October 17, 2008
A Multi-Year Drop in Giving Ahead?
Lucy Bernholz, writing on Philanthropy 2173, hopes she’s wrong. While the Foundation Center and other organizations have predicted that giving will stay steady despite the economic crisis, Ms. Bernholz says she has big doubts.
“I don’t think a short-term drop in giving is all we’re facing here,” she writes. “I think we’re going to see new banking rules, new credit rules, new housing laws, new charitable giving laws, new philanthropic approaches, new tax structures, new public-service demands and possibly programs, the heads and tails of demographic and generational shifts, and lots of other things that will fundamentally restructure the business of giving as we know it.”
A drop in giving this year is just the beginning, she says. She wonders how long we’ll have to wait — 2009? 2010? beyond? — until charitable giving recovers.
Do you agree with Ms. Bernholz? How has your organization been affected by the downturn so far?
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Thanks for picking up on this – important to keep in mind I’m talking about ALL giving – individual, corporate and foundation. Already some interesting comments about this over at www.philanthropy2173.com.
And, of course, the next question is – if I’m even a little bit right, what do each of us – nonprofits, donors, advisors, beneficiaries (direct and indirect) – do to adjust?
— Lucy Bernholz Oct 17, 02:03 PM #
Oh, and don’t forget the role of political giving in the short-term
http://philanthropy.blogspot.com/2008/10/charitable-and-political-giving.html
— Lucy Bernholz Oct 17, 02:08 PM #
Spend some time with the latest issue of Advancing Philanthropy. Has a great profile/lookback at historical giving trends during past downturns: 1987 crash, Asian Market crash, 9/11, etc. The whole pie of giving (not just one segment, like foundations) mirrors the economy and stock market, and recovers (with some lag time) as they recover. While philanthropy and philanthropic methods may be changing, MOST funds are given by plain old folks writing out of their checkbooks. While there’s going to be some pain for the foreseeable future, I don’t see that we’re headed into an environment where giving is down drastically due to a vastly-reshaped policy or regulatory scene. People will give ‘cause it feels good to give, ‘nuf said.
— Nancy C Oct 17, 02:24 PM #
Nancy – I hope you are right. I just think the forces of change are too big, too diverse, and too dynamic to hope they will wash each other out and things will stay the same (even though it always feels better to try to ignore change).
I also know we’re operating within a very small band of opportunity – the historical trend that I think matters most here is the 1-2% band of income that Americans have been giving within for the last 30 years. There is not a lot of wiggle room in a band of 1-2%.
And one more thought – I just got an email from Bloomberg/NYT noting that Warren Buffett is saying this a great time to buy stocks. Here’s a weird question that flashed through my head – if I’m someone who has watched my 401K/college savings plan/house value drop 25% in last 3 weeks, and Buffett says “buy”, do I do so? And, if I do, which part of my budget did that “buy” just come from? And what effect does that have on what is left in my wallet?
— Lucy Bernholz Oct 17, 03:09 PM #
Is the issue of dropping revenue a by-product of the economic times or of a changing regulatory environment?
If one considers only those issues related to economic trends then it is realistic to believe that giving to those organizations that survive will rebound. The question may be will organization be adaptive enough to weather the short-term downturn of donations. And if not how will those services be replaced – by expansion, merger, consolidation or will those services lost be gone forever.
Ms. Bernholz adds a twist to her analysis, however, by adding changes in the regulatory environment as being a deterrent to a full scale rebound. I do not believe that previous economic recoveries have been impacted by significant shifts in oversight and regulations. Consequently, as Ms. Bernholz suggests the additional factors may in fact acts as a retardant on giving by certain segments of the philanthropic community. If her assumption is correct – a significant increase in regulations and oversight is on the horizon – then her conclusion has validity.
— John C. McGee Oct 17, 03:11 PM #
I agree with Lucy. The current economic turmoil is fundamentally different from any previous experience, and it will impact charitable giving. With one third of nonprofits in economic distress prior to October, this may be a tipping point that drives mergers and dissolutions. Donors who have to change their lifestyle to accommodate the new economic realities will expect nonprofits to do the same.
Ron Mattocks, Author of Zone Of Insolvency
— Ron Mattocks Oct 17, 04:16 PM #
(This is cross-posted on PhilanTopic.) Foundations are just one source of charitable giving, and they cannot lift the overall bottom line in 2008 if individuals and corporations feel compelled to make deep reductions in their support. We’ll have to wait and see.
But I think the comments addressing how possible reductions in funding may play out across areas of nonprofit activity are well taken. We’ve heard similar questions in prior downturns: Will foundations cut their giving for the arts to provide more human services support? Will grants for international activities go down as the domestic demand for charitable resources rises? We at the Foundation Center would be interested in knowing what other areas of activity nonprofit organizations are particularly concerned about.
In the meantime, we’re going to delve back into our historical data and work on providing perspective on how giving for particular areas (as well as types of support) were—and, in many cases, were not—disproportionately affected during the last economic downturn. Stay tuned.
— Steven Lawrence Oct 17, 05:04 PM #
PLEASE…do not leave public frustration out of your “giving in the future” formulas.
A steady stream of negative press has eroded public trust in nonprofits. It’s this, combined with the current economic climate, that is going to hurt us.
We must get in-depth analysis of our work in every paper (or on our websites) and make both a social and economic case for our work.
— robert egger Oct 20, 09:38 AM #
Regrettably, I agree with Lucy and Ron. To use an analogy of airplane hijacking, this economic situation feels like 911, not D.B. Cooper. The fear, stakes and severity is greater.
Yes, I think we’ll see ordinary people digging deeper, but this group has been eroded by high debt, compression of the middle class and the reshaping of the world economy. Much of the growth in giving has come from large gifts of assets — business interests that have mushroomed with a bouyant, sustained economy that was held up by easy access to credit. These gifts will inevitably drop off over the next couple of years as the world’s economy restructures.
Philanthropy in previous recessions of the last 50 years didn’t rely quite so much on the philanthrocapitalist.
— Malcolm Burrows, Toronto Oct 20, 10:33 AM #
Yes, charitable giving may suffer if we continue to do things the way we’ve always done them. The need is still there, we just need to more vigorously and regularly share that need with donors. They still believe in us. Charities will suffer when fundraising staff give up!
— jfundraiser Oct 20, 01:18 PM #