In January 2020, early indicators pointed to growth in charitable giving in the United States in 2020. The economy was strong, the stock market was performing well, and unemployment was at record-low levels. While the economy isn’t the only predictor or motivation for charitable giving, research shows that people who feel financially and economically secure tend to donate more, and people with more uncertainty give less.
Projections of charitable giving are included in the Philanthropy Outlook, a report from the Lilly Family School of Philanthropy, presented by Marts & Lundy, that projects giving over the next two years (in this case, 2020 and 2021). In what now seems a prescient decision, the school’s research team included models and findings for what would happen if a recession similar to the Great Recession of 2007-09 took place.
Inclusion of the stress test was intended to help nonprofits think strategically about and plan/prepare for the next recession, whether it came in 2020 or 5-10 years from now. Using characteristics from the Great Recession in the stress test, the model estimated that if a recession of similar magnitude occurred over 2019-2020, giving would be 10.6 percentage points lower in 2020 than the Philanthropy Outlook’s baseline projection.
It is too difficult to predict the total impact of the novel coronavirus on the U.S. economy and thus, on charitable giving.
“The stress test provides important context to the magnitude of how this might hurt philanthropy. It’s not a direct comparison, as this virus and its effects are quite different from the Great Recession. However, it is interesting and relevant to compare the two to see how a recession caused by the virus could potentially impact charitable giving,” explained statistician Jon Bergdoll.
Without a doubt, nonprofits in the coming days will be asked to do more with less as communities, families, and individuals reel from the loss of jobs and income.
However, philanthropy is stepping up, as it did during the Great Recession. Then, an analysis of the Million Dollar List found that foundations gave more gifts of $1 million or more during the Recession. Whether they gave more after the market rebounded, or they responded to increased societal need, they continued to give. Now, more than 560 foundations have signed a pledge to support and hold themselves accountable to their nonprofit partners.
Corporate giving at the level of $1 million or more also followed the business cycle rather than broader economic trends. While it remains to be seen how corporations respond to the current pandemic, Candid has a list of corporations, including AT&T, Dow Chemical Company, and Lowe’s, who have stepped up to provide support for nonprofits at this time.
In addition, Americans’ giving to human services from all sources of giving (individuals, bequests, foundations, corporations) increased in inflation-adjusted terms in both 2008 and 2009. Giving to food banks increased 31.9 percent in 40 cities from 2008 to 2009. There also may be room for donor-advised funds to give more during this time, as payout rates from them increased during the Great Recession.
These findings illustrate that nonprofits and fundraisers should continue asking for gifts during this time, illustrating the need that their organization fills (although it’s important to be sensitive to donors’ situations at this time). As Dr. Tim Seiler says, “if your mission was valid before this crisis, it’s still valid today.”
However, during this current pandemic, there are still many unknowns. In addition to private philanthropy, the government has also worked to help nonprofits.
Recently, it passed the Coronavirus Aid, Relief, and Economic Security (CARES) Act to help taxpayers, businesses, and nonprofits. Philip Purcell, faculty member at The Fund Raising School, outlines here the provisions of the law that affect nonprofits and donors.
Highlights of those provisions include loans of up to $10 million made available for eligible nonprofits with 500 or fewer employees, a new universal charitable deduction for 2020, a new 100 percent Adjusted Gross Income (AGI) limit for 2020 (up from a 60 percent limit for cash contributions), the suspension of the required minimum distribution for 2020 from IRAs, 401(k)s, 403(b)s, and other defined contribution plans, and an increase on the limit of cash contributions from corporations.
While Purcell noted that it remains to be seen whether these provisions are extended after 2020, he believes that they will help nonprofits this year.
Seiler agrees, although he says that the message the government is sending to nonprofits is important to note: “The government is recognizing the role of philanthropy, in addition to the role of the public and private sectors. In this sense, the three sectors are coming together to help Americans.
“That message and signal, as well as many others, tells nonprofits to keep moving with their own missions.”
Tips for Fundraisers
- Stay the course: keep in touch and communicate with your institutional and individual donors.
In some cases, donors may be willing to give more in order to help you meet your mission and serve more people.
“Fundraising is not easy, and it will only get harder. However, we do it because it’s good. If your donors shared your values before, they’re going to continue to do so after. Communicate that message and the need you serve to those donors,” says Dr. Seiler.
- Be knowledgeable of, and able to discuss the new provisions in the CARES Act with your donors.
It could affect giving in a variety of ways for some of your donors. Know the provisions that may reduce the cost of giving for donors and how they can benefit the donor and your organization as you work to fill a need.
- Recognize and communicate the vital role that your organization, as well as others, plays in serving the public good.
“Throughout history, we’ve seen the philanthropic sector step up and fill the gaps that other sectors are not able to fill or may not be best equipped to fill,” Dr. Una Osili explains. “While philanthropy can’t solve this crisis alone, it is an important part of the overall response.”