Charities can expect giving to rise 3.4 percent this year and 4.1 percent in 2020, according to projections in a report released today.
The growth will be driven by increases in all forms of giving, though individual giving will nudge up only slightly, led by big jumps in foundation grant making and bequests.
The new projections indicate that giving will be stronger than average giving over the past 10 years, 25 years, and 40 years. Giving grew an average of 1.1 percent over the past 10 years, 3 percent over the past 25 years, and 2.7 percent over the past 40 years, according to the researchers’ analysis of “Giving USA” data.
The annual “Philanthropy Outlook,” produced by the Lilly Family School of Philanthropy at Indiana University and presented by fundraising consulting company Marts & Lundy, takes into account the full scope of economic indicators: the volatile stock market of recent months as well as job growth, wage growth, gross domestic product, and the new federal tax law, which cut taxes on corporations and households while also making it likely that fewer people would benefit from incentives for charitable giving.
This year’s report makes projections in an environment of relative uncertainty, given the partial government shutdown coming in the wake of the worst December stock-market performance since before the Great Depression. Last year’s report ventured a guess that 2019 would see an increase in giving of 4.2 percent.
Today, things remain tricky to forecast. “No one knows what the stock market will do this year,” says Una Osili, associate dean for research and international programs at the Lilly Family School of Philanthropy, who oversees the outlook report.
But a rise in disposable income could balance market volatility, adds Phil Hills, president of Marts & Lundy.
“Over the next two years, there’s still the capacity to significantly increase your overall fundraising totals,” Hills says. Now is not the time to retrench or pull back,” he says. ‘You should continue to go strong with your staffing.”
Sources of Giving
Foundations are expected see the largest increase in giving this year, with grant making up 7 percent, according to the report. Most grant makers decide how much to give based on an average of the past three to five years, so that means stock-market gains from the past are a big factor. But volatility ahead could prompt grant makers to pull back in anticipation of smaller endowment gains or possible losses, as many suffered during the financial crisis.
“The foundations number is one to watch,” says Osili, “If things continue to be volatile, that could result in a shift downward in foundation giving.”
The impact of the 2017 federal tax overhaul on individuals and corporations remains to be seen, Osili says. “Tax reform is still unfolding, and it may take some time for households to modify their behavior,” says Osili.
Giving by living individuals, the source of two of every three dollars donated to charity, is projected to increase only 2.1 percent in 2019.
Part of the reason might be that many Americans are still making up ground from the Great Recession, suggest Hills: “Household income has just started rising.”
The changes in the tax law, including the doubling of the standard deduction, which makes itemizing less advantageous for millions, are also likely to affect various segments of donors differently, Osili suggests. “One possible outcome: Charities that depend on high-net-worth supporters may not be affected. But charities that depend on middle-income, everyday Americans might see a shift.”
To wit: Charities that depend on broad support, such as United Ways, are likely to see giving remain essentially flat in 2019, the report says, while hospitals are expected to raise 5.2 percent more and universities 3.5 percent more.
Hills is already seeing a big difference in how donors are reacting. High-net-worth supporters are still giving strongly but midlevel ones — those who give roughly $50,000 to $200,000 annually — “are a bit more leery about what to do but still willing to give some of that.”
People who give less than $50,000 a year? “They’re stuck in this limbo area, waiting to see how the tax piece shakes out.” (Read about the decline in ranks of middle-class donors.)
The cut in the corporate tax rate reduced companies’ incentives for giving, Hills notes, and what they will choose to do with their windfall remains an open question. (See the Chronicle’s most recent survey of corporate giving.)
The report projects that giving by businesses is likely to grow very little, up only 3.2 percent this year. Corporate contributions are often tied to internal factors within a specific company, Osili says. Many companies are using their tax savings for increased salaries or investments in their business operations.
Also, the imposition of tariffs and the drop in oil prices might have an impact on many businesses, she says. “Corporate philanthropies tend to respond to conditions within their own industry. Pharmaceutical companies may respond differently than, say, manufacturing.”
Bequests are expected to jump 5.4 percent in 2019, though Osili acknowledges that this source of giving is the hardest to predict because contributions depend on when estates close. But a big wave is coming: “If you look at demographics, bequests will be a big factor going forward because of the size of the baby boomer cohort.”
Navigating 2019
Acknowledging that “we are in more uncertain times than we’ve ever been,” Osili urges fundraisers to carefully consider the economic context in which giving will occur this year and next.
Charity leaders should listen carefully to their donors for early signs of shifting conditions, Hills says. “The fundraisers in the field are often the first ones to know what’s really happening.”
Organizations need to use data as much as possible to base their decisions on where to put their resources in seeking support.
“One thing I saw during the Great Recession: Organizations and fundraisers shifted into a kind of hunker-down mentality,” Osili says. “But there’s always a good time to tell your story, to engage donors, to build relationships with donors. And those are important, regardless of the overall economic climate.”
Above all, she suggests, don’t sit on the sidelines. The big picture is one of continued growth: “This continues to be a positive environment for fundraising. So be proactive in reaching out to donors and don’t hold back, saying we can’t do anything until we know what’s going to happen this year.”
