The Other America’s Philanthropy: What Giving USA Numbers Reveal in 2011

altAs some readers will recall, “The Other America” was a study published in 1962 that was influential in informing social policy. It documented the extent of poverty in the United States – asserting that much of poverty was unacknowledged. Fast forward to 2011. Has a good part of philanthropy forgotten about poverty in this country right in the midst of the worst recession since the depression?

Last week the United Way of the Central Carolinas announced that it had withdrawn $2.5 million out of its $10 million in reserves to try to level fund community agencies struggling with increased need and reduced government contracts. Its fundraising had fallen $5 million short from the previous year.

Yet here comes the headline from this year’s Giving USA report on charitable giving: giving was up by 2.1 percent in 2010 over the previous year, indicating a rebound of charitable giving. We can either think of that United Way as a low performing anomaly or look deeper to understand why so many community organizations are still struggling.

Among fundraisers, there’s an ethic of not crying wolf, of seeing the positive even in the negatives, and assuming that the unending generosity of the American charitable donor will win out. But below the headline, the Giving USA numbers this year present an alarming picture for communities across the United States on any number of counts.

  1. What we see in the Giving USA numbers is a still-depressed domestic giving scene. The 2.1 percent increase logged for 2010 estimated giving is an increase based on numbers for the previous two years that have been adjusted down. The adjusted cumulative decline in Giving for 2008 and 2009 was 13 percent so the 2.1 percent estimated increase brings giving to an 11 percent decline from pre-recession highs.
  2. This decline, as we suggested last year, has not been evenly distributed. What is most obvious in this year’s numbers is a significant disinvestment in people in need on the domestic front. As we understand the numbers, the subsector that took the biggest hit in terms of decreased dollars was human services at a 5.6 percent decline in inflation adjusted numbers last year alone. While at first glance, the category appears to have remained stable, Patrick Rooney, of the Center on Philanthropy where the Giving USA number are crunched, says that 75 percent of the relief giving from this country to Haiti last year went as grants and contributions to domestic human service agencies. Backing that amount out results in the 5.6 percent drop.
  3. The giving that is documented is increasingly not in the form of immediately spendable dollars. It includes gifts to foundations that keep increasing even while foundation grantmaking remains distinctly pallid. Additionally, grantmaking from corporations, reported to be skyrocketing here, is increasingly in the form of in-kind products, particularly from pharmaceutical companies. Some link this largess to attempts to get rid of excess inventory but major corporate cash givers to human services such as the financial sector and retail have been declining.
  4. Much of the discussion of charitable giving now and going forward is predicated on a national economic recovery which is assumed to drag along charitable giving and philanthropic grantmaking. But we see plenty of indications of an attenuated, prolonged recovery, not only slow, as Federal Reserve chairman Ben Bernanke recently noted (here and here), but one that still leaves millions of Americans on the employment sidelines. How will this really affect charitable giving in the near future and why? Will this 2.1 percent estimated increase disappear as the IRS data comes in?

NPQ believes that the unevenness of the recovery, which is occurring on Wall Street but not yet on Main Street, is reflected in the charitable giving numbers. Major institutions are recovering while smaller organizations in troubled communities are still struggling with the equation of increased demand and decreased resources.

To demonstrate that giving hasn’t really rebounded, we have the Giving USA estimates themselves, which twice have had to be revised downward from the original 2010 report. Some will remember that last year’s Giving USA report initially indicated that individual charitable giving had risen in 2009 despite the rampaging recession. After two subsequent downward revisions, the real number was a decrease of 6.5 percent individual giving, much more in line with what nonprofits tell us they are experiencing. Will there be a need for additional downward revisions after this report? Maybe so.

The impact of the recession on charitable giving has been more devastating than people might have imagined. Let’s face it. This is a recession where long term unemployment and underemployment is beginning to resemble that of the Great Depression, cushioned by an array of social programs that didn’t exist 80 years ago, but undermined by an unwillingness of government to utilize its powers to create job-generating opportunities.

Taken at face value, the Giving USA report says that charitable giving climbed a modest amount in 2010. But within that tepid number, some sectors grew proportionally much more than others.

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The big winners in giving over the 2008 – 2010 period have been in international giving. The Giving USA numbers show that international giving has grown by 18.6 percent during that period. This realm of giving, which has traditionally been a relatively small slice of the giving pie, has according to Patrick Rooney, been pretty steadily on the increase since 9/11. This number would be even higher if the giving to Haiti that was recorded in the domestic human services category were added.

Rooney suggests that this giving is a response on the part of the American people to a growing understanding of our interdependence with the rest of our planet, but the ease with which contributions can be made after a natural disaster and the activities of mega funders such as Gates on the international front may figure in as well.

Giving to education — K-12 education and colleges — grew 5.2 percent, much of that increase occurring in late 2010. Giving to arts institutions also grew by 5.7 percent, despite persistent reports that the arts were taking a devastating hit in the recession. In a recent discussion with NPQ, Rooney suggested that the increase in these sectors may have everything to do with the fact that they contain large institutions, both with fundraising infrastructure capacity and personal connections to the affluent sectors of our economy. This served them well as the economy began to rebound at the top. Moreover, the segments of donors that grew substantially in 2009 included giving through charitable bequests — always a segment of giving that emphasizes the big institutions — grew by 18 percent in 2009. These are charitable dollars that are much more accessible to denizens of the club, not to grassroots groups on the street. Similarly, the charitable giving incentive du jour has been the IRA rollover, which enables wealthy people to take from their retirement plans to give to charity benefits, colleges, and arts institutions to a far greater extent than any other type of group.

Although Giving USA includes donor-advised funds (DAFs) as a charitable giving recipient, given their propensity for fast spending — three or four times as fast as 5 percent spending-bound private foundations — we view DAFs as charitable givers, and the donors who are establishing mini-foundations in the national charitable funds are also inclined toward institutional giving, especially since the only way to access DAFs is to have an ability to contact the investor. DAFs don’t make themselves available for unsolicited proposals, so unless you’re part of the club, unless you know the donor, it is virtually impossible for grassroots, human service nonprofits to access those dollars directly.

Even for foundations — the growing segment being family foundations — the trend is toward funding among the social classmates. Gifts to foundations grew faster than grants from foundations, according to Giving USA, but beyond that, foundations are increasingly resistant to unsolicited proposals. Whether increasing or decreasing, foundation dollars are more likely than ever to be restricted to members of the in-group, the social club, and inaccessible to the charities whose leaders don’t belong.

Brad Smith of the Foundation Center comments that there is “a trend among some foundations to design their own theories of change and strategies and then either implement programs themselves or select the organizations from which they are willing to entertain proposals. The actual design of these strategies frequently is done in collaboration with nonprofits and universities, so if you happen to be part of the process, you’ll most likely get a grant. If not, well, you’re just not part of the in-crowd.”

The numbers we see aren’t always real dollars when nonprofits are concerned. On the corporate side, the shift to in-kind giving, giving in product rather than in cash, has been pronounced for some time. In the past few years of Giving USA statistics, the dominance of pharmaceutical companies who subsidize purchases of prescription drugs for individuals and who donate product overseas and elsewhere, is a major part of the corporate giving picture. At the same time, giving by the financial sector, whose collapse precipitated the overall economic collapse, has been in short supply, not only cutting back in giving, but in some cases, major givers have simply disappeared. Strikingly, the financial sector was always a strong cash giver to charities and a major supporter of human services groups. The imbalance in charitable giving against the social safety net groups shows up even in the mix of corporate givers still in the game and corporate givers missing in action.

Throughout the Giving USA report are indications that some of the trends, now seen as inching upward, are keyed to expectations of trends from past recessions. But our suspicion is that this isn’t like past recessions. Official unemployment is back over 9 percent and moving upward. New job creation isn’t even keeping up with the expansion of the numbers in the workforce, much less generating enough jobs to start chipping away at the numbers of people without jobs. And none of that includes the proportions of the population working at part-time jobs because of the lack of full-time employment or the people working far below their job skills because of the lack of opportunities. With no appetite at the federal level for a job-creating stimulus, this doesn’t look like our parents’ recession, but rather a likely persistent or even double-dip downturn that won’t be headed back toward “normalcy” anytime soon. And normalcy hardly looks like the “acceptable” 5.5 percent unemployment of years past.

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.

NPQ believes that there is a class divide in our society, and it is reflected in a class divide in charitable giving and in the nonprofit sector. Just as corporate CEO compensation is now back at pre-recession levels even while joblessness persists, the needs of the poor and of the organizations that serve the poor have virtually disappeared from political discourse and from the priority lists of philanthropy. And the incentives — bequests, IRA rollovers, etc. — flow toward the institutions with the fundraising infrastructures and the social connections to major donors.

Is it time to rethink the incentives built into our charitable giving structure, where a donation to a sector or institution serving primarily the affluent, is treated identically to a donation meeting the safety net needs of the poor? If we do not rethink the current structures, the creeping and deepening class divide in our society and in the nonprofit sector will only persist.

  • Jackie Norris

    The logical conclusions drawn by this article should be a must-read for every donor in America. When will the “in-group” giving stop in this society? When will people who need a hand up receive more funding than animals? Thank you for printing this…now it should be distributed to the widest readership possible.

  • Laura Pierce

    The trends and underlying causes identified here ring true to me, and I appreciate NPQ for calling attention to them. Here in Seattle, we have some very strong foundations setting strategy. I partially understand the temptation as we are all trying to tackle complex, systemic social issues that no single nonprofit organization can address (and funders do have a broader view), but we need meaningful collaboration between funders and nonprofit service providers to develop effective solutions.

    The fact that the Giving USA stats have been revised to reflect declines in giving was news to me–the reports indicating that individual giving is holding steady are what I have been hearing. Certainly a 13% decline is more in line with what I am seeing than level giving.

  • Jim Mueller

    Great article. In addition, we need to factor in the increasing expansion of the sector, which grew by 40,000 net new nonprofits in 2010 alone. The pace in previous years had been more robust, but that still is very significant. We should be calculating the numbers not only by giving but by receiving; in other words when we factor in the growth, the $ per non profit shrank 15% in 2009 remained flat in 2010 according to the preliminary numbers from Giving USA.

  • burpo

    United Way is a poor example here. Their fund development/business model is dying and they haven’t come up with a new one to reflect the new realities.

    As technology allows greater direct engagement, intermediary organizations are being dismantled (when’s the last time you used a travel agent?). As a fundraising intermediary, United Way may be irrelevant.

  • Serena Everson

    When taking over a non-profit as an executive director, I have found in all the year A Spiritual Abode inc. has been serving its community for 11yrs+ is has never been granted a grant. We serve the mental Health/dual diagnosis members of our community that we are trying to help and we are finding it exsteamly diffucult to get help in our community as well.When will the small non-profits get help to keep dual diagnosis people off the streets and get them treatment? Thank you for this articile…hdza

  • Laura W-M

    couldn’t agree with you more. I worked for 2 large corporations where the UW contribution was voluntary but expected (especially if you were on the officer level, as I was). I think that contributions by coercion are on their way out.

  • Krista Cole

    Great article & so relevant! I’m an Exec Director for a 37 yr old nonprofit serving seniors. I work with 19 senior centers, about 100 employees & 700 volunteers, to deliver Congregate Meals, Meals on Wheels and Transportation services and help the senior centers in so many other ways. About 48% of our funding is Fed/State funds from the Older Americans Act funding stream. We’ve been fairly successful in the past at securing grants as part of that other 52%. HOWEVER..this year we were informed by our local United Way that they were “going in another direction” and would no longer be supporting Meals on Wheels…in fact when I talked to other senior service providers…turns out they got the same message…no more funding senior programs. In my lifetime, United Way was always the “safety net” for the community and respected. Our local United Way has decided that “they” know what’s best and how to do it and are going to focus on changing “the world” rather than supporting causes that are considered safety net. They seem to fit your article to a “T”. Further, it seems that most funders are done with safety net programs and done with seniors in general. I’d like to get on my soapbox and remind them and everyone else that it those very seniors who built this great country we enjoy and the beautiful communities in which we live. AND, it is through no fault of these wonderful seniors that our countries leadership has not “taken care of business” causing social security to be a joke, prices to sky rocket and their futures to look bleak. This is not the country “they” (our seniors) worked so hard to build.
    So, I agree with this article…we are definately NOT feeling like the “in crowd” and would love to have those dollars being shipped out and closely held to be available to making this the great country our seniors intended on building by supporting community-based, grassroots causes and organizations who struggle to do just that! Just sayin!

  • Nancy Bacon

    Within conversations about international development and social change, it is striking how rare it is for people living in poor societies to be consulted in proposed solutions. We are moving away from investments in the social good and towards ala carte funding for narrow solutions to specific problems. We need some foundation/large scale individual funder to put some money in the consideration of a new model that includes the people we are trying to serve.

  • Kalman Stein

    I am amazed that United Way has escaped scrutiny or criticism during this recession, and the Central Carolina cited is no exception. Just before the recession started United Ways shifted to impact funds that “focus on improving education, financial stability, and health throughout our community.” Immediate help to the poor is not in that equation, these are middle class concerns. And that United Way was also plagued by the revelation of excessive executive salary and perks. Given that, it is no surprise their fund-raising fell short.

  • Terri Fleischer

    I’ve worked 19 years for a nonprofit agency that advocates for abused and neglected children in the child welfare/foster care system. We have always depended heavily on donor support, both from individuals and corporate givers. Texas ranks very close to the bottom in services to women and children, notwithstanding social class position. Unfortunately, these populations, along with the elderly, are clearly discrimated against when it comes to needed services. I cannot blame individuals for taking charitable giving out of their equation, but corporations and government – from the local level upward – may want to re-evaluate their giving policies and realize what is truly important in terms of support.

  • Terri Freeman

    What is most troubling to me about this situation is what I see as an increasing divide between one part of the nonprofit community — foundations — and another part of the community — service providers. We must be in this fight together. The decreases in public funding of human services, coupled with this data present a picture of future disaster for our domestic communities.

  • Duane

    The limited analysis in this article while good, appears to be there simply to support the direction of opinion put forth.
    1. OK, so the decline was not “evenly distributed”. This is interesting, but so what?
    2. Somehow giving to foundations and through in-kind is less noble than cash to safety net non-profits?
    3. We have always had to kinds of non-profits if you look at the annual income or expenses. We have hospital and universities and then everyone else.
    4. When is the last time the government had powers to

  • sylvia katoroogo

    working in an non profit organisation whos fundres are from USA am amazed at the facts in this,one thing that i still question is why do governments were these organisation operate support them fully,the NGOS cannot work alone,they donors need the service providers and also the policy makers who are key to all the operation and implementation of our activits,i futher commend USA citizens for the big heart they ahve in giving,the east africa ,you ahve done graet,the impact is felt,even as westruggle through the econmonic crisis u ahve pbserved sustainability,big ups………..

  • Michele Harris

    All excellent points – and refreshingly aware of the fact that nonprofits have responsibilities to their donors, and to the money we receive. We need to be evermore aware that those who give us THEIR money, are entitled to know that THEIR money is being professionally handled, that we deliver!

  • Jackie Dawson

    I work for a non-profit and have only been in the non-profit business for a few years, but I totally appreciate your comments. While I found this article interesting, I think it is absolutely essential to remark on the responsibilities of organizations to their donors. Demonstrating that a donor’s dollars are in fact, going towards the cause is very important and if that is difficult to prove or doesn’t appear to be the case, that will discourage a potential donor from sending their money.
    Unfortunately, and to the article’s point, there is a bit of a bias against local social programs from major donors. It could be related to past experience of some group taking their money and not really putting it toward the cause. It could be the simple fact that many more wealthy donors do not see in “their” communities the need for such social aid. It could be a stronger personal interest in giving (e.g. family connection to cancer, mental illness, the arts, other health-related causes or international focus). My point is, there may be a bias, but maybe not and to suggest it, is a bias towards one argument, rather than considering all facets behind a donor’s motivations. The article leaned a certain way.

    Also, we live in the greatest country in the world and our philanthropic efforts domestically and internationationally far exceed any other country in the world, but I do believe that there has been a shift of focus in giving from domestic to international efforts. While there is nothing on face value wrong with that, there clearly are needs within each community that are not being addressed. It is the responsibility of each of us to pay more attention to the plight of our own communities AND the responsibility of viable grassroots non-profits to provide the solutions and deliver on those promises.

  • JulieE

    United Ways are trying to change their business models by being a more relationship focused organization. Why people do not invest in their own communities where they live is something I do not understand. Trying to reach out to neighbors can only improve the places where we all live.

  • Bob Jackson

    The answer is certainly not the government creating jobs or another stimulus. Wake up, the government is not the solution!

  • anita durel

    For nearly 40 years I’ve work in this sector — both in grassroots organizations and the hospital/university realm. I completely agree that we need to begin segmenting more carefully. Hospital and colleges skew the numbers. They are more likely to have major endowments (that puts them in a more sustainable position than typical nonprofits.) If we take them out of the equation, it looks completely different.

    The Segmenting by sector and budget size would be far more useful to the vast majority of nonprofits if we looked at the numbers without the giants of higher education, private schools, and medicine. But then again, the mid-sized and small nonprofits may have the greatest numbers, but they are not the ones that fuel the research. Maybe we need some foundation to fund more authentic research that would focus on the vast majority of nonprofits that struggle to provide services and keep the doors open. I also see another segmentations that is important. Many institutions rely on major government funding that funds substantial portions of their work. These are not the same institutions that live on grant vagaries, shifting corporate preferences, and individual giving.

    The Foundation funding remains problematic in my eyes. For decades foundations have given money for new projects and capital expansion above all else– all of which place nonprofits in more vulnerable positions. When nonprofits then assume the added expense of supporting these new initiatives and expanded property, they come up short in operations funding. Instead of supporting operations, helping organizations gain the skills to become more sustainable, training boards to get engaged in the fundraising process, or investing in establishing even small endowments for organizations, they push getting bigger and that often translates to unsustainability. Foundations still make too many of these decisions in isolation. They study the business models of the nonprofit giants not the the vast number of smaller institutions. Business models for mid-sized to smaller non-profits clearly demonstrate a need for both board and CEO training. They need help in designing business models that will work for their organization’s unique needs. Foundations need to examine and analyze the nonprofit models, too, if they are to understand what the consistent needs are and what roles they should play.
    if they are to be part of the system to solve problems in our country, then this is a move that is past due.

  • Windy H.

    I want to address the comments made about the “dying business model” of the United Way and other umbrella groups. The model makes it easy for people to give to issues they care about most-through workplace giving, payroll deduction. The question is not how to save a dying business model, but continuously how to make it even easier to give, for which there are always more ideas and tools, including and especially technology. I believe (and many others do as well which is what makes this country great) that we have three piggy banks: savings, spending, and charity/tithing. Workplace giving models make filling up that third bank incredibly easy for a lot of people.

  • Ellen Hicks

    In response to Jackie Norris: if people don’t have the inclination to be kind to animals, then they don’t have the inclination to be kind – to anyone.

  • Peter Sills

    And meanwhile, state and local governments are either eliminating or downsizing programs designed to help the poor survive. The need for foundation money is greater than ever.

  • bineet

    I think @Bob Jackson is right.
    The government is not the solution!.The people should wake up.
    Second ” here” link in 4 index are not correct. I think it may be