Confidence in an improving economy, bequest giving and a few mega gifts helped charitable giving in the United States continue to rebound, up 7.1 percent during 2014 to $358.38 billion.
Adjusted for inflation, charitable giving was up 5.4 percent compared to 2013, with much of the sector returning to pre-recession levels sooner than originally projected. It’s the fifth consecutive year that giving has increased.
Preliminary estimates pegged total giving at $358.38 billion, up from a revised $339.94 billion in 2013, according to Giving USA 2015: The Annual Report on Philanthropy for the Year 2014, released on June 16. The 60th annual report is researched and written by Indiana University Lilly Family School of Philanthropy and sponsored by Giving USA Foundation, a public service initiative of The Giving Institute.
These initial estimates are based on an assortment of econometric models and will be revised twice, finalized when Giving USA’s preliminary report on 2016 giving is released in 2017.
Giving USA’s authors two years ago estimated that it might take six or seven years to reach the 2007 inflation-adjusted high of $355.17 billion in giving. The 7.1 percent increase in giving last year is the third largest increase in the past decade, behind only 2005 (12.4 percent) and 2012 (10.3 percent). It’s also higher than the average increase of the last five years – 5.5 percent, or 3.4 percent when adjusted for inflation.
“While circumstances vary from organization to organization, it appears the nonprofit sector overall can at last focus on expanding giving rather than regaining lost ground,” said Amir Pasic, Ph.D., dean of the Indiana University Lilly Family School of Philanthropy in Indianapolis, Ind.
Only the international affairs subsector reported a decrease last year, down 2 percent, or 3.6 percent when adjusted for inflation, to $15.1 billion. Giving to international affairs was down for the third straight year, something officials attributed to there being no major international disasters.
Otherwise, each subsector saw giving rise, led by arts, culture and humanities:
• Arts/culture/humanities, 9.2 percent (7.4 percent adjusted for inflation), to $17.23 billion;
• Environment/animals, 7 percent (5.3 percent), to $10.5 billion;
• Health, 5.5 percent (3.8 percent), $30.37 billion;
• Public-society benefit, 5.1 percent (3.4 percent), $26.29 billion;
• Education, 4.9 percent (3.2 percent), $54.62 billion;
• Human services, 3.6 percent (1.9 percent), $41.1 billion;
• Religion, 2.5 percent, (0.9 percent), $114.9 billion; and,
• Foundations, 1.8 percent (0.1 percent), $41.62 billion.
Mega gifts, particularly from young technology entrepreneurs, boosted giving considerably, with many geared toward higher education and health. But overall giving still would have been up even without the mega gifts taken into account, according to Una Osili, Ph.D., director of research at the Lilly Family School of Philanthropy. “Giving would have still increased without mega-gifts but this helped the size of the increase. It certainly didn’t change the overall direction,” she said.
Revisions to previous years’ estimates were generally in line with typical revisions, according to Osili. “When government updates those numbers, that’s what we use to revise our numbers,” she said, along with up to date data form the Internal Revenue Service (IRS). During the recession, government model revisions tended to be much larger than they had been in the past, leading to greater revisions in those years.
It’s the first year that Giving USA is moving away from the narrative of how long it will take to get back to the prerecession highs of 2007, Osili said. “We’re starting to see many subsectors reach pre-recession highs. That suggests to us that giving is in fact recovering. Some subsectors’ recovery is already under way,” she said.
As a percentage of Gross Domestic Product (GDP), giving inched up from 2 percent to 2.1 percent. Giving has been about 2 percent of GDP for a long time, Osili said, and has become a big challenge for the research, policy and practitioner community. “We’re starting to see that increase. That’s encouraging,” she said, and moving in the right direction. What we have to keep in mind, there is a tremendous amount required to move even 1 percent,” she said.
Religion continued to be the single largest recipient of giving. However, it also continued a near 30-year decline. While religion once accounted for more than half of giving — 53 percent in 1987 — last year it comprised less than one-third (32 percent) of all giving.
The only areas that have not yet returned or passed pre-recession levels are giving to foundations, public-society benefit and international affairs.
Patrick Rooney, Ph.D., associate dean for academic affairs and research at the Lilly Family School of Philanthropy, noted that while total inflation-adjusted giving has grown beyond its prior peak, caution is warranted. “As three of the four sources of giving have not yet exceeded their previous peak levels, with only foundation giving reaching its prior high, it is still too early to tell if total giving will sustain above the pre-recession level,” he said.
The four primary sources of total giving all were up:
• Individuals, 5.7 percent (4 percent inflation-adjusted), $258.51 billion;
• Foundations, 8.2 percent (6.5 percent), $53.97 billion;
• Bequests, 15.5 percent (13.6 percent), $28.13 billion; and,
• Corporations, 13.7 percent (11.9 percent), $17.77 billion.
Individual giving comprised 72 percent of the total. Gifts from all three types of foundations — community, independent and operating — all were up. Changes are influenced most by grants from independent foundations, whose gifts were up 7.8 percent and accounted for almost three-quarters of the category’s total.
“Individual giving is affected by available disposable income at the household level, wealth and growth in the S&P 500. All three increased last year, as did the amount people spent in general, not just on charitable donations,” said W. Keith Curtis, chair of the Giving USA Foundation and president of Virginia Beach, Va.-based consulting firm The Curtis Group. “With virtually every economic indicator that gets measured showing growth, I think it’s safe to conclude they played a large part in making 2014 a banner year for giving from every source,” he said.
Major stock indices all were up for 2014, including the S&P 500, up 11 percent, NASDAQ up more than 12 percent, and the Dow Jones up 7.5 percent.
“Corporate giving decisions, on the other hand, have historically been driven by changes in pretax profits and GDP,” Curtis said. “Other factors might be affecting how much they donate; time and further research will tell.”
Large national donor-advised funds (DAF) saw a slowdown in giving, which might have dampened giving to public-society benefit, Osili said. It’s hard to make broader generalizations about DAFs because of where they are located in the sector. Some are housed at individual nonprofits or community foundations, which saw stronger growth last year. “We also know that giving to some pass-through charities – those that redistribute their funds to other organizations – have seen little to no growth in recent years,” she said.
Considering that overall giving is not only at a historic high but has been up five consecutive years, “this really is good news for philanthropy,” Curtis said. “One thing that we still have to be aware of is just that the growth in philanthropy is tied a lot to what’s going on in the economy; something none of us have control over. That’s something we should be cautious about,” he said.
An improved economic outlook and strong stock market have left his members feeling hopeful and confident, said Steven Churchill, president and CEO of the Association for Healthcare Philanthropy (AHP). “There’s still some uncertainty in terms of how healthcare reform will impact hospitals but that hasn’t had a negative impact to date on development officers and hospitals and foundations,” he said.
Churchill said it’s difficult to predict how healthcare reform will completely impact hospitals or development offices or foundations at hospitals but it definitely has had an effect on decision makers at hospitals. Traditionally, the CEO of a hospital has seen the value in foundations but has seen it more like “icing on the cake,” Churchill said. “Today, with lower reimbursement rates, more pressure on the bottom line, more CEOs – sometimes for the first time ever – are turning to foundations for additional revenue,” he said.
Donor-advised funds are something that nonprofits need to be paying attention to, Curtis said. Donors who give through DAFs are thinking about philanthropy and they’re planning their gifts, making contributions to an organization that they likely have a passion for. “Nonprofits need to make sure that when they’re getting those gifts, they’ve got to cultivate those folks, because it’s really a good chance they will continue to give them gifts,” he said.
“The number of donors are about the same but the average gift amount is really going up. To some degree, that’s because of big gifts we’ve seen,” Curtis said. The challenge for nonprofits is not taking a donor for granted. “What you have to be doing is really focusing on donor retention, making sure when gifts are coming in, you’re really engaging with those donors, staying up with them, not just assuming that gift is going to come in, therefore the next gift will come in. Really try to engage those donors in the life of the organization,” Curtis said.
The workplace campaign at United Way of Pickens County has consistently seen modest increases, less than 5 percent, in the past five years according to President Julie Capaldi.
The Easley, S.C.-based affiliate typically raises more than $1 million a year and in recent years has seen quite a few more gifts of stock and individual leadership giving of $1,000 or more. Capaldi said it also established its first women’s leadership affinity group and had “a little traction,” when it comes to planned giving. She expects 2015 could be an even better year.
“Nonprofits are working hard, spending time with donors, feeling good with what their donors are doing. The caution is, if there was any pullback. I wish I could predict the economy but right now people are feeling good about the economy,” Curtis said.
“While the numbers are good, we can’t rest on that success. Nonprofits have to continue to move forward, do some of the things we’ve been doing, talking to donors, making sure messaging is out there, and being transparent,” Curtis said. Besides being cautious about the economy, he said the general population of donors is probably still a little more cautious coming out of the recession. NPT