June 23, 2005 | Read Time: 17 minutes
Donations to charities rose by 2.3% in 2004
Donations to America’s charities appear to be on the rise after several challenging years. “Giving USA,” an annual
yearbook on philanthropy, reported last week that giving rose by 2.3 percent in 2004, to $248.5-billion — the first increase in three years. And many fund raisers interviewed in recent days say 2005 is proving to be an even stronger year for giving, albeit one that still could produce some difficult times, especially for small charities.
The signs that fund raising is recovering along with the U.S. economy have persuaded many nonprofit groups to become more ambitious. Paulette Maehara, president of the Association of Fundraising Professionals — which represents nearly 27,000 fund raisers — says that in recent months she has heard from more and more nonprofit institutions that are hiring new fund raisers, starting capital campaigns, or both.
“It is hard to talk to a university or health-care provider that is not in a campaign,” she says. “There are absolutely more campaigns being launched in 2004 and 2005 compared to 2002 and 2003.”
Nevertheless, Ms. Maehara and other charity officials say the outlook for 2005 is not entirely positive. Unease about the country’s financial health and high fuel prices are causes for concern, they say. What’s more, they say donors might become more wary because of proposals under consideration by the Senate Finance Committee to place new restrictions on some types of noncash gifts and change the rules governing the operations of charities and foundations.
Economic Indicators
“Giving USA” said the economy was the most important reason for the rise in gifts, including growth in the gross domestic product, as well as gains in the stock market and corporate profits.
Still, the “Giving USA” report said, philanthropic increases were slowed in 2004 by such factors as a contentious presidential campaign that may have caused some people to give to political causes instead of charities, an unemployment rate of 5 percent, and the 27-percent rise in gas prices from January to June.
While the overall amount raised by charities across the country showed a significant increase above the 2.7 percent rise in inflation, the “Giving USA” report found that the gains have not been evenly realized among the nation’s nonprofit groups. Many small and medium-size charities are still struggling to raise as much as they did before the economy soured in 2001.
Just under half of the organizations with budgets of less than $1-million in donations raised more money in 2004 than they did in 2003, according to “Giving USA.” However, three out of five of the biggest groups — those with contributions totaling $20-million or more — raised more last year than they did in 2003. “Giving USA” based that conclusion on data from 900 charities.
Social-services groups have faced an especially difficult time. Donations to them fell by 1.1 percent last year, the third consecutive year of declines, according to “Giving USA.” The last time these groups saw such a sustained downturn was during the recession in the early 1970s.
International groups, which faced a 1.8-percent decline, were the only other type of organization where giving dropped. Such organizations will probably see a big increase when the donation totals for 2005 are tallied. While up to $2.5-billion was donated to help victims of the tsunamis in South Asia, “Giving USA” estimates, most of the money was given this year so the catastrophe did not have a big impact on 2004 totals.
One reason for the uneven results for groups with different sizes and missions: Small charities tend to rely on money from a broad mix of individuals, while bigger groups receive the bulk of their money from foundations, corporations, and affluent people. Stock-market gains helped increase foundation and corporate giving, as well as gifts from the most-wealthy donors. But a high jobless rate and stagnating wages for middle- and lower-income families made it difficult for many people to increase their giving.
“The recovery in fund raising has been mixed and spotty,” says Harry Lynch, a New York fund-raising consultant who works primarily with charities that have budgets of $4-million to $25-million. “Our clients, particularly social-service groups, find it to be rough going.”
50th Anniversary
This year’s “Giving USA,” which is based on research conducted by the Center on Philanthropy at Indiana University, in Indianapolis, is the 50th annual edition of the report. For 1954, the first year examined, “Giving USA” reported gifts totaling $6.3-billion, which equals $44.2-billion in today’s dollars.
While donations rose last year, they did not return to 2000 levels, when contributions were tallied at $252-billion — the highest total ever reported by “Giving USA.”
Charitable giving as a proportion of the gross domestic product also peaked in 2000, at 2.3 percent, compared with 2.1 percent last year. And giving by individuals, which typically accounts for about three-quarters of total contributions, in 2000 accounted for the highest share of after-tax personal income since 1963: 2.4 percent. Last year, that income share was 2.2 percent.
Sylvia Ronsvalle, vice president of Empty Tomb, a Champaign, Ill., organization that studies religious giving, says fund raisers should pay close attention to indicators such as the decline in giving as a portion of gross domestic product.
“The state of philanthropy is not as rosy as ‘Giving USA’ suggests,” she says. “The headlines say that giving went up — because that is what the total dollars did — but if you look at the data in a more meaningful way, it actually shows a cooling off of interest in philanthropy.”
Among the other key findings in this year’s report:
- Gifts by living individuals grew by 1.4 percent in 2004, while bequests rose by 6.4 percent.
- Businesses and foundations both increased their giving by 4.5 percent.
- Wealthy Americans put a lot of their money into philanthropic foundations. Gifts to foundations grew by 8 percent, a bigger percentage gain than to any other type of nonprofit organization. Environmental organizations won the next largest percentage increase, with 4.2 percent.
Estimates Adjusted
The “Giving USA” estimates are based on data gathered by government agencies and an array of researchers and include both cash and noncash gifts. “Giving USA” annually updates its estimates from the prior year’s report after more complete federal tax data and other information become available.
This year’s report, for example, says that last year’s report overestimated total charitable giving in 2003 by $4-billion, a change that meant total giving was 1 percent less than the previous year’s total in inflation-adjusted dollars — and that it did not grow by 0.6 percent, as “Giving USA” reported last year. This year’s report says that, adjusting for inflation, Americans made donations totaling $245.4-billion dollars in 2002 and $243-billion in 2003.
Here is how the different types of recipient groups fared last year according to “Giving USA”:
Environment. Groups that work on environmental and animal-related issues collected $7.6-billion last year, a 4.2-percent rise.
The increase is tied, in part, to last year’s presidential election, some environmental officials say, as they and their donors sought a change in administration to one considered more friendly to their cause. “Many of us would have chosen a Bush defeat, but the reality is that groups on the defensive often do their best getting attention and supporters who want to fight back against government policies they disagree with,” says Jack Murray, director of development for the National Resources Defense Council, in New York.
The tsunamis also struck a chord with many environmental donors, says Matthew McClain, marketing and communications director at the Surfrider Foundation, a San Clemente, Calif., group that works to preserve oceans and beaches.
He believes the tragedy may have prompted Surfrider’s supporters — many of whom are surfers and beach activists — to think even more about the condition of oceans and beaches everywhere.
The organization had its best-ever first quarter this year, he says, raising $770,000, or $162,000 more than in the first quarter of 2004. He says the charity will probably raise a total of 19 percent more than it did in 2004, aided in part by a new print and television campaign that has nearly doubled traffic to Surfrider’s Web site.
Public-society benefit. Consumer-watchdog groups, United Ways, Jewish federations, and other groups that benefit public society raised 4.1 percent more in 2004, or a total of about $13-billion. Such organizations achieved rapid gains in donations during much of the 1990s, but subsequent increases have been modest.
United Way of America has not totaled how much local United Ways have raised, but it estimates they outpaced inflation, with total growth of no more than 5 percent, says Richard S. Belous, vice president of research.
Arts and culture. Donations to arts groups grew 3.9 percent in 2004, a percentage point lower than the increase in 2003, according to “Giving USA.”
Many of these organizations reported increases in foundation and corporate grants.
At the Miami City Ballet, fund raisers decided to send out many more foundation proposals in 2004 than in previous years — an effort that paid off with a 19-percent rise in such gifts, to $626,000 for the fiscal year that ended April 30.
“We got a lot more darts thrown out there and we had a good, solid increase,” says Mark B. Rosenblum, the ballet’s general manager. Last fiscal year, the group received a first-time gift of $25,000 from the Jerome Robbins Foundation, in New York, while another New York foundation, the Louis B. Mayer Foundation, doubled its gift, to $100,000.
The group raised $4.8-million in all last year — or about $400,000 more than it had expected. Officials say the previous year’s total, $5.5-million, was unusually high because it included a $1-million gift, as well as $800,000 from an overnight cruise, the largest fund-raising event in the ballet’s history.
Education. Educational institutions received an estimated $33.8-billion last year, a 2.7-percent rise. The gain followed three straight years of declines.
The ups and downs in giving to education over the past several decades appear to closely mirror the rise and fall of the stock market. In 2000, for example, donations to education jumped nearly 12 percent.
Some education fund raisers say that for the majority of their donors, who are usually alumni, it is not a matter of if they will give, but when.
James Kunetka, assistant vice president for development at the University of Texas at Austin, says the institution expects giving to increase in 2005 because the state’s economy is doing better. The university last year completed a $1.6-billion capital campaign.
“Moving out of the campaign, we expected the inevitable decline, but the economy in Texas is doing a little better than the rest of the country, and that makes a big difference for us,” Mr. Kunetka says. “We are getting the gifts.”
Health. Giving to health organizations, which accounted for 8.8 percent of the total estimated giving last year, rose for the second year in a row, to $22-billion. When adjusted for inflation, donations to health causes increased by 2.3 percent last year.
William C. McGinly, president of the Association for Healthcare Philanthropy, which represents 2,100 hospitals, says medical-care institutions face several challenges as they raise money, including complying with privacy regulations, which took effect in 2003, making it harder for some hospitals to solicit former patients. Also, lawmakers and others have raised questions in recent years about whether nonprofit hospitals should lose their tax-exempt status because they don’t provide enough charity care to indigent patients. “All this makes donors uneasy,” says Mr. McGinly.
Many health organizations, however, have seen modest gains. The Ochsner Clinic Foundation, in New Orleans, reported gains of nearly 5 percent last year, to $5.5-million. The increase, says Charles Heim, the group’s vice president for philanthropy, was especially impressive given the weak local economy, which has been hurt by the departure of several oil and other companies.
Because the Ochsner Clinic draws patients from outside the city, Mr. Heim and his colleagues decided in 2003 to create a traveling fund-raising event, or “road show.” Accompanied by clinic doctors, fund-raising officials travel to cities with large numbers of former patients and donors to talk to groups of 50 to 75 people at free luncheon presentations about advances in treatments for such illnesses as heart disease.
At CancerCare, a New York group that provides counseling, education, and other services to people who have cancer and their families, a net increase of 10 percent in contributions in fiscal 2005, says Suzanne Hilser-Wiles, the national director of development. That will be $16-million for the charity’s current fiscal year, which ends this month.
Special fund-raising events brought in more money than expected, and the charity increased the amount it spent on direct-mail appeals and other efforts to reach individual donors, including hiring a new major-gifts officer.
Religion. Last year gifts to churches and other religious organizations increased by 1.7 percent, to $88.3-billion. That was 35.5 percent of the total estimated giving for 2004, the biggest share of donations to a single cause.
Over the 50 years of the survey, “Giving USA” has found that donations to religious groups have generally increased with the growth in people’s after-tax disposable income.
However, since the late 1980s, giving to religious organization has not kept pace with the rise in disposable income. Since 2001, for example, giving to religious charities grew by 3.6 percent, while individuals’ disposable income rose by 8 percent.
Beverly A. Browning, a fund-raising consultant in Buckeye, Ariz., who has spent 20 years advising religious organizations, says such groups are struggling to get money from private foundations and corporations.
“The decisions are taking longer, and the grants are smaller,” she says. “You might wait a year before you find out if you get a grant or not.”
By contrast, she has found that getting a state- or federal-government grant is often a quicker process than it previously was as governments have made a push to get religious groups to provide more social services. “It used to be just the opposite,” she adds.
The International Fellowship of Christians and Jews had strong fund-raising results, raising $44.1-million last year, 11 percent more than in 2003. More than $12-million came from a mailing to thank donors that the charity added in 2002. The short letter contains a receipt acknowledging the donor’s gift, which the recipient is encouraged to save for tax purposes. At the bottom of the receipt is a tear-off portion with a message that reads, “Please return with your next gift to change more lives.” Forty percent of donors who receive such receipts make a repeat gift, says Pamela Barden, vice president of development, with an average gift of $53.18.
International affairs. Charities that provide services overseas received an estimated $5.3-billion last year, a drop of nearly 2 percent from 2003.
Last year’s decline follows a spike in disaster-related giving that started in 2001. In that year, gifts to international-affairs groups grew by 10 percent, due in part to international crises, including earthquakes in El Salvador and India, as well as the terrorist attacks here in the United States. News about relief efforts in Afghanistan and elsewhere may have helped continue the growth the next two years, when contributions grew by 9.7 percent in 2002 and 12.2 percent in 2003.
Many groups say they are making renewed efforts to attract visibility to their causes. International Aid, in Spring Lake, Mich., which refurbishes medical equipment and ships it to clinics in poor countries, ran radio ads, sponsored a pig roast, and entertained 1,200 people a year ago at an open house that included a tour of its warehouse. “We sit with a 100,000-square-foot facility on a major highway and too many people were driving by without knowing exactly what we do,” says Dean Agee, a vice president.
Last year, the charity raised $4.8-million to help victims of the tsunamis and increased its other cash gifts by 40 percent to $3.3-million. It says it is keeping up that pace this year, in part by reminding donors of its work in areas not affected by the disaster.
Social services. Gifts to social-services groups failed to keep pace with inflation for the third year in a row, dropping by 1.1 percent from 2003 to 2004.
Peter Wise, director of the Trenton Area Soup Kitchen, says finding donations has become more difficult even as the need for services grows. Last year, for example, his group served 160,000 meals, up from 97,000 in 1999.
This year, the organization is already 5,000 meals ahead of last year’s pace. Soaring real-estate values in central New Jersey, which indicate the region’s growing wealth, also mean that low-income families face an increasingly hard time covering living expenses.
And Mr. Wise’s organization expects donations for the fiscal year that ends this month to be down 4 percent from the previous year.
Due to an increasingly competitive environment for donors and slackening government support, he is also already predicting a tough time raising enough money to match the group’s $1.5-million budget for the 2006 fiscal year, which started this month. “We are going to continue to scramble,” Mr. Wise says. “I don’t see a turnaround in a positive sense.”
To increase publicity and donations, the soup kitchen, which also provides adult-literacy and other classes and does some advocacy work, plans to publish a cookbook with recipes from local celebrities. It also is about to send letters of introduction to people who recently moved to the area — names it gathered from real-estate transaction records.
Some social-service groups have fared better lately. At the Union Rescue Mission, in Los Angeles, contributions have increased modestly in the last few years and are projected to rise by nearly 6 percent this year.
Walker L. Railey, the mission’s vice president of development and communications, says the charity has made a serious push to personalize its contact with donors, most of whom had previously received little more from the group than a mass-mailed solicitation.
“We’re trying to do everything from calling donors with a thank you to simply putting an actual stamp on response cards, instead of running them through a postage meter,” he says.
Mr. Railey says he is most proud of an effort started last year to enlist people who have used the mission’s services to call donors to thank them for their gifts, and to ask if they have any questions or if they would like a prayer performed in their name. Donors are then sent a letter with a photograph of the charity clients who made the calls. Even though the letter does not include an explicit request for money, many donors have made a gift.
Some 4,500 donors were contacted by the charity last year through those phone calls and other efforts to reach out directly to supporters, and Union Mission raised 16 percent more than it did in 2003.
“We’re discovering that people have more money than the level they are giving at,” Mr. Railey says, “and when they feel a personal connection with the mission and the people, their giving shows it.”
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The complete “Giving USA 2005″ report will be available in late June and can be ordered by calling (847) 375-4709 or from http://www.givingusa.org. The cost is $65.
Holly Hall, Nicole Lewis, and Elizabeth Schwinn contributed to this article.
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GIVING AS A PERCENTAGE OF THE U.S. GROSS DOMESTIC PRODUCT
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GIVING TO CHARITIES, BY SOURCE OF DONATIONS
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HOW DONATIONS TO CHARITIES OF DIFFERENT SIZES FARED IN 2004
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