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Sunday, 26 June 2016 10:49

Charitable dollars ebb and flow as total giving reaches record high

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While a recent report shows that charitable giving is on the rise nationwide, the trend is far more complex on the local level in West Michigan.

In its annual report on philanthropy, Giving USA Foundation estimates that individuals, estates, foundations and corporations together donated $373.25 billion in 2015. This is the largest amount in American history and a 4-percent increase over the previous year’s $359.04 billion when adjusted for inflation.

According to Giving USA Foundation Chair Keith Curtis, this growth implies that “Americans are embracing philanthropy at a higher level than ever before.”

However, some experts aren’t sure that a larger sum necessarily indicates “embracing philanthropy.” While the total dollar amount is up, giving as a percentage of the nation’s GDP remained at 2.1 percent, as it was in 2014. The giving-to-GDP ratio has remained nearly constant over the last 40 years, even through the recession. Giving as a percentage of disposable income didn’t budge from the previous year’s 2 percent, either.

Still, it’s “something to celebrate” that philanthropy does improve with the economy as opposed to remaining stagnant, said Michael Moody, who serves as the Frey Foundation chair for family philanthropy at Grand Valley State University’s Dorothy A. Johnson Center for Philanthropy.

“The absolute, number-one thing that determines these Giving USA numbers is the economy,” Moody said. “The overall economy has been going through a recovery and now we’re especially seeing giving going up because people are feeling more stabilized in their household finances on average.”

Total giving experienced a sharp drop-off of $52.02 billion from 2007 to 2009 because of the recession, and it took years for philanthropy to recover even modestly. The reason: Although the economy had improved across the board, most people didn’t feel stable enough to give at the level they are now, Moody said.

LOOKING CLOSER

On a local level, tracking trends can be far more difficult. Some events are nearly impossible to predict, such as the passing of a wealthy person with a large bequest in place, the endowment of a foundation, or a large corporate donation.

The Johnson Center for Philanthropy tracks charitable giving data for Kent County using the Giving USA report as a model. From a data perspective, Moody finds the unpredictability interesting.

“It’s exciting because every time you do it, you find some things you didn’t expect,” he said. “The last couple times, foundation giving went up 30 percent and then down 14 percent. That’s much more volatile than nationally.”

As such, the picture painted by the national statistics may not be representative at all for many local nonprofits. For example, the Grand Rapids Community Foundation (GRCF) strays from the Giving USA results in a number of ways, according to Marilyn Zack, vice president of development.

This is in large part due to the organization’s support of estate plans, she said. While bequests make up only 8.5 percent of donations nationally, that portion is closer to 20 percent for GRCF. And although foundations nationwide received less money in 2015 than the year before, the community foundation is on track for 8-percent growth in its current fiscal year, which ends June 30.

For Heart of West Michigan United Way, which has a model that relies heavily on individual giving through local companies, its success is tied directly to that of its business partners, said Mike Kerkorian, vice president of resource development.

This has led to a “churn in fundraising” for the organization as high-income baby boomers retire and millennials move in, he said. While the next generation doesn’t necessarily want to give less, it will take time for them to come into their own financially and be able to make gifts at the same level. 

In the meantime, United Way is working now to establish relationships with the next generation through volunteerism, as millennials “want to be really hands-on with their nonprofits,” Kerkorian said. The organization hopes this will set the stage for future giving.

NONLINEAR SPENDING

Local giving data can also illustrate the composition of a community better than national data. For example, the Johnson Center’s most recently available data shows that foundation giving made up 23.1 percent of total giving for Kent County in 2013. Nationally, foundations made up 14.6 percent of total giving in the same year, according to the Giving USA report.

“We know there’s significant wealth in Kent County and there’s families of considerable means here,” Moody said. “They tend to use foundations for their giving, rather than give as individuals. So the proportion of people who choose to give through a foundation is larger in Kent County than many other areas of the country.” 

On a national level, foundations gave 6.3 percent more in 2015 than the year prior. At the same time, foundations were the only category among the nine listed in the Giving USA report to receive less money in 2015 than in the year before, with a 4-percent decrease. 

This disparity between dollars received and dollars spent in a given year is likely due to the nature of endowments. Money doesn’t “pass through” foundations as quickly as it does with other kinds of nonprofits, according to Moody.

“That’s the one that’s going to be the most volatile,” he said. “It’s usually that you donate the money to the foundation to create an endowment and then in subsequent years they give off of that endowment. So it’s not a year-to-year match.”

CHANGING TIMES

Despite the variation in giving across communities and organizations, national data can indicate long-term trends that speak to the country’s dynamic culture.

For instance, international giving experienced the largest spike by far of the nine giving categories, up 17.4 percent from 2014. While certain international challenges, such as the Syrian refugee crisis and Nepal earthquake, have had an impact, technology also has changed the way Americans react to those challenges. Social media outlets spread the news of these events to far more people and giving is now easier than ever before, sources said.

One trend noted in the Giving USA report is the continued, steady decline of religious giving. From 1981 to 1985, faith-based organizations received 58 percent of all giving. From 2011 to 2015, their share dipped to 33 percent. Moody attributes this to a “declining religiosity” across the board and to a shift in the concentration of wealth. 

Religious giving tends to come from the middle to lower class. As wealthy people prosper more every year, their money shifts to other causes. However, religion did see a small 2.6 percent bump in total giving last year, which may point to it reaching a point of equilibrium, sources said.

Looking ahead, the Giving USA report notes that the economy is slowing down. While nonprofits can likely expect giving to increase in 2016, it may be a more modest growth than the year prior. Moody said that while this growth in total dollars is encouraging, the real celebration would come if people were giving more proportionally to their income.

“What people will tell you is that giving as a percentage of GDP has hovered around 2 percent for a long time,” he said. “The real challenge will be to move that needle from 2 percent to 3 percent.” 

Read 4891 times Last modified on Friday, 24 June 2016 10:51

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