Growth in Giving Cools Down

Total tops $203-billion, but rate of increase is lowest in 5 years

Charitable giving slowed last year to its lowest rate of growth in five years, rising just 3.2 percent to an estimated $203.5-billion after adjusting for inflation, according to statistics released last week in Giving USA, an annual survey of the state of philanthropy.

The slowdown is causing many charities to delay new programs and cut overhead expenses because of concerns that giving will remain soft in coming months.

The slackening pace of giving is evident across the board. Gifts from individuals grew only 1.5 percent after inflation, the lowest gain in five years. Corporate gifts rose 8.4 percent, a rate of growth that was nearly a third less than that of 1999. Foundation giving increased 15.7 percent, short of the 17.8-percent gain posted in 1999.

Giving rose the most among environmental and health charities and a broad category of other organizations that includes United Ways and Jewish federations. Arts and human-service organizations had the lowest rates of gain.

In interviews, fund-raising officials said the slowdown has continued this year. They said two factors caused donors to hold back on making gifts of cash or stock: a steep decline in stock prices and a weakening of the national economy, which eroded consumer confidence.

Some observers see a positive side to the Giving USA figures, noting that total donations grew last year by $6.3-billion, after adjusting for inflation, and set a record for the sixth straight year. “It’s a good-news story,” says George C. Ruotolo Jr., chairman of the American Association of Fundraising Counsel Trust for Philanthropy, in Indianapolis, which publishes Giving USA.

But the percentage increase in donations fell to less than half the pace of growth in 1999, and the slowdown hit some nonprofit groups especially hard. Contributions to colleges and other educational institutions declined 0.7 percent in 2000 compared with 1999. Charities engaged in international activity saw a 0.8-percent drop in giving after a gain of 20.9 percent in 1999.

Cutting Costs

While it remains unclear whether the economy — and giving — will rebound in the second half of this year, many fund raisers are cutting costs to cope with the leaner times.

* At MAP International, a Christian international-relief and development organization in Brunswick, Ga., gifts from individuals made during the period from October 1, 2000, to April 30, 2001, fell 9 percent compared with the same period a year earlier.

* Disabled American Veterans, in Cold Spring, Ky., experienced a 40-percent plunge in the number of people who responded to direct-mail appeals in December, compared with the same month a year earlier, says Max Hart, the group’s director of fund raising. “When you get that kind of falloff, naturally there is a huge impact on dollars received,” he says, adding that donations from the December 2000 mailing totaled $1.5-million less than those of a year earlier.

Mr. Hart blames the lower response not only on the slower economy and declining stock market but also on an overly aggressive pitch. “We asked people to increase their contribution by 50 percent over last year, and we probably turned off donors,” he says.

* The Christian Appalachian Project, a social-service charity in Lancaster, Ky., got $300,000 less than expected from a direct-mail appeal in December, says Sue Sword, vice president of direct response and gifts in kind. In recent weeks the charity has begun to see a slight turnaround in its giving, but it still could end 2001 short of its $15.8-million direct-mail goal, she says. “Hopefully, we can weather this period,” Ms. Sword says.

To compensate, the Christian Appalachian Project has begun sending its newsletter to more prospective donors than in the past, putting appeals for monthly donations in thank-you letters to donors, and spending carefully.

Despite the difficult circumstances facing some charities, a tally of million-dollar-plus gifts may offer some reason for optimism.

In the first three months of this year, the number of gifts of that size made by individual donors increased by 32 percent to 300, up from 227 in the same period in 2000, according to the Center on Philanthropy at Indiana University, in Indianapolis. The number of gifts of $1-million or more by individuals in the first three months of 2001 was up 53 percent from the last three months of 2000, when 196 such gifts were recorded.

Patrick Rooney, director of research at the Center on Philanthropy, says the tally doesn’t necessarily mean that giving has revived.

“We need to see if the trend is repeated in the second and third quarters before we can say if giving is rebounding,” he says. If the pattern does not hold, the first-quarter numbers may simply show that donors made gifts in hopes of avoiding further declines in stock prices or to maximize tax benefits, he says.

While overall giving grew by more than 3 percent, after accounting for inflation, no individual category of charity had an increase in donations of more than 2.4 percent. The remainder of the overall increase can be attributed largely to gifts to foundations.

Here is a closer look at how charities of various kinds fared in 2000, according to Giving USA, and what nonprofit institutions are doing to adjust:

Arts. Giving to cultural and humanities groups edged up by 0.5 percent, after accounting for inflation, to $11.5-billion, the second year donations rose after two years of declines.

Fund raisers at the Alley Theatre, in Houston, expect donations to have risen $400,000, to $3.9-million, by the end of its fiscal year in June compared with the same period last year. But one corporate grant maker that regularly gave $25,000 will not donate this year because the donor wants to spread its support to other groups, says Kristen Loden, director of development. Other major corporate givers also are trimming their annual contributions, she says.

As a result, the theater is trying to broaden corporate support by pushing for gifts of $2,500 to $5,000, then encouraging those smaller donors to give more in future years. “We are seeing that there is a lot of potential that hasn’t been realized in lower levels,” says Ms. Loden.

The San Francisco Ballet is preparing for the possibility of fewer gifts from high-technology and financial companies next year by searching for new corporate donors, says Lisa Kitchen, who writes grant proposals for the ballet. In 2000, the ballet raised 40 percent of its $24-million budget through donations. “Trying to maintain that level is really challenging,” says Ms. Kitchen.

Education. For the first time since 1988, giving to colleges and universities, libraries, private schools, nursery schools, and tutoring programs fell compared with the year before. Giving to charities in this group was down 0.7 percent from 1999, when donations rose 6.1 percent from the year earlier. In 1998, giving rose 13.3 percent, a 30-year high.

Giving USA‘s estimate of educational giving is far different from the 14-percent increase in giving to colleges and universities reported earlier this year by the Council for Aid to Education. But the council’s figure was based on reporting from colleges and universities for the fiscal year ending June 30, 2000, so it did not reflect the December decline in stock prices.

David B. Anderson, associate vice chancellor for development at North Carolina State University, in Raleigh, says that two recent gifts of more than $1-million to his university came in at half what the donors had pledged. Both donors hope to make up the shortfall when stock prices rebound, he says.

Environment. Groups that work on environmental and wildlife issues saw giving expand 2.2 percent to $6.2-billion. Some charity officials attribute the increase to donors’ negative reaction to the environmental policies of President Bush, who has been criticized for backing off tough new proposed standards on arsenic in drinking water and for pushing to open the Arctic National Wildlife Refuge in Alaska to oil drilling, among other things.

“The new administration has undertaken some programs that have been antagonistic to the environment, so a lot of our people have been mobilized,” says Jack Murray, director of development for the Natural Resources Defense Council, in New York. “If that were not the case, we would certainly see a softening” in donations, Mr. Murray says. The charity gained 32,000 new members this past April, and expects to raise $50-million by June 30, the end of its fiscal year, up $14-million from last year.

Health. Contributions to hospitals and other health charities rose for the eleventh year in a row, to $18.8-billion, a 1.4-percent increase after taking inflation into account.

However, some groups have managed to post larger gains, thanks to fund-raising strategies that help insulate them against fluctuations in the stock market. The American Cancer Society’s national headquarters, in Atlanta, expects to raise more than $800-million this year, up $50-million from last year. Rob Mitchell, national vice president for income development for the charity, expects nearly $200-million to come from Relay For Life, a 24-hour walkathon held in 3,000 localities that brings in small per-mile pledges from the friends and families of walkers.

“Giving small gifts is not particularly affected by the economy,” he says. Because the charity has relied on small events to reach fund-raising goals, Mr. Mitchell thinks his group has mostly escaped any negative effects on fund raising from the economy’s recent downswing.

Human services. Charities that provide human services, including Disabled American Veterans and the Christian Appalachian Project, saw a gain of 0.3 percent to $18-billion, compared with a gain of 5.6 percent in 1999 and 25 percent in 1998.

The drop in stock prices late last year also cost Big Brothers Big Sisters of America, in Philadelphia, a $2-million donation that it had expected to be the first of a series of annual gifts by a new donor. The gift would have helped the charity expand its after-school mentoring program. The donor, a financial-services company that provides services to stock brokerages, could not keep its commitment after experiencing its first revenue decline in its 13-year history, says John Lubbe, vice president for fund development at the charity. Mr. Lubbe says he is asking foundations to step up their giving to Big Brothers Big Sisters because gifts from corporate donors have slowed.

International. Charities that provide services overseas received $2.7-billion last year, making it the smallest category in the survey. Giving fell 0.8 percent, after a 20.9-percent increase in 1999.

Groups such as MAP International that have seen declines in giving are taking steps to cut costs. Lee Owen, the charity’s director of resource development, says that MAP had planned to begin offering programs in nine places in Africa this year to teach people how to avoid spreading H.I.V., the virus that causes AIDS. But because of budget limitations, fewer such programs will be started this year, she says.

“If the income is not there, we can’t do the programs,” she says.

To meet its 2001 fund-raising goal of $4.1-million, MAP is focusing on solicitations of major gifts, increasing direct-mail appeals, and putting feature stories about the group’s work on its Web site. While the charity has not instituted a hiring freeze, Ms. Owen says department managers must show “good justification” before hiring. And existing staff members will be cross-trained so they can pitch in as needed.

Religion. Nearly 40 percent of the total given to charities went to churches, synagogues, and other religious institutions. Donations to those organizations totaled $74.3-billion last year, up 0.9 percent over 1999.

At In Touch Ministries, in Atlanta, donations dropped 4 percent, or $2-million, from a year ago. Last year the charity raised $48-million. Thomas Wood, a development official at In Touch Foundation, the fund-raising arm of the ministry, says that the charity hoped to increase fund raising by 10 percent over last year. But, he adds, “I don’t think we are going to hit that.”

United Ways and public-interest groups. United Ways, Jewish federations, consumer-protection groups, and other charities in this broad category experienced the largest gain in donations, a 2.4-percent increase over 1999, to $11.6-billion. That helped to reverse the effects of a 1.4-percent decline, to $11.3-billion, that charities in this category faced in 1999.

Still, the 2000 increase pales in comparison with the 27.5-percent gain that these charities enjoyed two years ago.

At the United Way of Monroe County, in Bloomington, Ind., the charity missed its $1.8-million fund-raising goal by $75,000, says Peg Stice, the executive director. She adds that the decline would have been deeper if the group had not received support from the Lilly Endowment.

However, fund raising at the UJA-Federation of New York, which supports a variety of programs at health, human-service, and educational charities in the United States and abroad, is up $5-million so far this year compared with the same period a year ago, says Paul Kane, a senior vice president who oversees fund raising. When the group’s annual campaign ends in late June, he says, he anticipates passing last year’s total of $133-million. But while he expects the charity to come out ahead, he doesn’t expect the gain to be as spectacular as in the last few years.

“We’ve had four years of incredible success,” says Mr. Kane. “No one likes the trend being down.”

Copies of Giving USA are available on computer disk for $135 each, plus $9 postage and handling. Print copies will be available this summer for $65 apiece, plus $6 postage and handling. To order a copy, contact the American Association of Fundraising Council Trust for Philanthropy, P.O. Box 1020, Sewickley, Pa. 15143-1020; (888) 544-8464. An order form is also online at: http://www.aafrc.org.

CHARITABLE GIVING, 2000