American giving is down. Education giving has slowed. Younger donors are abandoning crucial sectors. Megagifts are warping the giving landscape. What are charities and their fundraisers to do?
Take a deep breath, for starters. Fear is a great motivator, but it is not a strategy.
In fact, if you look beyond the numbers, the Giving USA Report 2023 alludes to a few strategies to consider for successful fundraising in the next one to three years. The philanthropic trends and valuable forecasts of the report are a major reason why The Angeletti Group is a member firm of The Giving Institute, the report’s publisher.
The Bad News First
According to the report, Americans gave an estimated $499.33 billion to charitable causes in 2022. That represents a 3.4 percent decline in inflation-adjusted dollars from 2021, only the fourth year in the report’s history that charitable giving has declined.
But do not forget the context. The two years of the Covid-19 pandemic had pushed American generosity to new highs, although in the past no one ever faulted a previous year for its high performance when Americans topped it from the following year.
Other challenges certainly contributed. High inflation reduced discretionary income, the stock market sank early in the year, pundits predicted recession, the Federal Reserve pushed interest rates much higher, natural disasters arrived every other week, and Russia invaded Ukraine. If it’s any consolation, the Russia-Ukraine war also disrupted the projected annual 8.4 percent increase in the sales of anti-depressant medications. Pass the Zoloft,® please.
If there is a cause for concern in this year’s report, it rests in the percentage given from disposable income, 1.7 percent. That is the lowest percentage in 40 years, and the trend has flowed generally downward since 2005. Americans may be becoming less generous.
Even still, the report’s history points to resiliency in American philanthropy. With nearly half a trillion dollars given to charity in 2022, the American spirit of giving still exists and will likely rebound, as it has every time after recessions and disasters.
Individuals Still Matter Most
Individuals remain the single largest source of contributions, giving 68 percent of total dollars, although the $319.04 billion they gave declined some 6.4 percent from the year before. If you add in bequests, ordinary citizens give 73 percent of all charitable dollars in 2022, and mega-gifts (defined as gifts of $450 million or more) totaled $13.96 billion, almost 5 percent of all giving by individuals. That is an increase of 2.3 percent and points to the importance of major gifts.
The rising number of foundations has partially offset the losses from individual giving. The $105.21 billion given by foundations in 2022 accounted for 21 percent of all philanthropy. And wealthy individuals who create private foundations are likely driving the 3.44 percent increase in the number of nonprofits from 2021. Those private foundations and gifts from donor-advised funds mask the individuals behind the gifts in the report’s statistics, but they also impart good news. The growth in foundation giving may mean that 1) foundations and the individuals who run them remain committed to addressing long-term social issues and 2) more individuals than ever may now be directing funds via foundations to the causes they support.
Shifting Priorities and Methods of Engaging Donors
The Giving USA report also sheds light on the evolving priorities within American philanthropy. Donors are increasingly focused on causes related to social justice, equity, international relief, and human services. In fact, the 14 percent of dollars that flowed to human services, while down from a year ago, now makes that category the second most popular overall behind religion (which at -3.8 percent year-over-year dropped somewhat faster than the overall decline). Education dropped to third place. These shifting priorities reflect a growing awareness and desire to address systemic challenges that impact communities across the country and may well signal the growing influence of Generation X on philanthropy.
Besides the increasing number of foundations, the report also underscores the continued popularity of donor-advised funds (DAFs). Their substantial growth in recent years will likely continue and may, in time, rival giving from foundations. One clear implication: make it easy for your donors to give from DAFs.
The Giving USA report also highlights the impact of technology on philanthropy. Nonprofits and fundraising professionals who embrace digital platforms to connect with donors, raise awareness, and drive giving are succeeding with more and more donors. The report explicitly states that organizations that leverage technology are more likely to thrive in the evolving philanthropic landscape.
Other Implications Are . . . a Bit Fuzzy
One year does not a trend make, but the past five years suggest that change is afoot. An old trend or two persist as new implications slide into view:
- Don’t panic. A long-time principle in advertising and marketing holds that success in uncertain times comes from not decreasing outreach. During difficult times, increase outreach to obtain greater market share and demonstrate strength. The pandemic proved that charities that continued to solicit gifts fared much better and emerged relatively stronger than nonprofits that pulled back or stopped soliciting altogether.
- Follow the money. Investments in major-gift fundraising programs offer the greatest return on investment. Large gifts now drive success. Also “replenish and expand portfolios with prospects and engage with them to drive momentum,” according to Peter Hansen of Hansen Philanthropic Solutions, a strategic partner of The Angeletti Group.
- Follow the older money. A great $140 trillion wealth transfer is underway, according to a New York Times article in May: “Of the $84 trillion projected to be passed down from older Americans to millennial and Gen X heirs through 2045, $16 trillion will be transferred within the next decade.” Start a planned giving program immediately if you do not have one, bolster the one you have, or “lease” one from experienced consultants who can do that for you, such as through TAG’s Planned Giving Launch Pad. At the very least, train your major gift officers to present prospects with the opportunities to commit to larger gifts that cost little or nothing now, that mix major and planned gifts, or that solve a family financial issue.
- Change your planning timeline. Instead of using a 12-month fiscal year view of your operations, adopt a 36-month view of your prospects, along with accompanying metrics. A three-year horizon is more realistic with prospects, says Peter Hansen. Build in time for discovery activity, cultivation and scheduling delays, and the sometimes long wait for an answer to a major solicitation.
- Upgrade your message. To generate enthusiasm among donors, do not talk about your organization’s needs. Always talk about a vision for change. And as Professor Russell James’s research on the use of language with donors has shown, talk to them in a way that casts them as potential heroes in that vision for change. Show them how to be heroic. Listen carefully and position yourself as the trusted sidekick in that donor’s journey to heroism. Offer your donors opportunities to be significant with the resources they know they do not need for living but nonetheless do not want to waste.
You are in the business of changing the world or, at least, your little corner of it. In that business, the sky is never falling. The sky’s the limit.