The Philanthropy Forecast is Mixed, with a Heavy Chance of Bummer

Ahhh…June…. Ice cream trucks started rolling. Pools opened. Gardens grew (at least before the heat waves). And the philanthropy world celebrated its annual wave of data geekery. Unfortunately, the data showed a mixed forecast for philanthropy, with a heavy chance of bummer.

Giving USA 2012 reported overall charitable giving only rose 0.9% in 2011 when adjusted for inflation, and the total amount given was still 11% below pre-recession levels. The numbers are likely the best-case scenario. The Giving USA team has revised its previous annual estimates downward after it later compared its forecasts to actual IRS data. Dr. Patrick Rooney, executive director of the Center on Philanthropy at Indiana University, reported that, given the slow economic recovery, it may take a decade for giving to return to pre-recession levels.

Individual donor news

Giving USA 2012 shows that donors’ giving rose 0.8% in 2011 when adjusted for inflation. Three other surveys provided slightly more positive windows into donor behavior.  The surveys relied on self-reported behaviors and intentions of donors. The exact figures aren’t scientifically accurate representations of the population, but I think the overall clues they offer are sound:

  • In the most recent Cygnus Donor Survey, 41% of donors said they increased giving in 2011 and 44% of the donors said they could have given more. Wealthier donors were more likely to have increased their gifts. And, only 7% of the survey respondents thought they’d give less in 2012.
  • The Millenial Impact Report 2012 again showed a generation eager to be involved in good causes and more willing than other generations to engage their friends in volunteering and giving.
  • A small survey by Fidelity Charitable revealed that more donors could increase their gifts of stock, real estate, and other complex assets if their advisors provided better advice about these options.

Dr. Rooney noted in a speech that individual and family giving controls almost 90% of philanthropy when you add together personal gifts, bequests, and giving through family foundations. I suspect the actual percentage is higher as the Center on Philanthropy and other analysts don’t have an accurate read on family giving through donor-advised funds.

Foundation and corporate grantmaking news

The Foundation Center’s annual estimates showed foundation grantmaking in 2011 was flat (adjusted for inflation). It was down 3% if you factored out the Bill and Melinda Gates Foundation. Giving USA 2012 showed foundation grantmaking was down 1.3% after inflation. The Commonfund Institute’s annual Benchmark Study of Foundations showed negative investment returns in 2011 after two years of increasing returns.

Giving USA showed corporate giving was flat in 2011, while the Foundation Center’s report showed corporate giving was up in 2011. Some articles about these reports note that much of the increase in corporate giving may be due to gifts of products, especially in the pharmaceutical industry.

Looking ahead, Commonfund and other investment advisors are predicting weak growth in endowments in the next couple years, echoing Dr. Rooney’s predictions for weak growth in giving. The Foundation Center’s report said that foundation grantmaking will only grow 1-3% in 2012, which means it will likely be flat or down again after inflation. Almost 40% of foundations expect to reduce giving in 2012.

What does this all mean for nonprofits?

The forecast includes:  flat foundation grantmaking; decreased government support for nonprofits; increased corporate and donor money being steered to 501(c)(4) nonprofits to sway elections (also predicted by Lucy Bernholz in her Blueprint 2012); likely changes to the U.S. tax code in 2013; and weak economic forecasts, including a very pessimistic one from Nouriel Roubini (the same economist who predicted the 2008 recession and housing market collapse).

People who know me know that I’m usually an optimistic guy. But it’s tough to remain optimistic in the face of the gloomy forecasts for philanthropy in the next 2-3 years. In many communities, it’s likely going to honestly feel like a philanthropic drought.

The best advice I’m seeing from fundraising and nonprofit consultants shouldn’t be new news to anyone.  But too few nonprofits have been diligent about disciplined implementation of the advice.

1. Individual donor cultivation and stewardship. Nonprofits will have to become even more focused on recruiting and keeping donors, whether those folks give through their checkbooks, donor-advised funds, or family foundations.  Giving USA, the Cygnus survey, and the Millennial Report all give similar advice for increasing the likelihood of individual gifts in a weak economy. Nonprofit websites and appeals should clearly state:

  • The need the nonprofit is addressing
  • How a gift will specifically make a difference and be wisely used
  • What has been recently been accomplished thanks to others’ gifts
  • Especially for Millennials, options for volunteering.

Some philanthropy observers see hope in the rapidly evolving options for crowdsourced giving (or “crowdfunding”) and micro-philanthropy. I’m personally a fan of this movement of grassroots, peer-inspired giving. Unfortunately the movement is still young and dynamic, making it hard for nonprofits to adapt to it. And, the few nonprofits who have successfully adapted to it don’t yet know if those new donors will grow into significant annual givers.

2. Hard-nosed business planning. It’s time to brush off your copies of Jim Collins’ Good To Great and Good To Great and the Social Sectors, read Mario Morino’s Leap of Reason, and/or consult your other favorite management and entrepreneurial resources. The nonprofits that have a better chance of thriving will be those that can back their fundraising strategies with:

  • A business plan based on market data and understanding of the true, full costs of each program or mission area
  • A culture of performance management that continually increases the effectiveness and measures the impact of their work
  • The guts to shed what doesn’t work as well or isn’t as core to the mission as it could be.

I am a donor, a nonprofit board member and volunteer, and a foundation staff member. I’m going to do my best to keep all these things in mind in my stewardship of my own and others’ philanthropic resources. And, I’m going to dig in deeper to support the causes I care most about.

How about you? What’s your reaction to the forecast for philanthropy?

One thought on “The Philanthropy Forecast is Mixed, with a Heavy Chance of Bummer

  1. This is a particulary difficult time especially in a politically active year. Wouldn’t it be nice to convince the media markets to focus a bit more on what Foundations are accomplishing and how we’re benefiting quality of life.

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