Editor’s Note: This article was originally published on March 1, 2019.
Giving in 2018 was up by healthy margins, with little or no effect from the tax reforms enacted the year before, according to Inside Philanthropy interviews with more than two dozen charities and other experts who track donations to large numbers of organizations.
But signs of an impending slowdown in charitable giving are emerging from multiple studies examining contributions last year, particularly those from donors of modest means. For example, a new analysis of giving to more than 4,500 charities released by the Association of Fundraising Professionals this week found that overall donations in 2018 were up by only 1.6 percent, lower than the rate of inflation.
The modest gain, driven exclusively by an increase in contributions of $1,000 or more, masked “huge challenges to the sustainability of fundraising,” said Elizabeth Boris, one of the researchers.
The most troubling trends were substantial drops in both new donors and those who made repeat gifts in 2018. The number of new donors fell by more than 7 percent, while repeat donors declined by nearly 15 percent.
“Smaller and mid-level donors are slowly but surely disappearing—across the board, among all organizations,” said Boris. “Philanthropy should not, and cannot be just the domain of the wealthy.”
Another analysis of small and mid-size online donations to some 130 charities by M+R, a communications consulting firm that advises nonprofits on fundraising and advocacy, found that giving dropped in December compared with the same period in 2017. As part of its annual benchmarking study, M+R examined donations from Giving Tuesday through the end of the year and found a median decline of 6 percent in the last 10 days of the month compared with those same days in 2017.
When the researchers examined mid-level gifts of $500 or more, the effects were more pronounced, reflecting a 13 percent drop in the last 10 days of December. The decline is a likely reflection of that period’s stock market turbulence, which caused many donors to reduce or hold off on making a year-end gift, says Jessica Bosanko, a senior vice president at M+R.
“For groups I work with personally,” she added, “a lot of them saw decent 2018 totals, but December was out of the ordinary for them.”
Another three-year analysis of giving to more than 9,000 charities from Blackbaud, the software company, found that giving rose by just 1.5 percent last year, slowing down from a 9 percent increase since 2016.
Some experts predict that fundraising will be more challenging starting this year and continuing into the future, due to a combination of demographic and economic factors.
This year is the first in which the full effects of the 2017 tax reform will become apparent due to increased standard deductions and other changes taking effect in 2018. Already, news stories have highlighted the fact that taxpayers who did not adjust their withholding pay to meet new tax circumstances are receiving lower-than-expected refunds, which could reduce their charitable giving.
Looking back over several years, IRS data reveals that people under age 55 significantly reduced their giving during the Great Recession, and they have not fully resumed their support of charities, says Robert Sharpe, the principal of Sharpe Newkirk, a Memphis fundraising consulting firm.
Barlow Mann, the company’s chief operating officer, points to data from the Federal Reserve showing that from 2007 to 2016, the median net worth of households fell for every age group except for people 75 and older. For people aged 35 to 44, median household wealth fell from $99,100 in 2007 before the recession to just $59,800 in 2016. And for individuals 55 to 64 years old, normally the years when people start making their largest outright gifts, median household wealth declined from $285,300 to $187,300.
People now in their 60s and older, baby boomers, and the last surviving members of earlier generations are the individuals who give the most to charity, and organizations with large numbers of donors in that age group are potentially poised to reap significant fundraising gains. However, the losses these people sustained in the recession and other factors could easily put a damper on their giving, Sharpe and Mann say.
Looking into the next several years, they say, baby boomers will be the primary supporters of charity, capable of making the largest outright gifts and bequests.
Once they have passed away, however, subsequent generations will be significantly harder to reach. For one thing, the younger generation, generation X, is much smaller. And another generation, the so-called millennials, are deeply concerned about charitable causes such as equality and the environment, but face especially difficult financial circumstances. Many struggle with crippling student debt and are living at home with their parents well into adulthood.
For many years into the future, few millennials will be able to make the larger outright gifts their elders did, according to Sharpe and Mann. That could make alternatives to traditional donations such as tax credits, cause-related investments and other revenue streams more popular.
To weather the coming fundraising challenges, Sharpe and Mann advise charities to segment their donors into a matrix encompassing as many as nine groups based on age and wealth, and to communicate with them according to their interests and economic circumstances.
In recent years, charitable organizations have increasingly focused on winning larger gifts from affluent donors, but “you need solicitations based on different files for both age and economics,” Mann says. “Don’t turn off your mid-range donors by only featuring stories about big gifts.”