June 20, 2011 | Read Time: 4 minutes
This year’s “Giving USA,” the annual yearbook of American philanthropy, reverses the story it told last year about how giving fared in the recession.
It now says donations fell by higher percentages in 2008 and 2009 than at any other time in the past five decades—even though last year the report said that donations in those two years had declined only slightly or held steady. What’s more, it now says the recession cloud may hover for years, and it could be as long as 2016 before donations return to levels raised before the economy soured.
Driving the gloomy picture was a decline in donations by individuals, which fell by nearly 15 percent, adjusting for inflation, over 2008 and 2009. That information, based on data released by the Internal Revenue Service, was not available when researchers produced their findings last year.
The about-face has big implications for fund raisers and policy makers. Last year, as researchers proclaimed that individual giving had held its own, many fund raisers and nonprofit boards wondered why their own organizations had lost so much ground in the recession.
And in Washington and state capitols, policy makers have discussed cutting back charitable tax breaks and encouraging private philanthropy to make up for government cuts, a view that may have been reinforced when it seemed Americans were giving generously even in the worst of times.
Guesswork Unavoidable
So is the picture of giving during the recession and the recovery in “Giving USA” more accurate now?
Indiana University’s Center on Philanthropy, which came under criticism last year because its estimates were so different from what charities said they were seeing, has made changes in its approach designed to combat the problem. But it still faces some challenges, in large part because of lags and gaps in what information about giving is available.
One problem is that “Giving USA” figures are based on estimates derived from an econometric model, rather than actual donations.
While the model takes changes in the stock market, personal income, and income-tax rates into account, researchers are forced to guess how much individuals give. That’s because the Internal Revenue Service does not release data on the donations people report on their tax returns until two years after “Giving USA” produces its estimates for a given year.
Even if they could get the IRS figures earlier, the researchers still must come up with estimates for how much is donated by the two-thirds of Americans who don’t itemize their contributions.
To improve this year’s “Giving USA,” Patrick Rooney, executive director of the center, said that researchers have added a new measure that they think will improve their ability to predict the IRS figures on charitable giving, as well as other consumer data that reflect changes in household spending.
Making those changes to “Giving USA” yielded a bleak picture of philanthropy in the recent past—and the data suggest that the fund-raising declines in support that many organizations have faced won’t be easily erased, Mr. Rooney said.
Gloomy but Welcome News
Though the new report paints a gloomy picture, academics and seasoned fund raisers welcomed the news that “Giving USA” has changed its view of recession giving.
“Revising the numbers for both 2008 and 2009 brings the estimates of giving more in line with what people were telling us and what we were all seeing,” said Edith Falk, a Chicago fund-raising consultant who also sits on a committee of experts who advise “Giving USA” researchers on methodology. “We will look at these years with much greater accuracy, with a better sense of how giving is really impacted in times of economic stress.”
The new “Giving USA” findings might also give lawmakers pause before they consider changes in the charitable deduction, because the new data show that charitable contributions are much more sensitive to economic pressures than previously thought, said Paul Schervish, director of the Boston College Center on Wealth and Philanthropy. Mr. Schervish and his colleague, John Havens, an economist, last year devised their own estimates, using different methods than “Giving USA,” and they found a 10.7-percent drop in giving by individuals in 2008 and 2009.
“It is important to understand the true effects of the recession,” Mr. Schervish said. “Charitable giving remains vulnerable to negative financial news, federal debt-reduction policies, and the proposed policies to raise taxes and lower the deduction.”
