Charities Face a Steep Climb to Make Up Losses From the Recession, Says ‘Giving USA’

Charities may spend the next decade trying to make up the ground they lost when donations plunged during the Great Recession. And bearing the brunt of the tough times may well be all the charities not favored by America’s very wealthiest citizens.

The long slog charities face became clearer last week when “Giving USA,” the yearbook of American philanthropy, announced that for the second year in a row, charitable giving barely grew.

Donations from private sources rose just 0.9 percent after inflation in 2011, the report found, and charities continued to feel a hangover from the recession.

“If we continue to grow at this rate, it will take more than a decade to get back to where we were in total giving in 2007,” said Patrick Rooney, executive director of the Indiana University Center on Philanthropy, which compiles “Giving USA.”

Historic Losses

The slow fundraising growth in 2011 comes nowhere close to erasing the historic loss of charitable donations in the recession—the deepest ever recorded in the report’s five decades.

Total donations to charities dropped by 13.4 percent in 2008 and 2009, “Giving USA” said as it released new estimates for contributions in those years.

The decline in 2008 and 2009 was largely caused by a 17.5-percent drop in donations by living Americans, who provide more than 70 percent of all contributions. After giving away as much as 2.4 of their disposable income since the late 1990s, Americans reduced their charitable giving to 1.9 percent of disposable income in each of the last three years.

Interviews conducted in the past two weeks with more than 40 charity officials and other fundraising experts suggest that 2012 will not be any better than 2011, largely because of the global economic crisis and also because of uncertainty about how the coming elections will affect tax rates and other issues.

“People are giving as much as they can, but they cannot give like they used to, and 2012 is going to be another tight year,” said Patricia Falvey, vice president for development at the Catholic Charities affiliate in Las Vegas.

Adding to her organization’s woes, she notes that the sluggish pace of donations comes at a time when “our federal, state, and county funding is down.”

Every source of donations except bequests declined or didn’t grow beyond inflation. The rise in bequests, of nearly 9 percent, or almost $25-billion, may be a sign of things to come, says Robert Sharpe, a Memphis fundraising consultant.

Mr. Sharpe, who has studied giving during the Great Depression, said that bequests accounted for a greater share of charitable giving in the 1930s, and that pattern is repeating itself now.

Many older donors, concerned about the uncertain economy or worried about outliving their assets, are deciding to put charitable gifts in their wills, he notes, rather than making large outright gifts of cash or other assets.

‘1 Percenters’

Perhaps the brightest spot in the “Giving USA” report was the strong growth in giving to the top three donor-advised funds, which each received donations of 77 percent, on average.

Such funds are popular with affluent people because they make it easy to give a large sum, receive an immediate tax break, and distribute the money to nonprofits later.

Charities that depend heavily on the wealthy are also benefiting as rich people recover some of the assets they lost in the recession.

That’s one reason colleges and universities, among the most sophisticated of fundraising organizations, are increasingly announcing multimillion- and multibillion-dollar capital campaigns.

But other charities are facing a tougher time, said Bruce Flessner, a Minneapolis fundraising consultant.

“If you are dependent on the 1 percenters, it will be a pretty good time,” Mr. Flessner said. “If you rely on middle-class donors, it will be tough.”

Few Gains

Only a few charitable causes were able to navigate through the tough economy to achieve gains last year.

Charities that conduct development and relief work overseas were the only type of nonprofit to outpace inflation by a significant percentage, at 4.4 percent, while donations to environmental causes increased by 1.4 percent after inflation.

Every other kind of group was even with 2010’s returns or suffered a decline.

Religious organizations experienced the biggest drop, with donations falling nearly 5 percent, in part because of a decline in the number of Americans who belong to churches, synagogues, or mosques, “Giving USA” said.

Other studies, however, have found that giving to religious organizations did not fall by that much. A survey released last week by the Evangelical Council for Financial Accountability found that gifts to 1,600 churches and other religious groups grew by less than 1 percent after inflation.

Other key findings from “Giving USA”:

• Donations to foundations dropped by nearly 9 percent, to $25.8-billion.
• Gifts by living individuals were found to be stagnant, totaling $217.8-billion.
• Corporate contributions fell by more than 3 percent, to $14.6-billion, while foundations gave 1.3 percent less, at $41.7-billion.

A free executive summary of “Giving USA 2012” is available online at givingusareports.org. The full report costs $45.

Debra E. Blum contributed to this article.