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BWF Client Advisory: Giving USA 2019—The Numbers and the Story Behind Them

For many fundraisers, the release of the Giving USA report is met with the same level of excitement as the Super Bowl.  Months of buildup, anticipation, and drama culminate in one defining moment that brings to life the best of what our field has to offer.  Of course, the advertising is less enthralling and none of us are being paid like wide receivers.

Perhaps that is a bit of hyperbole, but the fact remains: the Giving USA report stands as one of the most anticipated events in our industry.  The Giving USA 2019 report was perhaps more anticipated than most because it is the first year, in what will be a series of years, where the impacts (both positive and negative) of the Tax Cuts and Jobs Act 2017 will fully come to light.  Below we reveal what the report says about the health and trajectory of philanthropy in this county.  Beyond that, we delve deep into the report to point to important, strategy-altering trends which may be missed by a simple scan of the numerical results.

What the Numbers Say

  • Mixed signals on total giving: At $427.71 billion, 2018 was a record year in American philanthropy when comparing current dollars. When adjusted for inflation, however, 2018 witnessed a 7% decline in giving. Taken together, it would be fair to say that giving was flat in 2018. But flat isn’t great.
  • Giving to the top five subsectors was down: When controlled for inflation, donations to religion (-3.9%), education (-3.7%), human services (-2.7%), foundation (-9.1%) and health (-2.3%) were all down.
  • Giving to international affairs (+7.0%) and environmental/animal (+1.2%) organizations witnessed increases.
  • Individuals still drive philanthropy: 68% of all philanthropy in the US was provided by individuals. That said, giving by individuals declined 3.4% in 2018, marking the first time that individuals gave less than 70% of total philanthropy since 1954.
  • Foundation and corporate giving increased: Giving by foundations rose 7% in 2018. Giving by corporations followed suit at a slightly less robust 2.9%.

What the Numbers Mean

When is a flat year actually a bad year? 

On the surface, the mixed signals about overall giving illustrated in this report may come across like a big nothing-burger. After so much hype about precipitous declines and serious headwinds, on paper, 2018 doesn’t look so bad. But when you put 2018 in a more long-term, historical context you see that 2018 was far off the pace. Over the last 40 years, year-over year philanthropy has grown steadily at 2.7%, when adjusted for inflation.  2018’s decline of 1.7% is a negative swing of $14.3 billion.

It is also interesting to see how philanthropy diverged in 2018 from some key indicators. The Gross Domestic Product (GDP) in the US grew a modest 2.7% in 2018. While normally, a growing GDP is a lock-step indicator of philanthropic growth, that was not the case this year as the US witnessed a 1.7% decline in overall philanthropy. Conversely, when we look at the Standard & Poor’s Index (S&P), we see that the index took a decidedly negative turn for 2018, declining 8.5% for the year. Philanthropy in the US usually follows the S&P but does so with a noticeable lag in timing. As such, it would be fair to point to the S&P’s 2018 performance as a key watch out for philanthropic growth in 2019 and beyond.

Individuals still drive philanthropy, but…

Make no mistake about it, individuals still drive philanthropy in this country. Yes, for the first time since 1954 giving by individuals represented less than 70% of the whole pie, but when you include bequests, philanthropic impact of individuals was closer to 78% in 2018. That said, it is impossible to ignore some headwinds and shifts affecting individual philanthropy. The simple fact is that few Americans are making gifts to charities. While each of us may feel that through decreased annual participation rates, the Lilly School at University of Indiana firmly proved that in their 2015 Philanthropy Panel Study that showed only 56% of American households make gifts to charity, down from 68% in 2003. Additionally, philanthropy for many American households is no longer incentivized as they are no longer required to itemize their taxes. A report by the American Enterprise Institute (AEI) suggests that as many as 27.3 million American households who have historically itemized, will now simply take the standard deduction.

Doing good is good business.

Corporate giving in the US increased modestly in 2018. Myriad factors influence how generous companies are in any given year, but last year proved to have the right formula for growth. Strong GDP growth, coupled with steady pre-tax profits, created an environment conducive to increased giving from companies. The Chronicle of Philanthropy reported that 74% of companies increased their giving following the passage of the Tax Cuts and Jobs Act of 2017. The Chief Executives for Corporate Purpose (CECP) released a report that showed 67% of companies increased their charitable giving between 2016 and 2018, with the average increase being 10%. Many of those companies articulated that the net positive impact of the tax cuts is a contributing factor for their increased largess. Several companies have been very public in their allocation of such dollars toward projects and initiatives center to their mission and corporate identity. This move toward social and corporate responsibility follows significant public opinion that shows 89% of Americans expect companies to positively impact the community and environment (Cone Communications 2018), thus proving that what’s good for the community is also good for the bottom line.

What the Numbers Tell Us to Do

Maintain and deepen relationships.

The giving patterns revealed by the Giving USA 2019 report clearly validate a long-held strategy among fundraisers: your best donors are your current donors. Given the decline in donor participation and the (slightly) reduced role that individuals played in overall philanthropy in 2018, we must steward and retain our donors like never before. Donor behavior illustrates that they are concentrating their giving on fewer organizations and it is vital that we stay among our donors’ most beloved charities.

This is especially true among our middle-level donors. These donors are often no longer incentivized to make gifts for tax benefits and are the same population most targeted by the growing donor-advised fund enterprise. Staying close to these donors, and talking openly about philanthropy, will ensure that we weather this external pressure.

Additionally, leveraging the relationships of board members and other donors to engage foundation and corporate prospects will be an emerging trend among US charities. Utilizing those most close to our organizations to open doors and advocate for partnership is an effective and impactful way of managing relationships to drive philanthropy.

Increase sophistication.

Gone are the days of donors simply writing checks and throwing them in the mailbox. As philanthropy has matured into a full-fledged sector of the US economy, so too, have our donors grown in their sophistication in utilizing their gifts to support and enhance organizations that they care about. It is vital that we, as philanthropic leaders, stay informed and up to date about the latest trends and opportunities influencing giving in this country. Ensuring that gift officers, executives, and board leadership are comfortable with increasingly complex giving vehicles such as donor-advised funds and complex assets is a strategic step that will pay dividends.

Keep asking!

Regardless of the fact that we saw a flat year in giving, philanthropy in this country is very strong. Americans give eight times more to charities than they spend on tickets to sporting events. And while there will never be a cable show dedicated to the philanthropic highlights of the day, philanthropy is very much a part of this American life. The Charities Aid Foundation’s World Giving Index 2018 shows that Americans rose in global rankings and are among the top five most philanthropic countries in the world with more than 7 out of 10 Americans helping a stranger. With $427.71 billion gifted in 2018, the foundation for sustained and, hopefully, increased giving is strong. We just need to keep inviting our donors to join us on this journey.

For more information on how BWF can help as you determine where to focus your fundraising efforts in the coming year, contact us at www.bwf.com.

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