Raising the Roof

Private donations to top charities rose 16% in ’98, survey finds

Fueled by the strong economy, America’s top charities raised 16 per cent more last year than they did in 1997, according to The Chronicle’s Philanthropy 400 survey.

The jump is the biggest since 1991, when The Chronicle began ranking the charities that raise the most from private sources.

The increase in giving beat the nearly 13-per-cent gain in 1997 and far exceeded the 1.6-per-cent rate of inflation.

The Salvation Army claimed the No. 1 spot for the seventh time in a row, raising $1.2-billion — an increase of 5 per cent over 1997. Both the YMCA (No. 2) and the Fidelity Investments Charitable Gift Fund (No. 3) had increases exceeding 25 per cent, raising $629.3-million and $571.9-million, respectively.

The American Cancer Society (No. 4) raised $556.2-million, an increase of 14 per cent, while the American Red Cross claimed the No. 5 spot, with an 11-per-cent increase, to $543.3-million.

Rounding out the top 10 were Harvard University (No. 6, with $462.8-million), Catholic Charities USA (No. 7, $446.3-million), Boys & Girls Clubs of America (No. 8, $430.7-million), Emory University (No. 9, $423-million), and America’s Second Harvest (No. 10, $392.4-million, mostly in food donations).

To be included on the 400, organizations had to raise at least $22-million from private sources — foundations, corporations, or individuals. The $33-billion raised by the Philanthropy 400 accounted for nearly one in five dollars contributed nationwide last year.

The survey demonstrates that big organizations are benefiting from the gain in giving to a larger extent than smaller ones are. Over all, charities saw a 9-per-cent gain in donations last year, according to Giving USA, an annual compendium of charitable giving.

Many charity leaders have been startled by the rapid rise to the No. 3 spot by the Fidelity fund, which was established by its parent company, Fidelity Investments, in 1992. Donations to the fund have increased more than fivefold in the last five years.

While the fund previously had strong opposition from many in the charity world, some now support its role in helping to spur overall giving. Others, such as the heads of community foundations, say their institutions could lose out if more and more donors flock to Fidelity to set up donor-advised funds and make big gifts.

To entice more donors, Fidelity introduced new on-line services in September. Now donors nationwide can set up and manage their own charitable gift funds on line, check account balances, get data on charities, review grants their funds have made, and submit recommendations for future grants.

Kenneth L. Gladish, executive director of the Central Indiana Community Foundation (No. 86), says that community funds, which operate regionally, need to work together to market their strengths and compete with Fidelity. “The idea is to do something on a national scale,” he says. “We need to submerge our own identities and idiosyncrasies at least enough to make a consistent, reliable case for our product nationally.”

Fidelity is one of the fastest-growing charities on the list, but the strong economy and surging stock market have made the turn of the century a jubilant time for fund raisers at many of the nation’s largest organizations.

“With the creation of capital for so many Americans, the last three or four years have been the best time for non-profit fund raising in over 25 years — for as long as I’ve been in the field,” says Lauren Libby, chief operating officer at The Navigators (No. 159), a religious missionary organization that saw its domestic contributions rise by 8 per cent.

Mr. Libby says that strong growth was enough to make up for the problems the charity faced raising money overseas. Because of economic woes in Asia, the total amount raised by the organization fell by 1 per cent.

Although the American stock market has not suffered the turbulence of the Asian markets, the occasional drops in the Dow Jones industrial average, a key indicator of market strength, causes jitters among some fund raisers.

But with the overall growth of the market over the past few years, “it doesn’t seem to matter if the market goes up or down,” says Dennis Prikkel, an associate director at the Evangelical Lutheran Church in America Foundation (No. 312), which last year raised $30.2-million, an increase of 16 per cent. “We’ve had some significant corrections in the last 18 months, but the gifts keep coming in,” Mr. Prikkel says. Last year the charity received nearly 800 gifts of stock, up from 75 a decade ago.

The economy is the big reason so many charities have seen giving surge, but some organizations say they are also beginning to see the signs of what is likely to be the largest intergenerational wealth transfer in American history. Scholars from Boston College estimated last month that the transfer could produce up to $25-trillion for charities over the next 50 years.

The Christian and Missionary Alliance (No. 217) had received so much interest in estate planning from donors that it created a separate entity to specialize in advising donors on bequests and other deferred gifts.

Last year the alliance handled 414 transactions involving deferred gifts, up from 250 in 1997. The charity is now bringing in some $25-million worth of deferred gifts each year, and officials expect that figure to double in the next three years.

Many of the charities on the Philanthropy 400 say they are setting records for the size of gifts they receive from both individuals and foundations.

“What is amazing is the enormous magnitude of some of the gifts that have been made,” says Inge Reichenbach, vice-president for alumni affairs and development at Cornell University (No. 21), which since 1997 has received its largest donations ever — two gifts of $100-million apiece.

Northwestern University (No. 33), received $56-million from a philanthropist who asked to remain anonymous — one reason its private donations soared by 58 per cent.

Many of the big gifts are starting to come from high-technology moguls, who long had a reputation as being relatively parsimonious. The Seattle Symphony (No. 357) raised $26.6-million — 131 per cent more than it did the previous year — much of it from people who donated their shares in Microsoft, which is located in nearby Redmond, Wash.

Fund raisers say they had projected that the symphony would receive 100 gifts last year of at least $25,000. Instead, it got more than 350 gifts of that size.

“That was just something that blew us away,” says Karen Rotko-Wynn, director of development. “It was astonishing.”

Another Seattle non-profit organization, the United Way of King County (No. 251), received 19 donations of at least $1-million from families.

“Three years ago, we had one family pledging $200,000 a year for five years,” says Rick Rafael, manager for media relations. Over all, contributions to the organization rose by 9 per cent last year, to $37.8-million.

But it was not just high-technology wealth that helped many groups win generous gifts.

Disasters like Hurricane Mitch caused donors to Catholic Relief Services (No. 80) to race to their checkbooks. The relief charity received $21.2-million in cash specifically for victims of the hurricane.

“The phones started ringing on the day that the hurricane news hit the media, and they didn’t stop for weeks on end,” says Albert Brill, director of development at the Catholic group.

It is not just gifts from individuals that are behind the bounty of private donations received by the nation’s biggest charities. As the assets of the nation’s foundations have expanded with the stock market, many funds are making bigger and bigger grants. One reason: They must comply with a federal law that requires them to distribute at least 5 per cent of their assets annually.

Washington University (No. 34) raised $188-million last year, more than doubling the amount in the previous year. A big part of the increase was a $100-million grant from the Danforth Foundation, in St. Louis.

Officials at The Bible League (No. 389), which saw a 29-per-cent jump in donations last year, to $23-million, say they are also receiving bigger and bigger grants.

“We are seeing both larger grants from existing foundation supporters and grants from new foundations,” says Ed McCarthy, vice-president for development. He says that the league’s grants from the Maclellan Foundation, in Chattanooga, Tenn., have increased at least tenfold during the last four years. Support from foundations over all has quadrupled.

The Lilly Endowment, which saw its assets rise by more than 20 per cent last year, to $15.8-billion, made a $42-million grant to the United Negro College Fund (No. 70) for a three-year program that will help historically black colleges and universities. The college fund took in $122.5-million last year, a 58-per-cent increase.

Lilly also made a $45-million grant last year, to build an endowment at the United Way of Central Indiana (No. 131) — a big reason for that charity’s 142-per-cent increase in contributions last year. Officials predict that within the next three to seven years, the endowment will generate interest earnings big enough to cover all the operating costs of the United Way.

Endowment gifts have become increasingly popular, not just with foundations but with individual donors. Many charities on the Philanthropy 400 said more and more donors were interested in earmarking their gifts for endowments, since that will insure that the organization will benefit from the contribution for many years to come.

The University of Texas Southwestern Medical Center at Dallas (No. 102) said giving rose by 43 per cent last year, in large part because of the popularity of a $25-million drive to endow scholarships.

“There’s been a tremendous increase in donor interest in making gifts in perpetuity,” says Sidney Mallory, vice-president for development. “For some period of time, the term ‘endowment’ has not been understood in terms of its importance. Now there seems to be a heightened interest in these gifts that have long-lasting impact.”

The Boy Scouts of America (No. 17) is receiving so many endowment gifts now that it has placed fund raisers who specialize in such gifts in each of its four regional offices. In 1993, the year the fund raisers were hired, the Boy Scouts had $440-million in endowed funds. Now the organization has nearly $900-million.

The interest in endowments is being accompanied by a growing desire among donors to set up planned gifts — donations that provide extra financial and tax benefits to donors but that often don’t bring a major benefit to the charity until after the contributor has died.

The Evangelical Lutheran Church attributes much of its 16-per-cent gain to $4-million worth of gift annuities that donors created after receiving a direct-mail appeal promoting such gifts. With gift annuities, donors give cash or other assets to a charity in return for fixed payments; when the donor dies, the charity receives the remaining assets.

The annuity mailing was sent to 19,000 people who had been identified as potential donors by 20 fund raisers working in different parts of the country. If the recipients of the appeal said they wanted to receive more information on gift annuities, they were contacted by the fund raisers.

“It struck the right chord at the right time,” says Mr. Prikkel, the group’s associate director. He says that in the past such a mailing had never brought in more than $2-million in gifts or pledges.

Though many of the charities on the Philanthropy 400 are excited by the records they are shattering with their fund-raising results, more than a few are worried about the future. While overall giving to charity may rise in the decades to come, some established charities are worried that they will not be the first choice of baby boomers, who are becoming an important force in philanthropy.

Seth Weintraub, chief financial officer at the Jewish Federation Council of Greater Los Angeles (No. 236), says he has seen firsthand that the children of loyal donors often have different philanthropic interests than do their parents.

He describes one man in his late 20s who will be responsible for a $500-million family foundation set up by his father, an entertainment mogul who for years has made big annual gifts to the federation.

“Given the age of that donor, I don’t know how many more years we can count on his gift,” Mr. Weintraub says. “We’ve had contact with the son. He is interested in sports rather than social services.”

Mr. Weintraub says the future of Jewish organizations like his and many other types of charities will depend on their taking the time to reach out to younger people and overcome their skepticism that giving to the causes of their parents will still matter in the new millennium. The idea of keeping the community strong, he says, has little appeal with many younger people who seem more interested in controlling where their money goes.

“We need to play an assertive role,” he declares, “not so much in fund raising but in developing relationships to educate young people. We all have to work harder.”

This article was written by Debra E. Blum, Marina Dundjerski, Holly Hall, Harvy Lipman, and Domenica Marchetti.