How America Gives Special Report: Breaking the Charity Habit

Heather Finnecy Dito

Each year, the charity world waits eagerly for the announcement of how much individual Americans gave to charity. And each year, that annual total doggedly climbs higher, faltering only occasionally. Four of the past five years, it has broken its own record, prompting confetti sprays and paeans of praise to this country’s generosity.

Yet fewer Americans appear to be giving to charity. In 2015, only 24 percent of taxpayers reported a charitable gift, according to a Chronicle analysis of Internal Revenue Service data. That’s down from 2000 to 2006, years when that figure routinely reached 30 or 31 percent.

Economists caution that the number of taxpayers who itemize their taxes and report charitable giving can vary for many reasons; Americans in the past decade have taken fewer deductions of any kind. But the Chronicle analysis is in line with several other studies. Their conclusion is the same: The number of households making room in their budgets for charitable giving is shrinking. One economist even wonders whether Americans have fallen out of the habit of giving.

This trend is significant, as it suggests a narrowing of support in America for philanthropy. Whether running capital campaigns, annual-giving drives, or direct-marketing efforts, nonprofits are relying on fewer, more affluent supporters.

Though recent critiques of philanthropy worry over the rise of megagifts from billionaires, nonprofit groups have become more dependent on the wealthy generally. Donations from households earning $200,000 or more now total 52 percent of all itemized contributions. In the early 2000s, that number was consistently in the 30s.

Middle-class woes and the country’s widening income disparity are undoubtedly partly to blame. But some fear that organizations are contributing to the problem by courting the well-heeled and slighting the small donor.

Though granted tax-exempt status, charities can see average Americans chiefly as a nuisance, says Changing Our World senior counsel Susan Raymond, a leading fundraising consultant whose clients have included national nonprofits and universities.

“I wish I had a dime for every meeting I have sat in in which a nonprofit has denigrated the small donor, treated that donor as an afterthought, as an also-ran, as the last item on the agenda, often tabled because time ran out,” she said in a recent speech to fundraisers in Pennsylvania.

Nonprofits, Ms. Raymond noted, celebrate big gifts from the wealthy, as they should. But that celebration “can become the public face of what you value. And then it is a short distance down a slippery slope to being the public face of who you are.”

A Measure of Generosity

Four times a year, officials from 70 or so nonprofits gather on a conference call and consider data that reflects on American generosity. Most of the organizations are titans with vast direct-marketing machinery to reel in thousands of small donations, often pocket-change gifts of $25, $50, or $100.

The group, called the donorCentrics Index of Direct Marketing Fundraising, includes household names like the March of Dimes, American Cancer Society, and Planned Parenthood. It has functioned almost like a stock-market index since its creation in 2002. Yet while the Dow Jones has soared in the intervening years, this measure of giving has drifted downward, a balloon with a slow leak. Annually over 14 years, the median number of small donors climbed just once, according to Target Analytics, a division of Blackbaud that runs the index; from 2005 to 2015 alone, the figure sagged 25 percent.

This decline might be dismissed as simply a failure of traditional direct-marking tactics in the age of Facebook and Venmo. But the index’s retreat is mirrored in other indicators. College alumni-participation rates, for example, have slipped more than 4 percent annually since 2005. A national survey conducted by The Y found the number of households that reported volunteering for or giving to charity each went down by double digits from 2010 to 2014. It concluded America was suffering from “engagement fatigue”

Perhaps the most persuasive evidence of a giving slump comes from Indiana University’s Lilly Family School of Philanthropy, which runs the Philanthropy Panel Study, a part of the University of Michigan’s Panel Study of Income Dynamics. The Michigan survey is a gold-standard longitudinal analysis. The data suggests the share of households donating to charity was 67 percent in 2004. Two years later, well before the Great Recession, that number slid to 65 percent. By 2012, it dropped to 59 percent.

The recession’s beatdown on household savings, home values, and the stock market accounts for some of this decline but not all, according to Jonathan Meer, a Texas A&M economist. Even after controlling for a number of factors, including wealth and income, his analysis still found a significant drop.

This surprised Mr. Meer, who’s been studying charitable giving for a decade. More data is needed to determine what’s behind the precipitous decline, he says.

One possibility: While the effects of the recession have eased, memories of its trauma linger. Americans — particularly those with limited discretionary income — may be rethinking their budgets and spending habits. Says Mr. Meer: “People say to themselves, ‘It turns out that my house isn’t going to appreciate 15 percent every year. I could lose my job that I thought was really steady and safe. And so I’m going to adjust my giving pattern.’ "

In short, for many Americans, the recession may have broken the habit of writing a check to charity. Once that habit’s broken, Mr. Meer wonders, will they pick it up again?

Mark McCarty, College of Saint Rose

Soft Spot in Growth

Kathy Jackson has much to celebrate as she prepares for her retirement as CEO of the Second Harvest Food Bank of Santa Clara and San Mateo Counties, in California. After she arrived in 2009 from a career in business, she helped the group ride out the recession and grow. Giving to the organization by individual donors has more than doubled in the past eight years, to $26 million.

Yet this shiny apple has a soft spot. The number of individual donors to the organization has dropped 8 percent over the past three years. Supporters writing checks for $1,000 or less have declined 10 percent.

The nearby Humane Society Silicon Valley tells a similar story. Dollars are up — the group raised what it says is a record $5.3 million in fiscal 2017 — but the number of donors is down, thanks to a big drop at the small-gift level. Individuals giving less than $100 have declined 17 percent since 2012.

What’s happened? Part of the answer at both organizations is that small donors have been cultivated and moved up in giving levels. But officials say other things are at work, too.

Explanations start with the widening disparity of wealth that afflicts the country broadly and Silicon Valley in particular. The region’s middle class has been hollowed out in recent years. “Our impression is that middle-class families who have been the historic bedrock of our giving are struggling,” says Ms. Jackson of Second Harvest. “We’ve seen a diminution of their giving.”

Other demographic and cultural shifts may also be contributing to the decline in small gifts. Millennials have overtaken boomers as the country’s largest generation, and it’s well known that they aren’t embracing traditional ideas of giving. Also, people are increasingly busy and bombarded with information and requests for help.

Special Report: How America Gives

The Chronicle examines giving trends nationwide through exclusive analysis of Internal Revenue Service data. See charitable-donation figures from every state, metropolitan area, and county.

• Share of Americans Who Give to Charity Shrinks, Chronicle Data Shows
• How The Chronicle Compiled the Data for How America Gives
• Growing Wealth in San Jose Doesn’t Always Work Out Well for Charity
• Albany Charities Find It Hard to Tap Influx of Wealth
• Milwaukee Mines ‘Untapped Promise’ of Big Donors to Close Funding Gap

“They just have a lot of things going on,” says Carol Novello, president of Silicon Valley’s Humane Society. “How do you get your voice in the social-media mix when they are inundated?”

Giving Up on Small Donors

Nonprofits aren’t blameless in the decline of small-donor giving. Many organizations cut back new-donor acquisition efforts, says Carol Rhine of Blackbaud’s Target Analytics division. As donors became harder — and more costly — to acquire, some groups facing budget pressure after the recession suspended those programs, only to get lean returns when they started them up again.

Some organizations are embracing strategies that purposely aim to raise more money from fewer donors. The March of Dimes is an interesting case study. It’s famous for assembling legions of volunteers in the 1940s and 1950s to raise dollars a few at a time to fund the researchers who vanquished polio.

Yet about a year ago, the organization stopped soliciting donations for $15 or less and focused on donors willing to give more. “The phrase I use with my direct-response team is ‘quality over quantity,’ " says Christopher Maddocks, head of marketing. It’s a strategy shift that should net more revenue, he adds; the organization was wasting money on small donors who churned on and off its rolls.

Supporters who make bigger gifts are more likely to commit to the organization for the long term. They are, in his words, “higher value” donors. In the simplest terms, the organization is investing in “donors who are in for a dollar, not for a nickel,” he says.

Davidson College is another leader in small-donor giving. For 11 years, at least 60 percent of its graduates opened their wallets for the annual fund. Yet in 2013, that record 11th year, Davidson decided that the 60 percent figure had taken on too much importance.

Officials began to emphasize other fundraising measures as well, particularly metrics that relate to dollars raised. Eileen Keeley, vice president for college relations, says she told the college’s trustees: “We may not get to 60 percent participation. But our goal is to raise as much money as possible for Davidson.”

Four years later, giving to the college’s annual fund has climbed from $14 million to $18 million. The alumni-giving rate, meanwhile, has slipped to 56.4 percent.

That’s a tradeoff Ms. Keeley accepts. Alumni devotion to the college remains strong, she says. But efforts to reach large numbers of graduates and get their attention were increasingly futile. The college was resorting to tactics that were counterproductive to actually raising money. Her annual-fund team, for instance, beat the drum year-round with the message, “Any size gift matters” — a rallying cry that might make a major-gift officer cringe.

Ms. Keeley also worried that the pressure to reach 60 percent was hurting chances that annual-fund givers would become big donors later. “You end up calling someone every day for the last 10 days of the fiscal year trying to get them to give,” she says. “You might get that $50 gift, but in what way does that inspire future giving?”

Erwan Rogard/MSF

Big-Gift Hunting

The efficiency of the “fewer donors, more money” strategy is undeniable. But it’s more complicated when hunting major gifts. And since the recession, nonprofits have had plenty of reason to focus on big donors. Charity leaders say government funding has dwindled as corporate support has grown finicky. At the same time, America’s wealth has become more concentrated among the wealthy.

Second Harvest and the Humane Society Silicon Valley both launched new efforts in recent years to tap into the region’s vaunted new wealth. “We’d be crazy not to,” Ms. Jackson says. “You have to pursue where there’s opportunity.”

Likewise, nonprofits in metropolitan Albany, N.Y., are seeing opportunity in the growing wealth of their region, which has seen a boom in technology companies. “Major philanthropists in the area are in a position to give at a higher level,” says Brian Hassett, president of the United Way of the Greater Capital Region. “That’s definitely where we have to go.”

Groups traditionally fueled by small gifts are also jumping into big-gift fundraising. Doctors Without Borders has added major and planned-gift staff in recent years to mine untapped potential in its donor base, says Thomas Kurmann, the organization’s director of development. Its donor numbers are growing but not nearly as fast as revenue from major gifts. That increased 200 percent in the past three years and, with planned gifts, now accounts for 40 percent of all giving. The group’s “fundraising pyramid is in full swing,” Mr. Kurmann says.

Colleges offer perhaps the best example of the feverish hunt for big gifts. Not long ago, they swore by the 80-20 rule — the notion that 80 percent of dollars would come from the top 20 percent of donors. But last year, just 1 percent of campaign donors contributed very nearly 80 percent, according to the Council for Advancement and Support of Education.

In recent years college presidents have come under increasing pressure to raise ever-larger sums yet spend less on fundraising, says Don Hasseltine, former vice president for development at Brown University. They also must show results fast, as their average tenure is now only about seven years.

College leaders want to invest in the often-expensive efforts to boost alumni-participation rates, Mr. Hasseltine says. They know anemic annual giving can damage the pipeline that will produce tomorrow’s major donors. But they can’t resist the more immediate payoff of adding principal-gift officers and stewardship teams.

“There is no short-term downside for leadership to make that investment,” says Mr. Hasseltine, now a senior consultant with the Aspen Leadership Group. “And you’re not thinking about 25 years down the line.”

These concerns extend far beyond elite universities. The College of Saint Rose, a small institution founded in Albany nearly a century ago by a Catholic order of nuns, recently celebrated a 15-year high in giving. But four seven-figure gifts alone accounted for at least $5.5 million of the $7.4 million it raised in fiscal 2017. The number of donors to the college since 2014 has dropped from about 4,100 to just under 2,600.

Ian Farrell, vice president for institutional advancement, says the college is fighting to recruit and keep more small and midlevel donors. He’s marshalling new marketing efforts, crowdfunding campaigns, and more. No college or nonprofit, he contends, can let its base of contributors narrow and become reliant on a few donors giving at top levels.

“You’re trying not to have your giving pyramid become a space needle,” he says.

Signs of Hope

Susan Raymond, the fundraising consultant, gave her blunt speech to fundraisers with the election results firmly in mind. A Ph.D., Ms. Raymond is a distinguished nonprofit veteran who has worked for the World Bank and the U.S. Agency for International Development. She recently joined Edmundite Missions Enterprises, an anti-poverty group in Selma, Ala.

In an interview, Ms. Raymond said that the campaigns of both Donald Trump and Bernie Sanders signaled that vast numbers of middle-class voters feel shut out of the country’s political and economic institutions. Nonprofits can’t turn their backs on these individuals, she argues.

People inherently want to feel valued, that they are contributing to the welfare of their community or country, she says. “But right now, there’s a whole bunch of people who don’t feel valuable.”

There are signs that charitable giving by small donors since the election may be rebounding — and reminding nonprofits of the value of these donors. Blackbaud’s index of direct-marketing fundraising is reporting a boom in giving as well as in the number of donors. Much of this increase stems from opposition to Trump administration proposals on the environment, civil rights, immigration, and other issues. But there has been an “astounding increase” across almost all sectors, says Carol Rhine, the Blackbaud analyst.

This may be a momentary spike, like the surges that follow natural disasters. But Ms. Rhine believes something more lasting is at work. Perhaps Americans are rediscovering the habit of charitable giving, she says. And maybe younger people are picking it up for the first time. “It’s not just 55-year-olds adding the ACLU to their giving,” she says.

“People are more engaged in civic life,” she says. “And how they show that is by giving more to things that matter to them.”

“How America Gives” data was compiled and analyzed by Tyler Davis and Brian O’Leary.

Correction: In an earlier version of this article, Susan Raymond was misidentified as a former fundraising consultant. She remains general counsel with Changing Our World.