Charitable Giving Falls . . . Again

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Charitable Giving 1960-2010

When the Giving USA Foundation and the Center on Philanthropy at Indiana University release their annual tabulation of charitable giving in the United States, the results spark a year-long dialogue. Addressing charity and philanthropy during the height of the worst economic recession to hit the nation in 80 years, Giving USA 2010 is full of answers—and questions.

Total charitable giving fell to $303.76 billion in 2009, down from $315.08 billion in 2008. That’s only a 3.6 percent decline in a year where national unemployment rates hit 10 percent at times. Does this reflect an “exceptional” level of American generosity, or were other factors—international disasters, the subprime mortgage crisis, reform of national health care—so dominant that they stimulated giving and philanthropy at a time when all the economic indicators were pointing down? Or was it really a calendar quirk, that the stock market’s major run-up in the last quarter of 2009 resulted in a surge of giving—think of the commitments of the suddenly uber-profitable Wall Street firms like Goldman Sachs—that undid the slow results of the previous three quarters?

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Despite the downturn in the economy and giving, the number of potential charitable recipients continued to grow. So with more groups (and churches) also eligible for tax deductible charitable deductions to support, that reduction in charitable giving is larger than it looks. At the Nonprofit Quarterly, we frequently report on groups showing huge cutbacks in individual and corporate giving, resulting in program cutbacks and staff layoffs that are certainly exacerbated by the variety of federal and state budget cuts. But something doesn’t match up: if charitable giving is only down 3.6 percent (or an inflation-adjusted 3.2 percent), why are so many groups reporting such serious hardships?

Individual giving hardly budged downward in a recession year where a large proportion of the population found itself hard-pressed to make ends meet. So who gave and who didn’t? This was—or still is—a small “d” democratic type of recession, where people at all income levels have felt economic jolts. Did the market upsurge in the fourth quarter make such a difference for the very wealthy, who represent a small proportion of givers but a large slice of individual giving, that they could compensate for the small donors who had to cut back on their charitable deductions? The sudden generosity of the high net worth donor may not be the entire explanation, since Giving USA reports a 23.9 percent decline in charitable bequests.

We never bought the idea of the inevitability of precipitous foundation grantmaking retrenchment in 2009, since any kind of 5-year rolling quarterly average calculation would have included the strong markets prior to the fourth quarter of 2008, softening the blow of the market downturn. It was really a matter of choice whether foundations would protect their assets instead of  protecting their grantees and the public. Foundation grantmaking did fall by 8.9 percent according to Giving USA (actually, in this case, the Foundation Center), but that’s not as high as the mid-double digit declines originally predicted. So how much of this was new foundations entering the fray, or big foundations undertaking new initiatives (like the $50 million matching pledge on New York City poverty made by George Soros’s Open Society Institute), or a real commitment on the parts of some foundations to go a bit countercyclical?

Much more perplexing is the “unexpected bounce,” in the words of Giving USA, to corporate giving, up 5.5 percent over 2008. Where the heck did that come from? Giving USA cited the reports of the Community Encouraging Corporate Philanthropy, which we have too , noting the increase in in-kind donations replacing cash contributions. However, we noted the shift in the composition of the CECP surveyed corporate givers, with some old mainstays in the financial and industrial sectors off the list in part because they’re out of the philanthropy game—or out of the game altogether. You don’t lose big corporate givers like Washington Mutual, Countrywide, and others, even if some parts of their philanthropy were absorbed by other banks (such as Bank of America swallowing Countrywide’s portfolio), without having a loss of philanthropic capital. Did Goldman give out that much in 2009 as a result of its record profits? There’s more to this story.

One of the problems of nationally aggregated statistics is that they lose important distinctions that exist within categories. For example, giving USA uses a category of recipients called “public society benefit” which lumps in organizations that receive charitable giving for their own operations with groups that are really charitable giving intermediaries—United Ways, for example, and the national, corporate-linked donor advised fund managers such as the Fidelity Charitable Gift Fund and its top competitors Vanguard Charitable Endowment and the Schwab Charitable Fund. Although Giving USA reports this overall category as down, Fidelity reports surprising increases in the funds it has taken into the donor advised funds and charitable trusts it manages, a reflection of the fourth quarter 2009 market surge.

What constitutes charitable giving for individuals is still predominantly religious giving–one-third of all individual giving. Giving USA reports that religion has declined a bit, 0.7 percent, but some elements of religious giving might be hidden in giving to youth and human service organizations, some proportion of which are likely faith-based. Giving to the arts, culture and humanities dropped 2.4 percent, but given the number of arts orfanizations we encounter that are really hurting, it soulnds like the big ones may be raising their dollars but the small ones are encountering charitabled precipices.

Not every recipient sector went down. Human services organiztions got an increase of 2.3 percent, suggesting that America’s charitable givers were not insensitive to the suffering of neighbors and communities whacked by the nation’s economic freefall. Health sector giving increased 3.8 percent. The year in question was dominated by the nation’s debate over health care reform, so at a minimum, health might have risen on donors’ radar screens.

International giving (relief and redevelopment, for example) rose 6.2 percent, some of that a continuing expansion of the awareness of international issues by donors and foundations, some of it reflecting responses to international disasters, although 2009 was declared by the United Nations one of the mildest natural disaster years on record. However, for charitable giving purposes, federal legislation allowed 2010 donors who gave for relief of the earthquake in Haiti to count those donations against 2009 tax payments, perhaps that’s reflected in the Giving USA numbers. Among foundations, particularly because of unfathomably large international grants by the Bill and Melinda Gates Foundation, international giving has been steadily on the upswing, a trend not undone by the recession.

How much new giving is there? Have all of the incentives such as IRA rollovers and expanded, clarified rules for donor-advised funds, not to mention the expansions in the programs of Fidelity, Vanguard, and Schwab, actually expanded the rate of giving? According to Giving USA, charitable giving in all of its forms topped 2 percent of Gross Domestic Prouct for the 13th year in a row, but hardly budging from the 2 to 2.1 percent range again. Do the incentives count or not? Would changes in the tax law, such as reducing the amount that high net worth households can claim as charitable deductions or giving a higher deduction for gifts addressing the needs of the poor (and a lower deduction for gifts that don’t), move the needle up or down?

Fundraisers will devour the Giving USA numbers as they always do for what they tell about where the dollars might come from in the future. But 2009 numbers don’t mean that 2010 will look similarly. Is the continuing recession, with maddening levels of unemployment and a Dow back under 10,000, likely to make 2010 look worse than anyone expects? Certainly, as we have reported, government revenues appear to be falling below projections in 2010. Might charitable giving and philanthropic grantmaking do the same?

When people say, “show me the numbers,” they’re asking for more than assuaging a quantitative fixation. The numbers in Giving USA tell us something about ourselves as a society, what we value as important, what we are willing to deemphasize and discard when the economy goes south on us. Giving USA 2010 should also stimulate debate over what charitable giving priorities tell us about our society.