Charitable giving may not be mired in a "lost decade" after all.
Donations will climb back to their 2007 pre-recession peak sooner than expected, according to a new estimate, thanks largely to strong gains on Wall Street and four consecutive years of economic growth.
Contributions from individuals, corporations and foundations totaled $335-billion in 2013, a 3-percent increase over 2012, when adjusted for inflation, according to "Giving USA," a report compiled by the Indiana University Lilly Family School of Philanthropy.
Even healthier gains have marked 2014, many charity leaders say.
The upward swing is strong enough that "Giving USA" researchers revised their view on when giving might surpass its peak of $350-billion in 2007. Donations might reach this mark this year, or at least in 2015, three years sooner than researchers had previously expected.
Still, that means most nonprofits have struggled over six years to raise as much as they did before the downturn.
"It’s pretty remarkable by historical standards that it will have taken so long," says Patrick Rooney, the Lilly school’s associate dean for academic affairs and research. "When we get there, everyone is going to breathe a sigh of relief."
Education and Arts
But not all nonprofits are benefiting from the improved outlook. Wealthy donors are driving the increase in giving, Mr. Rooney says, and that is one reason the causes they favor did best last year.
Donations to education rose 7.4 percent, while arts giving grew by 6.3 percent.
How Different Causes Fared in Fundraising
2011-2012 change: 4.0%
2011-2013 change: 11.6%
PUBLIC & SOCIETY BENEFIT
2011-2012 change: 2.5%
2011-2013 change: 9.7%
ARTS & CULTURE
2011-2012 change: 5.6%
2011-2013 change: 12.3%
ANIMALS & ENVIRONMENT
2011-2012 change: 5.3%
2011-2013 change: 11.6%
2011-2012 change: 3.0%
2011-2013 change: 7.6%
2011-2012 change: 2.3%
2011-2013 change: 3.1%
2011-2012 change: 1.8%
2011-2013 change: 0.2%
2011-2012 change: 1.9%
2011-2013 change: 6.2%
Meanwhile, causes that draw a large number of poor and middle-class donors fared less well: Religious groups suffered a 1.6-percent drop, while human-service groups raised less than 1 percent more.
Robert Mitchell, chief executive of Atlas of Giving, an organization that forecasts giving rates, said stock-market gains boosted gifts to donor-advised funds and colleges more than to big national charities that depend on the support of large numbers of small donors. His organization, which uses econometric models to estimate donations, says giving increased by far more than "Giving USA," rising 13 percent in 2013.
"Gains in the stock market don’t matter much to normal donors who give out of their income rather than out of their wealth."
For example, donations to the Communities Foundation of Texas would have been almost flat last year compared with 2012 if not for two extraordinary gifts from wealthy individuals totaling $60-million.
"People are still conservative in what they’re giving," says Susan Smith, the foundation’s executive director.
To reach new donors, the foundation started advertising to the public for the first time. The ads were designed to appeal to younger parents who are not wealthy and don’t have a history of giving. One ad, placed in the playbill this spring for performances of the touring Broadway show "Beauty and the Beast," showed a mother and her daughter serving as volunteers and told readers: "You don’t have to be a billionaire to be a philanthropist."
Time to Act
As the economy improves, it’s the right time to woo new donors, says Lon Swartzentruber, chief advancement officer at Grand Rapids Christian Schools, which runs five campuses in Western Michigan.
"In a recession, someone might give to five charities," he says. "Now we see that coming back to five to 10 charities, and we want to be one of them."
The number of donors to the schools dropped by more than 20 percent during a three-year fundraising drive that started in 2008, compared with a similar drive that started three years earlier, Mr. Swartzentruber says. Now the number of donors is rising again.
Despite last year’s snazzy stock-market performance, many nonprofits have found it difficult to maintain support from high-level donors.
Like the Communities Foundation of Texas, the Philbrook Museum of Art has tried to broaden its pool of supporters. That’s because the number of supporters at the highest rung of the Tulsa museum’s membership roles—those who give at least $2,000 annually—have declined by 10 percent since the recession hit. Their contributions, which totaled $700,000 six years ago, limped in at $574,000 last year.
"It feels like a punch in the stomach," says Rand Suffolk, the museum’s executive director.
To make up for the loss, Mr. Suffolk has designed programs to appeal to a broader range of visitors, particularly minorities and children.
Philbrook’s new "MyMuseum" program gives schoolchildren a box of art supplies, like drawing paper and a pencil, and an "art card" that depicts a different piece of art in the museum’s galleries each month. The children can come back each month for new cards, which are available in English and Spanish, and a new art supply. So far, more than 14,000 children have taken part.
In another program, Second Saturdays, the museum offers free admission once a month, art classes, and activities for children, like a scavenger hunt on the museum grounds.
Mr. Suffolk credits the expanded children’s program for increasing the number of people who give $55 to $125 a year by 17 percent since the recession. Gains among midlevel donors, who give up to $750 a year, were more impressive, at 45 percent.
The broader membership appeal has also helped Suffolk showcase the educational offerings to corporate donors who want to support programs aimed at a diverse audience. One of them, Oneok, a Tulsa energy company, chipped in $200,000 in May to support the free Saturday program.
Steady economic growth, along with gains on Wall Street, are causing giving to grow even faster in 2014 than it did last year for the nation’s Jewish federations.
The federations achieved a nearly 2-percent increase last year, and gifts are now up 5 percent nationally, says Jerry Silverman, president of the Jewish Federations of North America, a membership group of 153 organizations.
"We’re seeing our major philanthropic leaders become more engaged," he says. "As they’ve stabilized their capacity, they’re looking at more ways to invest in our mission."
In recent years, many of the federations were heavily focused on helping people who had been laid off, had trouble paying their mortgages, or were homeless.
One such effort was J-Help, a $25.9-million fund raised by the Jewish United Fund/Jewish Federation of Metropolitan Chicago, which leaned heavily on its major donors to pitch in.
The improving economy helped the organization attract 891 more gifts last year than in 2012, pushing its annual campaign above $81-million, the most the group has raised since 2008. Sensing a greater feeling of financial stability among its supporters, the organization took a new tack, hoping to appeal to donors who wanted to provide money for new programs.
The Breakthrough Fund, a new program that has raised $1-million to date, offers small grants of about $5,000 to "boutique" projects such as an effort to start a Chicago-area Hebrew National Honor Society at schools that teach Hebrew, camp programs designed to make young people more accepting of people with developmental disabilities, and afterschool educational programs that seek to link gay history and issues of gender identity to Judaism.
"J-Help was this ‘Oh, my gosh, we’ve got people hit hard by the recession, we’ve got to help them,’ " effort says Aaron Cohen, a spokesman for the group. "Breakthrough is different. It represents an eclecticism among donors."
InterVarsity, a network of Christian campus ministries, also sees the improving economy as a good time to start increasing its ambitions. The organization noticed that its average gift was more than $1,000, but it did not attract many gifts of more than $10,000.
Andrew Ginsberg, InterVarsity’s director of advancement, says the relatively high average gift amount and thousands of donors who also volunteer suggests that the charity could attract a large number of gifts between $10,000 and $25,000.
Last year it introduced its "Vision Partners" program, to attract those midlevel donors who might want to give more if their gifts were spread out over several campuses in a region.
The group does not have professional fundraisers. Instead, it relies on its 150 campus directors to solicit gifts.
To persuade donors to give more, Mr. Ginsberg developed guidelines for them to follow that outline an easy-to-remember "three cups of tea" approach.
The first cup, he says, is to build trust. The second cup is to listen to donors and help them understand what their passions are. The third cup is to encourage staff members to pitch donors to support the programs that match those passions. "We have thousands of loyal donors who have the ability and the affinity to InterVarsity to give more," he says. "They seem ripe to invite into a larger relationship."
Debra E. Blum contributed to this article.
Large Gifts Rebound Slowly
Big donations—those greater than $1-Million—have a long way to go before returning to their 2008 level. Here's a look at such donations for the first five months of each.
Individuals Dominate Giving
Donations by individuals—by far the most important source of funding for nonprofits—rose significantly in 2013. Researchers say wealthy individuals were the main source of the increase.
Source: Giving USA