Donations pass $400 billion milestone in U.S.
On the surface, reports that charitable giving in America hit a record high of more than $400 billion in 2017 are encouraging.
But some leaders in Michigan’s philanthropic and nonprofit sectors said they have seen no evidence of the increase, which the Giving USA Foundation highlighted in its annual report on philanthropy.
Researched and written by the Indiana University Lilly Family School of Philanthropy, the report found that giving from all sources grew in 2017. Three of the four sources posted gains of more than 5 percent: corporations (8 percent), foundations (6 percent) and individuals (5 percent).
“That’s not necessarily the report that we’ve heard,” said Donna Murray-Brown, president and CEO of the Michigan Nonprofit Association. “I’d really like to dig a little bit deeper to see how Michigan fared.”
Murray-Brown said she doesn’t dispute the findings in the report and has always considered Lilly’s research to be very credible, but what she’s hearing and seeing from nonprofit leaders throughout the state differs considerably. In conversations with fund development officers and staff at various nonprofits, she has not heard about increases in what they’ve seen in giving levels. What they are sharing with her is that they rely heavily on individual donations, which they expect to decrease.
“I do know that a lot of organizations are expressing some anxiety that donations will not be at the same rate as before,” Murray-Brown said.
However, Keith Hopkins, a fundraising consultant and owner of Ada-based Hopkins Fundraising Consulting LLC, has been hearing a different story.
While he can’t speak to what is happening on the east side of the state, he said fundraising in West Michigan remains strong.
In the last five or six years in Kalamazoo alone, four or five campaigns have netted $4 million or $5 million each and have exceeded their goals, including for Ministry with Community and Family & Children Services, Hopkins said.
“I tend to work on major big campaigns,” he said. “So it could be that many small and mid-size nonprofits are struggling.”
Detroit-based fundraising consultant Michael Montgomery said the Giving USA figures always include giving to churches, which may be one of the reasons why he and Murray-Brown are not hearing what Hopkins is hearing.
“Donna and I work in the secular nonprofit community. The people we see and work with are not necessarily associating themselves with with religious giving,” said Montgomery, owner of Montgomery Consulting Inc. “Americans gave a little over $400 billion last year, and $127 billion of that went to religious organizations.”
As for the record high level of giving, Montgomery said he doesn’t think it’s really a big deal.
“It’s like a person passing 40,” he said. “Yes, they crossed a perceived barrier and we can have some fun with that. But when all is said and done, there really isn’t much difference between a person being 41 instead of 39 or, frankly, when American individual and institutional donors give $410 billion to charity instead of $390 billion.”
WATCHING FOR CHANGE
Hopkins said he thinks the Giving USA report is a very hopeful sign. He said Americans collectively give more money than the gross domestic products of most countries.
“This is a pretty big jump to hit that $400 billion benchmark,” he said. “That’s an impressive number when you realize that 70 or 80 percent comes from individual donations.”
Respondents to a Michigan Fundraising Climate Survey conducted by Montgomery Consulting indicated they were both seeing gifts and hearing from donors making larger than typical gifts in 2017 in anticipation of tax law changes.
“Assuming that Michigan donors are not somehow very different than those in the rest of the U.S., some part of the 2017 giving growth by individual donors reported in Giving USA was anticipatory giving,” Montgomery said.
Amir Pasic, dean of the Lilly School of Philanthropy, attributed the increase in giving in part to increases in the stock market, as evidenced by a nearly 20-percent growth in the S&P 500.
However, many nonprofits are becoming increasingly concerned about the potential impact of recent changes to federal tax policy. The tax overhaul signed into law by President Trump kept the deduction for donations to charitable organizations but the sharp increase in the standard deduction could lead to fewer people itemizing deductions on their tax returns. The tax incentive to give to charity could be diminished with more people utilizing the standard deduction and not itemizing.
Murray-Brown remains cautiously optimistic that people will continue to give, but she’s unsure giving levels will remain the same or increase, given the tax policy changes.
“This is something we will be watching and monitoring,” she said.
ENTERING THE CYCLE
As a result of the new tax policies, Montgomery said giving will cost more for many taxpayers. He said the old tax law subsidized charitable giving by itemizers by an average of 20 percent. But, going forward, he predicts that there will be fewer itemizers and the charitable gift deduction also will be worth less to those who still itemize. He also cites the last broad tax cuts, which happened during the Reagan administration, which did not — in and of themselves — increase charitable giving.
“Charitable giving grew in those years but neither expanded as a percentage of GDP, nor grew faster than the economy as a whole,” Montgomery said. “When all is said and done, when lower taxes leave more money in the pockets of Americans, they tend to keep it rather than giving it to charity. That is what I expect will happen in 2018.
“What I’m seeing and hearing is that first quarter 2018 giving has generally been down. This is perhaps not surprising given uncertainty surrounding the new tax law. Also, the stock market remains high but has become more volatile. We are about to move into the ninth year in what has historically been a roughly seven-year business cycle.”
Hopkins agrees that the country can’t ride the current economic wave forever and eventually will face a recession. While the economy eventually will pull back a bit, he remains encouraged because of a demographic change in the United States.
“The leading edge of the Baby Boomers are 71 or 72. Many of them have been through their peak earning years and many are starting to retire, and their accountants are saying that they’ve got to start giving some money away,” Hopkins said. “I don’t think anyone wants the government to have any more of their money than they have to give.”
News coverage in the nonprofit section of MiBiz is made possible by advertising support from the Grand Rapids Community Foundation. GRCF is a leader in funding, initiating and leading programs that benefit the greater Grand Rapids area in arts and social engagement, education, health, neighborhoods, economic prosperity and the environment. This advertisement has no effect on editorial consideration in MiBiz.