Nonprofit Magicians – Nothing Up Their Sleeves

There are competing studies but the results are pretty close – giving increased between 1.5 percent and 1.6 percent during 2018. That puts charities behind the nation’s economic growth, which at this writing is still being tabulated by the federal government but projected to be about 2.6 percent.

Even more troubling is that giving went off a cliff in December 2018, the time of year that charities rely on for a hefty chunk of revenue. Depending on whether it’s the Blackbaud Institute for Philanthropic Impact or the Fundraising Effectiveness Project (FEP) numbers or any of the siloed calculations, giving plunged between 4 and 6 percent when the months of December 2017 and December 2018 are compared.

The number of donors likewise dove to dangerous levels. According to statistics from the FEP and its Growth in Giving Database, the number of donors declined 4.5 percent during 2018. When donors are divided into three groups – general (less than $250), mid-level (between $250 and $999), and major donors (at least $1,000) – the only quadrant to increase in revenue was the major gift area.

The sector’s backbone donors, those who respond to direct mail, make a call when seeing an infomercial at 3 a.m., fill Red Kettles during the holiday, are disappearing. The number of “general donors” declined 4.4 percent and mid-level donors dropped 4 percent, according to the FEP statistics.

The database results showed new donors declined 7.3 percent year over year. The number of new retained donors dropped 14.9 percent, and the number of lapsed donors who were recaptured dropped 1.6 percent. The only year over year increase was in repeat retained donors and that was just 0.2 percent.

Some nonprofit analysts say that the tax reform bill that doubled the standard deduction while eliminating others is a culprit of the decline. It might be part of the reason but there is a larger issue.

The U.S. Bureau of Labor statistics estimates that 4.9 percent of American workers hold down two jobs to make ends meet. The percentage of unemployed Americans was 3.9 percent in December 2018, up from 3.7 percent the previous month and the highest rate since July of that year. December is a bad time to be out of work – for families and for charities. Those year-end gifts turn into egg nog so that families can feel a little festive and normal.

What the federal numbers don’t account for is the gig economy of workers grabbing whatever cash and part-time positions they can find. With online buying sitting at between 9 and 10 percent, finding those holiday positions is tougher. Have you recently tried to find someone to help you at a department store? And, Amazon can only contract with so many drivers.

PepsiCo just announced a $2.5-billion restructuring and plans to jettison thousands of workers, positions taken by what company officials called “relentlessly automating.” General Motors, Kraft Heinz, Goodyear, Wells Fargo, Starbucks, Verizon, Union Pacific and multiple media companies recently announced tens of thousands of layoffs. The Payless shoe chain is closing 2,100 stores and the venerable Sears is teetering in and out of bankruptcy.

Some financial professionals are predicting an economic slowdown or even recession at some point in 2019. Even the Boy Scouts has floated the idea of a bankruptcy filing.

Nonprofit board members and senior staff need to start looking more seriously at mergers. That’s not just the local little organizations. Bold steps need to be taken to merge chapters and possibly at the national level with such organizations – dare it be said — as the Boy Scouts and the Girl Scouts merging.

Fundraising might also need to return to fundamentals. Digital storytelling has become vital to the sector but actually putting something in a potential donor’s hands is possibly longer lasting. Communicating with donors and asking how they want to interact with a charity is imperative. It saves money and endears the donor to the nonprofit.

The 2020 election cycle is upon us and it is going to get sour. Money will be drained from charities for political campaigns, especially when a dozen or more candidates vie for a party nomination. Charities have the unique potential of changing the discussion from the screaming on television, radio and online to deliver a message of hope. Think back a few presidential campaigns ago and remember how that idea resonated with Americans.

Charities have also been a place of support and hope. That message has to get out, street by street, town by town and state by state. The revenue will follow.