As fundraisers look ahead to the year’s end, many see storm clouds gathering on the horizon. Inflation and a possible economic recession have fundraisers preparing for pandemic-inspired giving to come to a screeching halt. While there hasn’t been a marked shift in donor behavior to date, some fundraisers say it’s only a matter of time until that other shoe drops.
Liz Nielsen, senior vice president for digital marketing at Feeding America, is on the lookout for signs that donors are feeling financially squeezed, such as a decline in the number of monthly donors or small-dollar donors who make repeat gifts. “We’re not seeing it yet,” she says. But she’s not alone in fearing that soon fundraising is going to get a lot harder.
Inflation is changing how Nicole Engdahl, senior vice president for planned giving and annual giving at the National Park Foundation, considers how often to appeal to donors and how much to ask them to give.
If the economic outlook worsens, she says she may cut back on the number of direct-mail appeals or ask new donors to make a slightly lower first-time gift to the foundation — suggesting a $20 initial gift instead of $25, for example. Inflation also underscores the value of monthly gifts, she says. These contributions not only offer nonprofits a dependable cash flow, but they can also be more palatable to cash-strapped donors.
“You’re going to be less inclined to write a check for $1,000 unless you feel really good about where you are,” Engdahl says. “But you can probably take out $50 a month for 12 months.”
Fundraisers are also focused on keeping past contributors on their donor rolls. When finances get tight, donors tend to pare down the number of charities they support. Nonprofits need to focus on demonstrating their worth to existing donors, Engdahl says.
“You just want to keep donors giving to you. If that means it’s less, that’s fine. They’re still in the habit of giving to you,” Engdahl says. “If you can continue to keep donors through an inflation period, they are going to be your most loyal donors after that inflation period is up.”
Sliding Stock Market
The drop in the stock market is a big concern for fundraisers. Gifts of assets, such as appreciated stock, have been popular in the last few years, but there’s no counting on them if the market sours.
“Most of the stock gifts come toward fourth quarter, and given how the stock market is doing today, it’s questionable whether we will see the same kind of revenue from stock,” says Kim Goldsmith-N’Diaye, development director at Doctors Without Borders.
In February 2021, the charity received a surprise $9.3 million gift of Tesla stock from a donor who had previously given just $100 a year. The donor has since made additional gifts of stock. But with the market sliding, Goldsmith-N’Diaye isn’t counting on a repeat windfall this year. Gifts of stock, she says, are “question marks.”
Charitable gift annuities are another unknown. Donors make these gifts — usually $5,000 or more — to a charity with the aim of growing its value in the stock market over their lifetime. While the donors are alive, they’re paid a portion of that investment on a quarterly or monthly basis. Upon a donor’s death, the charity keeps the balance of the invested gift. Last year, donors established a glut of new charitable gift annuities with the National Parks Foundation, but this year Engdahl says she’s seeing hardly any.
Charitable gift annuities tend to be popular at times of great market fluctuation, Engdahl says. They’re an income stream donors can count on. But inflation has donors turning away from this giving vehicle. “Once you set up a CGA,” she says, “you can’t get that money back if you need it.”
Fundraisers at peer organizations have told Engdahl they’re also receiving fewer charitable gift annuities. Engdahl is in the process of revamping the charity’s appeals for those gifts.
‘Everything Is More Expensive’
With so much uncertainty, it’s no wonder that there’s an undercurrent of anxiety at many nonprofits.
“The combination of inflation and the anticipated recession is creating both a real and anticipated shortage of donations to our member organizations,” says Michael Corey, executive director of the Human Service Chamber of Franklin County, an umbrella group for Ohio regional health and human-services organizations.
Corey says nonprofit professionals also worry that, after more than two years of the pandemic, donors are tired of giving to support health and basic needs. Another fear: Some donors may divert their philanthropic dollars to political campaigns ahead of the midterm elections this fall.
“Even if donations from donors were flat and remained where they had been at, that’s essentially a cut because everything is more expensive right now,” Corey says.
All the while, rising costs are sending more people to nonprofits for help meeting their basic needs, and it’s also making construction projects more expensive. In Columbus, Ohio, the local Goodwill tossed out plans to renovate its headquarters. Between January 2021 and May 2022, construction costs doubled, prompting chief executive Ryan Burgess to cancel the project and instead plan to sell the building and relocate the group’s headquarters.
In Chicago, Holly Buckendahl worries that high prices could deter volunteers. Buckendahl, who is the chief executive of Ronald McDonald House Charities of Chicagoland and Northwest Indiana, credits volunteers with providing between $1 million and $2 million worth of free labor to her nonprofit each year. Thousands of volunteers augment the charity’s small staff to manage free housing for families whose children are receiving medical treatment at nearby hospitals. But Buckendahl worries that her staff will be stretched even thinner if volunteers drop their shifts because of high gas and transportation costs.
A Bright Spot
The economic outlook is also prompting a change in how fast foundations make grants and how many strings they attach to them.
The latest “Giving USA” report says giving by foundations has been a steady source of income for nonprofits throughout the pandemic. Those gifts, $90.88 billion last year, decreased slightly in 2021, sliding 1.2 percent, when adjusted for inflation. Fundraisers say these gifts have been a bright spot, especially because many foundations gave charities the freedom to use those funds to literally keep the lights on.
“We have seen an increase in general-operating support, which we had not seen before,” says Juanita Sheppard, vice president of foundation relations at United Way of Greater Atlanta. That flexibility is all the more important because basic expenses such as utility bills, and technology have all gotten more expensive.
Sheppard applauds these multiyear grants, noting that general-operating support will help nonprofits like hers ride out high inflation. Foundations, she says, are looking at the long term.
The San Diego Foundation, for example, is awarding general-operating support to help nonprofits through this period. Brian Zumbano, chief development officer, says that while the foundation is not yet feeling a squeeze, the nonprofits it supports very much are. The communities they serve need more support, and it’s becoming more and more expensive for nonprofits to cover the costs of their utility bills, stock the shelves of food pantries, and provide for other basic needs.
Inflation, Zumbano says, “has already made an impact on our strategy.”
