Recessions aren’t always dire for nonprofits, but the coronavirus crisis doesn’t fit the mold of past disasters.
“This is uncharted territory,” says Laura MacDonald, vice chair of the Giving USA Foundation and principal at Benefactor Group, a fundraising consultancy.
Economists and fundraising experts like MacDonald say we can look to past crises, like the Great Recession, to predict how donors may respond. But they’re careful to point out that this crisis is unique, and precedent may not hold.
Giving usually holds its own during recessions, says Patrick Rooney, an economist at Indiana University’s Lilly Family School of Philanthropy. During typical downturns since the 1950s, giving has actually gone up by a modest 0.3 percent a year on average. But that figure excludes the last recession, the worst downturn since the Depression.
“During the Great Recession, we saw this dramatic decline in total giving, especially household giving,” Rooney says. From 2000 to 2016, the share of households that gave to charity dropped 13 percentage points.Most households that gave to charity before the economy tanked continued to contribute about the same share of their income during and after the downturn. But fewer new donors joined that group after the downturn ended in June 2009.
While overall giving dropped during that period, giving to human-service groups like food banks and shelters increased. Donations to human-service groups rose 8.5 percent overall in 2008 and 1.8 percent in 2009, according to the annual “Giving USA” report.
But demand for human services also increased during that time, and that increase in overall donations didn’t necessarily cover the costs of surging demand. Already in this crisis, some charities are seeing an uptick in demand as hourly workers lose their jobs, schools and child-care centers close, and people living on the margins are forced to make tough choices.
‘Not Just Another Hurricane’
In the short run, donors are going to feel more poor. “Households who live paycheck to paycheck are going to be strained to provide financial support,” MacDonald says. “And the households at the very top end whose giving might be tied to their equity investments are also going to want to sit on the sidelines a bit while they see what this crazy stock market does.”
During the Great Recession, institutions that were running capital campaigns or were in the process of starting them ended up raising as much money or more than they expected, said Phil Hills, president of fundraising consulting company Marts & Lundy. Typically, it took an additional year or so than originally planned for groups to meet their goals. Those organizations tend to rely heavily on very large contributions.
A 2001 analysis on giving during historical crises like economic downturns, wars, political turmoil, and natural disasters found little impact on giving during the year of a crisis or the following year. But this crisis is unique, with so many unknowns about its effects on health and the economy and, therefore, unknown effects on philanthropy. “Uncertainty is the enemy of the capital markets and is the enemy of philanthropy,” says Rooney.
“This is not just another hurricane or another tornado or another earthquake.”
