This past June, Giving USA released their annual overview of philanthropy in the United States with detailed numbers, graphs, and descriptions for the year’s charitable giving. The report, first published in 1956 and produced by the Lilly Family School of Philanthropy at Indiana University-Purdue University Indianapolis since 2000, is the industry-wide measuring stick for annual giving. Before we break down the numbers, we should celebrate the fact that 2018 was ranked second highest historically in charitable giving in the United States. Americans donated nearly $428 billion to charitable ventures over the course of the year and through various forms of giving.
With that incredible news in mind, it’s possible that you’ve also heard that after decades of growth in overall charitable giving, adjusted for inflation, giving finally dropped. That is accurate, however it should be given some perspective. Giving only dropped 1.7% from 2017 to 2018. The percent of charitable gifts made by individuals in 2018 made up 68% of all charitable giving. While this is the first time that number has not dropped below 70% since 1954, other giving trends have been growing and seem to be on a continued upward trajectory. For example, giving by foundations and corporations grew by a collective 7.6% when adjusted for inflation in 2018. Una Osili, Associate Dean for Research and Internal Programs at the Lilly Family School of Philanthropy provided an optimistic view of the current giving trends in an interview with CNBC. “What we see in data is that the number of total donors is declining. But among those who are giving, the amounts are increasing. So, donors are down but dollars are up. It’s a greater concentration.”
But Why the Drop in Individual Giving?
After so many years of increased giving, a change in that trend – even if $292.09 billion was donated by individuals in 2018 – can cause a bit of panic within the charitable giving space. Of course, for fundraisers the real question is, “Are there any key factors that are causing the 1.1% decline in giving?” The answer is fairly complex. The economy is continuing to surge and while Wall Street has shown signs of volatility over the past year, it’s still a bull market. It would seem that the decline in giving isn’t because of a lack of a financial capacity of donors. One likely contributing factor is the Tax Cut and Jobs Act passed at the end of 2017. The new law increased the standard deduction for taxpayers, eliminating the benefit for many to make tax-deductible charitable gifts. The Tax Policy Center has estimated that charitable giving could drop by up to $20 billion annually as a result with roughly 90-95% of filers not bothering to itemize their returns.
The Giving USA report supports those estimates. The number of people who itemized their deductions in 2018 was around 16 to 20 million — a significant drop from the 45 million people who did so in 2016. Additionally, from 2017-2018 charitable giving only increased .7% compared to 7.1% between 2016-2017 according to Giving USA’s report.
Another potential factor influencing the decline of individual donors could be a decline in overall trust in charities. According to a study by Give.org, U.S. adult's trust in nonprofit organizations declined nine points from 58% in 2017 to 49% in 2018. Even more alarming is the “informed public (ages 25-64, college educated, significant media consumption, and in top 25% of household income)” dropped from 73% in 2017 to 51% in 2018.
The Big Winners
Americans are still passionate about giving to a number of different charitable causes. Giving by foundations rose by 7.3%. This could be that more Americans are giving through their own foundations and Donor-Advised Funds. Giving by corporations also rose by 5.4%. Americans continue to make their donations towards real estate, stock, and gifting businesses to charity.
Donations to international affairs spiked last year with $22.88 billion donated to the cause. That was nearly at the 2015 record of $25.09. International affairs led all specific causes with an increase of 7% over the 2017 totals.
Arts, culture, and the humanities continued to be a popular cause for donors, increasing 2.1% from 2017 to 2018 (adjusted for inflation). Environmental and animal endeavors also saw a solid increase in donations and topped its highest ever funds raised in a year bringing in $12.7 billion in 2018.
Jay Love, Co-Founder of Bloomerang and board member of the Center on Philanthropy at Indiana University summed up the slump in giving with an eye on the future in his article on Bloomerang. “Seeing so many declines during a period of a rising stock market, and overall economic prosperity is what is most troubling to me,” Love said. “Usually in growing economic times, the results in all of the various categories are rising, and in the worst case are holding steady.”
The Big Losers
Foundations took the biggest hit in gifts received in 2018, receiving $50.29 billion. That is an inflation-adjusted drop of more than 9% compared to 2017. While Foundations still made up 10% of all gifts made in 2018, the drop was more than 3% higher than the next biggest loser, Public-Society Benefit with a 6% decline in inflation-adjusted funds received.
2018 proved to be hard for religious organizations as well. Giving to religious organizations dropped to below 30% for the first time ever (29% in 2018 according to Giving USA’s report). Giving to religious institutions has been on the decline since 2005 though. That year giving made up 35.8% of specific causes. In 2010 it dropped to 34.6%. By 2016 it was down to 32%, and now 29%. This mirrors the decline in attendance that religious institutions are seeing. If that trend continues, the decline in funding likely will follow.
Along with religious organizations, contributions to education declined. Education donations decreased by 3.7% from 2017-2018 (adjusted for inflation). The drop follows an increase in gifts to education by 8.6% from 2016-2017 (adjusted for inflation). Donations to education have been increasing steadily for the past 20 years, so it’s possible that this is an anomaly, but it’s not to be ignored. While most universities and colleges operate their budgets through endowments and are somewhat insulated from the ups and downs of annual charitable giving, if the upward trend doesn’t resume in 2019, there could be serious cause for concern, including tuition increases, reduction in programming and hiring freezes for professors.
The Silver Lining
If history tells us anything, it’s that change happens. Markets fluctuate, giving trends shift and it’s important to be flexible. As any seasoned investor will tell you, you must look at the big picture. Before fundraisers start worrying that it is raining rocks when it comes to charitable giving, it cannot be overstated that 2018, when adjusted for inflation, was still ranked as the second highest giving year on record only behind 2017. $427.71 billion was donated to charity. Individual giving was only down 1.1% which is hardly a slump. Nearly all other forms of charitable giving are up. Apart from bequests, which stayed fairly flat from 2017, in 2018 corporate giving increased by 5.4% (2.9% after adjusted for inflation) and foundation giving increased by 7.3% (4.7% after adjusted for inflation) according to Giving USA’s report. And while giving to foundations did drop 9.1% (adjusted for inflation) in 2018, 2017 was the highest ever recorded giving to foundations.The bottom line is that, before you overreact to any reporting, take some time and contact your charitable giving experts at RenPSG. RenPSG is the gold-standard for philanthropic giving solutions and can help you achieve your charitable goals. Contact us today and let’s get started.