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Giving Study Projects Consecutive Yearly Hikes

By Mark Hrywna - January 20, 2016

Charitable giving is expected to continue to grow through next year, rising by an estimated 4.1 percent in 2016 and 4.3 percent in 2017, according to a new forecast.

Total giving in both years will be slightly less than the 40-year average growth rate of 4.4 percent, according to “The Philanthropy Outlook: 2016 and 2017,” released today by The Lilly Family School of Philanthropy at Indiana University-Purdue University in conjunction with consulting firm Marts & Lundy.

It’s the second annual report by the Lilly Family School of Philanthropy to project giving into the future rather than review giving as in the annual Giving USA report. The inaugural Philanthropy Outlook released a year ago projected an increase in giving of 4.8 percent for 2015 and 4.9 percent for 2016.

The annual Giving USA report first unveiled in June estimated overall giving was up 5.4 percent in 2014, reaching nearly $360 billion to approximately 1.1 million charities in the United States.

The total giving rate is expected to increase above the 5-, 10- and 25-year annualized averages. Average annual giving is expected to increase $13 billion per year between 2013 and 2017, compared with the average decline of $3.2 billion realize from 2008 to 2012.

Giving from all sources is expected to increase in 2016 and 2017, with the largest jumps being foundation giving:

  • Foundation, 5.7 percent and 6.4 percent;
  • Estates, 4.8 percent and 4.9 percent;
  • Corporations, 4.6 percent and 4.7 percent; and,
  • Individual, 3.7 percent and 3.8 percent.

Giving to education will continue to see the strongest growth, up 6.3 percent this year and 6.1 percent in 2017.

“The involvement of a new generation of philanthropists is now bearing fruit and institutions, particularly educational institutions that can inspire and engage donors in their future, have unique opportunities,” said John M. Cash, Ph.D., chair of the board of directors of Marts & Lundy. “The substantial projected increase in foundation giving, driven by new wealth in family-directed foundations, indicates that the importance of individual donors, particularly at higher giving levels, continues to increase,” said Cash, Ph.D. “As the disparity between the very wealthy and the rest of our society grows, the new report demonstrates that nonprofits should focus their attention on all levels of giving and should pay special attention to the potential for securing leadership commitments from top-level donors,” he said via a statement announcing the projections.

“The Philanthropy Outlook,” which will be updated annually, provides data for predicted year-to-year growth rates for 2015 and 2016, and includes context and explanations of the economic factors and conditions that influence predicted changes of giving.

According to the report, economic factors that are expected to have the most significant, positive impact on U.S. charitable giving in 2016 and 2017 include: projected growth in the S&P 500 Index, personal income, and the net worth of households and nonprofits, among other factors. Certain conditions, however, such as changes in tax policy or significant changes in the world or U.S. economy could affect predictions for giving.

The report’s research team employed an econometric methodology to develop the projections for “The Philanthropy Outlook 2016 & 2017.” This type of methodology tests statistical relationships between variables. Researchers tested more than 16,000 combinations of economic variables that had the potential for influencing each type of giving, ultimately identifying 20 key predictors of giving.

Total giving could be lower if the S&P 500 grows more slowly than the estimated 6 percent this year and 7 percent next year. Predicted individual/household giving would fall short if household and nonprofit net worth grows less than 4 percent for each year and personal income grows less than 3 percent each year.

“We project stronger growth in giving to education in 2016 and 2017 than in overall giving or in any of the sources of giving,” said Una Osili, Ph.D., director of research for the school. “This may be due in part to the increasing interest of donors, and especially wealthy donors, foundations and even corporations, in funding higher education, as well as a growing role for philanthropy in K-12 education.”

Complete methodology for the report can be found at www.PhilanthropyOutlook.com

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