Philanthropy 400 Special Report: Top Charities Appeal to Impatient, Policy-Minded Donors

Willie Petersen, Teach for America

With the bulls running wild on Wall Street, charities that appeal to a new breed of investment-minded donors saw big gains in 2016, according to the Philanthropy 400, The Chronicle’s annual ranking of charities based on the support they raise from individuals, foundations, and corporations.

As a group, these 400 nonprofits raised a total of $108.7 billion — more than a quarter of all dollars given to American charities in 2016. Donations were up 5 percent among groups that appeared on both last year’s rankings and this year’s. Those numbers contain compelling stories about how philanthropy is changing, along with donors.

The new donors take many forms. They are affluent Americans pouring assets into donor-advised funds at a furious pace, forgoing the family foundations they might have created only a few years ago. They are stock-market winners looking for charities sophisticated enough to handle gifts of appreciated equities.

Many new donors are new to charitable giving altogether. They are policy-minded progressives shaken by the election of President Trump and showering money on organizations that aim to protect civil liberties, immigrants, women’s health, and even information itself.

The new donors are tech-savvy and impatient. They aren’t satisfied to slap Band-Aids on social problems but want to rebuild entire systems: education, health care, criminal justice. They’re drawn to charities that frame their appeals for support as “investments.”

Look no further than the top of the ranking to see the new donors in action. Fidelity Charitable Gift Fund claimed the No. 1 spot for the second straight year, despite a nearly 12 percent drop in support in 2016. At $4 billion raised, the donor-advised-fund manager was still a half-billion dollars ahead of its nearest rival, United Way Worldwide.

In 2017, uncertainty — the buzzword of 2016 — remains a factor. Donors don’t know what charitable deductions will be available if the Trump administration and Congress rework the tax code. And fundraisers wonder if gifts made in response to this year’s wildfires and string of hurricanes will replace year-end contributions they count on.

Read on for more takeaways from the latest Philanthropy 400:

Donor-advised funds continue to dominate.

While giving to Fidelity Charitable was off in 2016, it is roaring back in 2017. When Fidelity’s fiscal year ended June 30, it had raised nearly $6.9 billion. That’s up 68 percent from the $4 billion it collected in fiscal 2016.

The dominance of donor-advised funds extends far down the Philanthropy 400. Six organizations in the top 10 are primarily built on the funds, which are accounts in which individuals donate assets, receive a tax benefit, and can later pick the charities that will receive the money. The top 10 groups account for 22 percent of all dollars contributed to Philanthropy 400 organizations.

One thing fueling the trend, other than the robust stock market: More wealthy people are shuttering family foundations and pouring the assets into donor-advised funds. Or they are bypassing the expense and hassle of foundations altogether.

The Philanthropy 400 and the New Donor

The Chronicle’s annual nonprofit ranking reveals charitable-giving trends today — and what they might look like tomorrow.

• Fidelity Charitable Tops United Way for 2nd Year in a Row in the Philanthropy 400
• Social-Service Groups Fight to Reverse a Slide in Donations
• U. of Florida Spurs Big Gifts With a Sense of Urgency
• Digital Connection to Children Helps Compassion International Retain Donors

At Vanguard Charitable Endowment Program (No. 10, up 6 percent in 2016), transfers of all or portions of a private foundation’s assets to Vanguard donor-advised funds increased by 34 percent last year, according to Jane Greenfield, the organization’s president. Some donors make that shift to donor-advised funds, she says, because their children don’t want their philanthropy to be locked into the mission of a private foundation. Instead, the younger donors want to tailor their giving to their own priorities.

“On the higher end of the business, we’re seeing some big movement there,” Ms. Greenfield says. “They’re finding that the next generation might not have the same passion for that mission.”

The Oregon Community Foundation (No. 108), grew nearly 237 percent, to $255 million, in 2016, thanks to one megagift (the transfer of real-estate holdings from donor Joseph Westin to his supporting foundation) but also the creation of many new funds. These often represent a family’s or donor’s first foray into serious philanthropy, says Max Williams, the Oregon foundation’s leader. In 2016, funds created to provide scholarships spiked by about a third compared with 2015, a development Mr. Williams attributes to skyrocketing college-tuition costs.

The current year also looks bright, he says. In an average year, the foundation raises between $75 million and $100 million. But with the stock market going gangbusters, more than $100 million had poured into the foundation’s coffers by the end of August.

To many in the nonprofit world, donor-advised funds represent an unwelcome change to charitable giving. Critics say they amount to a warehousing of philanthropic capital that could be put to better use if distributed to worthy causes more immediately. Organizations managing funds are often more opaque than even the most guarded private foundation; aside from a few crumbs of information they leave on tax returns, they have no legal obligation to report how money comes to them or how they pay it out.

Case in point: Goldman Sachs Philanthropy Fund, which this year pushed its way to No. 3 on The Chronicle’s list, with a staggering 450 percent increase in support from 2015, the biggest gain in the survey. Though the fund is now one of the largest charities in America, officials declined interview requests to discuss its 2016 gain with The Chronicle. In an emailed statement, a spokesman credited the increase to the fund’s “philanthropic-minded families.”

At least some in the nonprofit industry see the growth of donor-advised funds positively. Peter Fissinger, president of Campbell & Company, a fundraising consulting firm, is sympathetic to concerns that some people may simply park their money in a donor-advised fund. But he’s not worried.

“I think any one thing that helps institutionalize philanthropy is good,” Mr. Fissinger says. Besides, he adds, “studies show that most people, when they have that money sittin’ there, start thinking about where to give it.”

The new donor expects sophistication.

Donors are getting more discerning about how they want to give. To keep up with them, fundraisers say they’re learning how to structure complex gifts — and introduce those ideas to supporters.

Aly Sterling, president of a fundraising consulting company based in Toledo, Ohio, says one creative means of giving is the “hybrid” gift. This might be a cash contribution for a charity’s current needs coupled with a life-insurance policy that names the organization as a beneficiary, for future giving. “We’re seeing a ton of those hybrid gifts now, even from younger donors,” Ms. Sterling says.

Tulane University (No. 286) was up nearly 12 percent, to $99 million, in fiscal 2016. It had an even better fiscal 2017, which ended in June and totaled $126 million. The New Orleans university, which had to rebuild its development staff after Hurricane Katrina, is in the quiet phase of a comprehensive campaign set to launch publicly next month with a tentative goal of $1 billion.

Starting nearly from scratch has enabled the institution to create what Ginny Wise, Tulane’s senior vice president for advancement, calls a “hybrid” operation in which all fundraisers are trained to make the case both for their individual college and for the university’s larger needs.

The team is also prepared to educate donors and their financial advisers about structuring complex planned gifts. “I think donors are really very sophisticated these days,” Ms. Wise says. “A lot of people have heard about these different tax-advantaged giving scenarios, but they don’t always know how they really apply to them.”

One marketing innovation at Tulane in 2016: the Jumpstart Trust, which allows parents to set up a five-year, income-producing trust for their recent college graduates working low-paid jobs. The money left in the trust is later turned over to Tulane for any purpose the donors choose. “They figure they’re probably going to be helping the kids anyway,” Ms. Wise says.

The new donor often fears President Trump.

Throughout last year’s presidential campaign, nonprofits that work on issues perceived as under threat from candidate Donald Trump began attracting more contributions. Though their 2016 fiscal years ended months before the election, the American Civil Liberties Union Foundation (No. 107, up 42 percent), Planned Parenthood Federation of America (No. 120, up 21 percent), and the Environmental Defense Fund (No. 177, up 11 percent) are among the organizations that saw big gains.

“When there’s someone in a position of power that is not consistent with your agenda, fear is always a huge motivator in fundraising,” says Rick Dunham, a consultant in Plano, Tex., who specializes in faith-based groups.

For organizations that lean conservative, 2016 was a mixed bag; Focus on the Family (No. 353), for instance, was up 7 percent, while the Heritage Foundation (No. 354) dipped 11 percent. This year, Mr. Dunham says, “conservative causes are struggling a bit. None of them are hitting home runs right now.”

After Mr. Trump was elected, the campaign-related groundswell of new support for causes under threat turned into a tsunami. Through August of this year, the ACLU raised four times the amount it did during the same period in 2016.

The challenge for organizations that gained new supporters will be hanging onto them, say fundraisers and consultants. In its year-end appeals, the ACLU plans to emphasize its victories so far and its need to continue to challenge the Trump administration’s policies, according to Mark Wier, the group’s chief development officer. In an email to The Chronicle, he said, “We feel confident but cautious” about fundraising prospects during the upcoming holiday season.

Planned Parenthood has gained 700,000 new donors since the election, says Jethro Miller, the organization’s chief development officer, in an email to The Chronicle. Many are new not only to his organization but to philanthropy itself, he says. In addition to a Giving Tuesday push (it will emphasize its affiliates’ local impact) and plans for a year-end gift-matching program, the organization is turning its donors into activists, asking them to call their Capitol Hill representatives, organize rallies, and sign petitions.

“A frequent question we’re asked is, ‘How can I help in addition to making a donation?’ " Mr. Miller says. “We’re not shy about asking our donors to take action on behalf of Planned Parenthood. They’re eager to take up the fight.”

New donors are thinking big.

Sally O’Brien, senior vice president for philanthropic partnerships at Pew Charitable Trusts (No. 27, up 130 percent), is increasingly seeing wealthy donors who want to place big bets. Eighty percent of its private support comes from gifts of $1 million or more.

“They want to get something done, and they’re quite willing to take on bold and risky enterprises,” Ms. O’Brien says.

She points to an effort sparked by Texas philanthropist Lyda Hill’s concern over deferred maintenance in America’s national parks. With Ms. Hill, Pew is investigating legislative and regulatory issues that cause the backlog of work.

Other fundraisers and experts report that philanthropists increasingly have grand ambitions. “Donors are really investing in systemic solutions,” says Ms. Sterling, the Toledo consultant. “They’re working hand-in-hand with organizations in a way we had not seen a decade ago.”

Frequently, donors want to help charities design programs. They’re also financing programs over longer periods of time than in the past, Ms. Sterling says, recognizing that what she calls “catalytic change” takes sustained commitment.

The Tides Foundation (No. 100), which saw contributions grow nearly 77 percent in 2016, to $270 million — thanks in part to what’s commonly known as the “Trump bump” — just launched a rebranding aimed at its new donors. The organization’s revamped website features a video promoting Tides as a great place to bet the house on social change. The words “risk,” “bold,” “dare,” “investment,” “partner,” and “impact” pop up in testimonials by Tides staff and board members, the leaders of grantee groups, and prominent philanthropist Kat Taylor.

“We can’t afford lethargy,” says Ms. Taylor, in the video. “Tides represents a real departure from the mind-set that we just need to tinker around at the margins.”

Rui Vieira/PA Images/Getty Images

New donors are shaping charities’ work.

Catholic Medical Mission Board (No. 65), which gets almost 95 percent of its private support from noncash gifts, saw donations increase nearly 31 percent in 2016, to $361 million. The international group says its 2017 fiscal year, which ended in September, was even better, as it earned more than $500 million in contributions, according to Adrian Kerrigan, senior vice president for partnerships.

It’ll need this support to finance its $500 million commitment to help realize the United Nations’ Sustainable Development Goals. Health and pharmaceutical donors influenced the way the nonprofit will pursue those goals: through a campaign to improve the health and well-being of women and children in the developing world.

“As the world has gotten smaller, people understand that health in the developing world can impact what we do in the United States,” Mr. Kerrigan says.

As an example of that reciprocity between donors and the Catholic Medical Mission Board, he points to a recent visit to the organization’s partner clinics in Haiti and Zambia by health-system CEOs who donate to his charity. The CEOs were impressed with how the clinics used community health workers and are adapting the model for their own health-care systems in Baltimore and Cincinnati.

Learning from the organization’s work abroad, says Mr. Kerrigan, “helps our donors, and they invest in it.”

New donors don’t generally gravitate to traditional social-service charities.

Giving to social-service organizations was flat in 2016. United Way Worldwide — No. 2 in the ranking but the Philanthropy 400 champion until last year — again saw support slip. Contributions were down 5 percent from 2015 to 2016, to $3.5 billion. The organization has recently unveiled grittier messaging in hopes of drawing more support. (See Page 20)

Of the 49 social-service organizations in this year’s Philanthropy 400, only 25 saw gains above 2016’s inflation rate of 2 percent. Of those, 18 were food banks or other anti-hunger organizations that rely heavily on product donations.

Unlike most other nonprofits, social-service groups can rarely cultivate donors from among the people they serve: There are no nostalgic alumni, no grateful patients, no delighted season subscribers. Also, these charities must balance the competing demands of soliciting government as well as private funding, notes Mr. Fissinger, of Campbell & Company. “If an organization is receiving half or more of its revenue in government funding, it hires to that expertise, even at the CEO level. That’s where they spend time, and that distracts from the other fundraising.”

Still, some experts say social-service charities also are struggling to compete for today’s donor. “There are some midsized and even large-size social-service agencies that have frankly just fallen asleep,” says Ms. Sterling. “They’ve taken for granted that their brand will do that job for them. And we’ve seen over and over again that younger generations have begun questioning the relevancy of these mega brands.”

Netflix offers a model for capturing tech-minded new donors.

Like most public broadcasters in the Philanthropy 400, New York’s WNET (No. 334) had a tough 2016: Donations were off almost 24 percent, to $86 million.

But fiscal 2017, which ended in June, saw giving rise, says Anthony Escobar, executive director for development; unrestricted gifts were up 5 percent compared to 2016. “The uncertainty over our funding with the federal government certainly helped,” he says. The station’s “Trump bump,” Mr. Escobar says, was nudged along by a campaign it ran promoting its “trusted news.”

One tactic that’s working has been an idea WNET and other PBS TV stations borrowed from the tech world: Passport, an online streaming service that helped boost membership numbers. Passport’s resemblance to Netflix and other subscription media outlets doesn’t hurt. “I think most of the people who are signing up already have experience paying monthly like that,” Mr. Escobar says.

Digital innovation is crucial to capturing the new donor. Fundraisers are talking among themselves right now about Apple Pay and other contestants in what Mr. Dunham, the consultant, calls “the big race that’s going on right now with wallets.”

Mr. Dunham says charities need to focus now on making their online fundraising as simple and streamlined as Amazon’s e-commerce platform.

“You can make one click and you’re done; you’ve just bought something,” he says. “And that same mentality is going to move more and more into the philanthropic space.”

With donors old or new: It’s still all about relationships.

Groups that made big leaps in the Philanthropy 400 often have an easy explanation: a long-term relationship with a big donor paid off.

Take the Rochester Area Community Foundation (No. 289), which was up 160 percent, to $99 million, for fiscal 2016, thanks to a $61 million gift from Robert and Richard Sands and their mother, Mickey, to create a supporting foundation. (The Sands family owns Constellation Brands, a producer of wine, beer, and spirits.) “The supporting foundation is designed to engage the next generation of the Sands family in community philanthropy,” says Jennifer Leonard, the Rochester group’s president.

The Sands family has had an association with the Rochester nonprofit going back to the late 1980s; members gave modest donations over the years, volunteered for the organization, and worked with it on various causes, according to Mary Holleran, the foundation’s spokeswoman. The family also gives through its company and its family foundation. Wealthy donors increasingly maintain several streams of giving, Ms. Leonard says, to implement various philanthropic strategies or accommodate giving by different family members.

Strong fundraising continued for the foundation this year; it ended its fiscal 2017 year in March with $49 million raised, $12 million more than the fiscal 2016 total apart from the Sandses’ gift.

This year, the 45-year-old organization is in the quiet phase of its first endowment campaign, which will target many longtime donors. It’s sent out its annual appeal earlier than in recent years and has ramped up a series of house parties. Hosted by board members and donors, the parties often follow a theme, like the arts, and get foundation officials out to the eight counties it serves.

“I realize that’s an old-fashioned technique,” Ms. Leonard says, “but it works well for meeting new friends.”

Alex Daniels, Drew Lindsay, and Timothy Sandoval contributed to this article.