Fundraising Update

Welcome to Fundraising Update. This week, a philanthropy historian makes the case that a court settlement with a family whose fortune was made in opioids should reshape how nonprofits think about naming rights. Plus, new data shows the rapid growth of donor-advised funds in 2020.

I’m Eden Stiffman, senior editor at the Chronicle of Philanthropy. If you have ideas, comments, or questions about this newsletter, please write me.

Thanks to sponsor Nacha for supporting Fundraising Update.

Rethinking Naming Rights

For years, activists have been pushing to hold the Sackler family accountable for the devastation caused by their company, Purdue Pharma. The family made billions of dollars manufacturing the painkiller OxyContin in the mid-1990s and peddled the drug so relentlessly that it helped spark the opioid epidemic. It was the source of much of the family’s enormous wealth and their celebrated philanthropy.

But when a U.S. bankruptcy judge approved a settlement for Purdue Pharma in September, many of those activists were disappointed. The family agreed to contribute some $4.5 billion to address the opioid crisis. But by the terms of the settlement, they would keep the bulk of the fortune they had made from OxyContin, would be shielded from future civil lawsuits, and would admit to no criminal wrongdoing. However, as the New York Times reported, the family “will be forbidden to seek naming rights to places like hospitals and museums until they have paid all their opioid debts and exited their worldwide opioid-related businesses.”

Photo illustration by The Chronicle; Photos by Getty, Chuck Myers, Carnegie Library of Pittsburgh

Philanthropy historian Benjamin Soskis writes in an opinion column that the settlement represents an unprecedented extension of the law into the philanthropic realm and should influence how nonprofits think about plastering the names of their benefactors on buildings and programs.

“A family that has destroyed so many lives should not be able to put its name on our trusted institutions,” Massachusetts Attorney General Maura Healey explained in a statement.

The final settlement does not say anything about existing institutions that bear the Sackler name. In fact, according to an individual Soskis spoke with who is familiar with the negotiations surrounding the settlement, one proposal discussed but not agreed upon would have prohibited the family from pursuing legal action against any institution that decided to take the name down, as several have recently done. As this individual notes, the bar on future naming is “symbolically significant but practically less so, in that no institutions were going to be creating new Sackler wings or galleries any time soon anyway.”

But that symbolic significance could itself have real practical consequences, Soskis writes. The provision’s inclusion in the settlement represents the clearest and most consequential statement in recent history of the public’s interest in scrutinizing the honors granted to donors.

The offer of naming rights has become one of the most effective lures in fundraisers’ bait box, he writes. And no doubt the money given in exchange for named recognition has done much good. But we might also view the prevalence of the practice of offering naming rights as a challenge to the preservation of public values, Soskis writes.

He argues the nonprofit world can rethink the way this works.

Some legal scholars, for example, have proposed recognizing that naming rights represent a real benefit for the donor that should be taken into account when calculating what part of a charitable gift is tax deductible. This would at least mean that the public would gain some additional benefit from named rights in increased tax revenue.

Many institutions have also begun to include time limits to naming rights in gift agreements (the Smithsonian, for instance, instituted a 20-year naming-rights limit in 2011), allowing a reset in case donors’ reputations become toxic. Other lawyers have stressed the value of incorporating morals clauses into gift agreements, which would give the charity the right to remove a donor’s name from an institution if the donor acts in a manner that harms the charity’s reputation.

Soskis has his own proposal: “If donors want to maintain the privilege of naming, we should encourage them to do so after other individuals whom they want to celebrate and memorialize.” While this won’t get rid of controversy over naming institutions, it would offer up new opportunities for donors to work with charities to identify names that they want to honor and be associated with — and help expand the pool of individuals who are celebrated in the public sphere.

Take some time to read Soskis’s opinion column. He digs into the boom in naming institutions during the Gilded age and the pushback against today’s billionaires.

New Approaches to Naming

Do you have examples of nonprofits’ naming something in honor of people who are not donors or members of a donors’ family? Send your examples my way.

Need to Know

“It’s the largest grant-making increase we’ve had in a decade,”

— Eileen Heisman, CEO of National Philanthropic Trust

Total charitable assets held in donor-advised funds grew to $159.8 billion in 2020, a nearly 10-percent increase over 2019, my colleague Michael Theis reports.

The nearly $48 billion received by DAFs is roughly equivalent to the amount of cash and stock raised by the 85 biggest organizations on the America’s Favorite Charities list and is equivalent to roughly 10 percent of “Giving USA’s” estimated $471 billion donated to all charities in 2020.

National Philanthropic Trust, the second-biggest DAF sponsor, brought in $4.9 billion in contributions last year. The trust examined donor-advised-fund data from 976 sponsors, which it says account for more than 95 percent of all such funds in the United States. Its findings have become key in policy debates about how to best regulate donor-advised funds.

The National Philanthropic Trust’s report said payouts reached highs not seen since the Great Recession. Using a formula from Candid’s Foundation Center — dividing the value of current-year grants against previous-year assets — the report notes that donor-advised funds had a payout rate of nearly 24 percent in 2020, up from 22 percent in 2019. The rate peaked in 2010 at 24.6 percent of previous-year assets.

Plus:

• Eighty-four percent of donors said they planned to give the same or more to charity in 2021 as they gave last year, according to a new study from fundraising technology company Classy. My colleague Emily Haynes wrote about the annual survey, which ran from August to September 2021 and asked a representative sample of 1,000 U.S. adults about their giving intentions and actual donations. In last year’s survey, 39 percent said they planned to increase their donations in 2020, and 41 percent of respondents to this year’s survey said they actually did.

Advice on How to Survive and Thrive During Crises

The Chronicle recently hosted a virtual forum with three nonprofit leaders who shared their experiences adapting to the Covid-19 crisis and explained how many of their new approaches led to an expansion of their organizations and missions.

If you missed that conversation, watch a recording here and read some of the highlights.

Yi-Chin Chen, executive director of Friends of the Children in Boston, said that in a time of crisis, it is more important than ever to communicate regularly with your clients and partners. Her organization pairs adults with kids to mentor them from kindergarten through high-school graduation. As the pandemic dragged on, Chen and her staff realized that the adult caregivers, not just the children, needed new sources of support. The organization conducted short surveys and talked to clients to see what they needed most.

Their feedback, Chen says, allowed the organization to respond in ways that would be the most helpful. “Over the last 18 months, it really went from being reactive crisis stabilization to proactively showing up to invest in the whole family and celebrating the capacity of our young people in their families to tackle these challenges,” Chen said.

What We’re Reading

Seattle Humane has been a fundraising powerhouse. As the organization campaigned over the past decade to build a $30 million facility, its leaders pledged to take in more at-risk animals and coordinate more adoptions. It promised to increase adoptions by 60 percent and grow the number of critters taken in from “high-kill shelters or no-shelter communities” by more than 40 percent. But the palatial shelter hasn’t lived up to those promises, a Seattle Times investigation found. “An awful lot of people have no idea that they are doing so little,” said a longtime donor who still volunteers at the shelters and thus requested anonymity. “People give millions of dollars to this organization. For that, things should be much better.”