Change is inevitable. Change is constant.”

Recognizing that ongoing change is part of our life is one thing. Understanding what that change means and how to capitalize on it can help even good fundraisers become stars. As John F. Kennedy has stated:

Change is the law of life. And those who look only to the past or present are certain to miss the future.”

None of us wants to miss the future.

So, with that thought in mind, I attended the session “Latest Trends in Giving and What They Mean for Your Organization” with presenters Stacy Palmer, Editor of The Chronicle of Philanthropy, and Jeff Wilklow, Vice President of Campbell & Company. Here are five of the key trends they cited:

Mega-Donors:

Among very wealthy, very generous philanthropists, much of their giving does not go directly to existing charitable organizations. While their philanthropy will eventually find its way to charitable purposes, it will first be funneled through special funds or foundations that the mega-donors create or contribute to.

Money by 401(K) 2012 via FlickrMany of those who earned their fortunes through entrepreneurialism will gravitate toward entrepreneurial philanthropy. This is particularly true with younger technology entrepreneurs. With a do-it-yourself attitude, these individuals may choose to create a charity or socially-responsible business rather than donate to an existing, mainstream nonprofit organization.

In any case, big donors are interested in funding big ideas. They’re interested in big solutions to big problems. To attract the support of mega-donors, your charity will need to focus on creative solutions for large challenges.

Legacy Donors:

Many charitable organizations embrace the idea that planned giving equals endowment building. For example, many charities have adopted policies that direct bequest revenue into the organization’s endowment fund unless otherwise designated by donors.

While your organization might have a bias in favor of building endowment revenue, donors have a keen interest in their own legacy. Donors want to make a lasting difference. So, they will likely be more interested in funding your programs and initiatives that help establish their legacy than they will in simply having their money deposited into your organization’s investment pool.

Just as we see that current donors have a growing interest in gift designations rather than unrestricted giving, we see a similar interest among planned giving donors who want to ensure their legacies. Some donors want to be assured of having a long-term, definable impact while other might be content with having their name, or the name of a loved one, on an endowment fund. The key is to understand what motivates the individual.

Social Donors:

Donors communicate with your organization in a variety of ways thanks to new technologies. They also communicate with each other like never before.

Donors are online. And it’s not just young donors. They view your website, they engage in crowd funding, they give online, they take surveys, etc. Here are a few simple things you need to do to make sure those experiences inspire support:

read more »

January 9, 2015

Are You Ready for the Coming Storm?

A storm is coming. It will affect the entire US economy. It will likely affect the global economy.

The nonprofit sector will not escape the impact. You need to prepare now.

Koyasan Umbrellas 3 by Andrea Williams via FlickrAs 2014 began to wind down, the US National Debt surpassed the $18 trillion mark! That’s over $154,000 of Federal government debt per taxpayer or more than $56,000 per citizen. During the six years of the Obama Administration, the US National Debt increased by nearly $7 trillion, representing 67 percent growth. And it’s still growing.

As if that’s not bad enough, the US Unfunded Liabilities total more than $92.5 trillion dollars, or more than $789,000 per taxpayer! It, too, continues to grow.

President Barack Obama, former-President George W. Bush, and the US Congress are all responsible for the rapid growth in the US National Debt since 2009 as well as the growth in the Unfunded Liabilities. So, I’m not going to engage in specific finger pointing, policy debates, or politics.

Instead, I want to focus on what this means for the charity sector looking forward.

The rapid growth of national debt is not sustainable. We should no longer ignore it. Here are some of the reasons why:

• While our enormous national debt is not significantly affecting the nonprofit sector at the moment, the day is coming when it will. Prudent organizations will prepare for the storm before it hits.

• At some point, failure to address the massive debt issue will lead to a downgrade in America’s credit rating. Think it can’t happen? It already has. In 2011, Standard and Poor’s cut the US credit rating to AA+ because the government “fell short” of taming the nation’s debt. In 2012, Egan-Jones cut America’s credit rating to AA for the same reason. While these downgrades have had a mostly symbolic effect, they foreshadow what is likely to happen unless the government brings the national debt under control.

• Eventually, future credit rating downgrades will make it more expensive for the government to borrow money. Interest rates will rise. That will take more money out of the economy.

• In addition to becoming increasingly costly to borrow, lending sources will be harder to find. Some of those lenders might also use the lender-debtor relationship to force US policy changes. We’ve already seen this with the China relationship. By the way, China, no longer the US, is the world’s largest economy in “real” terms of goods and services produced.

• To deal with the debt, the federal government has four possible courses of action (or some combination of these): 1) pay more to borrow more which will add to the debt and take more money out of the economy, 2) print more money which would be inflationary, 3) cut spending which would likely mean less money for the social safety net and nonprofit organizations, and 4) raise taxes which will reduce individual disposable income. So, even if the government does address the debt situation, it could have a short-term negative impact on the nonprofit sector before it has a positive effect.

• A massive, growing national debt will make it more difficult for the US economy to experience strong growth in Gross Domestic Product. Philanthropy correlates closely with GDP; it’s been about two percent of GDP for decades. If the economy doesn’t grow rapidly, philanthropy is not likely to do so. If the economy truly falters, we might even see a drop in year-to-year philanthropy as we did during the Great Recession.

We’re already beginning to see some of the effects I’ve described above. If nothing is done to tame the national debt, these effects will be magnified and could eventually become catastrophic.

There are some things that nonprofits can do to prepare:

read more »

%d bloggers like this: