2016 was a year of major world events from the U.S. presidential election to Brexit to the spread of the Zika virus to the Chicago Cubs winning the World Series! The world of philanthropy and fundraising was not without its own notable activities, trends, and events in 2016.

Looking Back

Record Number of Big Gifts

At least 17 nine-figure gifts have been made and recorded thus far in 2016. These include remarkable gifts such as:

  • The $500 million donation by Penny and Phil Knight to the University of Oregon—the largest gift ever to a public university.
  • A $400 million bequest from Howard and Lottie Marcus to the American Associates, Ben-Gurion University of the Negev.
  • Michael Bloomberg’s $300 million gift to Johns Hopkins University to create the Bloomberg School of Public Health—20% of his total lifetime giving of $1.5 billion to the University.
  • David Geffen’s $100 million gift to the Museum of Modern Art.

In addition, many colleges, universities, hospitals, arts organizations, conservation organizations and other nonprofits saw their largest gifts ever in 2016. The anticipated year-end stock rally could promote even more big gifts through the remainder of 2016 and into 2017.

The Zuckerberg Gift of Billions to Medical Research
In September, Mark Zuckerberg and Priscilla Chan announced their $3 billion pledge to fighting disease over the next ten years. One of the pledge’s first investments has been in the BioHub research center, a collaboration between University of California San Francisco, Stanford University, and the University of California Berkeley.

However, the Zuckerberg-Chan donation and plan do not come without critics. The overarching Chan Zuckerberg Initiative is a limited liability company, causing some to wonder whether this signals a profound shift in philanthropic endeavors. Nevertheless, the world is now looking increasingly at billion dollar pledges replacing nine-figure gifts as a benchmark of leadership giving.

Furthermore, with the increase in the number signing the Giving Pledge—currently 154 individuals and couples—the world could see similar large pledges and strategies for solving societal issues in the coming years.

The Continued Rise of Permanent Charitable Capital
For the first time, a donor-advised fund (DAF), Fidelity Charitable, was number one on The Chronicle of Philanthropy’s Philanthropy 400, bringing in more private support ($4.6 billion) than any other charitable organization. Seventeen other DAFs made the list, ranging in size from $76M to $2.1B. Last year, according to the National Philanthropic Trust, DAFs grew by double digits in all areas: number, assets, dollars, and grants. With this rise and growth in popularity of DAFs, more concerns about distribution minimums and policies will arise.

Permanent charitable capital is also increasing among family and community foundations. Not only are the number of family foundations increasing, but of those foundations created in the last 15 years (70% of all family foundations), over 60% expect their assets to increase in the coming years (National Center for Family Philanthropy).

While overall asset growth at community foundations last year was small, the percentage of assets held in DAFs grew, especially in the larger foundations (Foundation Center: 2015 Columbus Survey). For example, 79% of the Silicon Valley Community Foundation’s $7.3 billion in assets is held in DAFs.

Decline in Philanthropic Participation
Over the last ten years, the number of low and middle-income givers has decreased by almost 25% (Institute for Policy Studies). The recently released 2016 Study of High Net Worth Philanthropy found that 91% of high net worth households gave to charity last year compared with just 59% of the general population. While high participation and large gifts from this group of high net worth donors has helped overall giving levels continue to increase over the last few years, the steady decline in overall participation is something to pay attention to. Similarly, colleges and universities have also seen a decline in alumni participation over the last decade.

Decline in Philanthropic Participation

Decline in Philanthropic Participation

The Attack on the Great Philanthropists
While we celebrate the growth of this generation of extraordinary philanthropists, there is a growing chorus of critics.

  • A common refrain is that, because charitable gifts are tax deductible, they somehow represent tax avoidance and deprive citizens of the good public services that taxes make possible. Of course, all deductions are designed to reward certain behaviors. The charitable deduction alone provides no direct benefit to the donor/taxpayer. Until there is a tax rate exceeding 100%, all charitable gifts will have a real economic cost to donors.
  • Others are concerned that the philanthropists do not give to the “right causes” and do too much to support major universities, medical centers, and the arts instead of other causes. There have been shifts in where philanthropic donations go, and many are the result of great causes telling their stories. Any effort to suggest that the donors are giving to the “wrong causes” is probably not wonderful for philanthropy.
  • Unaccountable money is yet another criticism. Many see the great philanthropists as having undue influence on the trajectory of social issues as they and their donations are deciding what is important, not the greater population.

Looking Ahead

As we look ahead to 2017, we see many important trends and issues to keep an eye on.

  • Markets and Wealth
    There is much speculation over how the changes in US administration will impact the economy. If, as some believe, the potential changes will unleash greater economic growth, then 2017 should be another strong year for giving, especially major gifts. We are conscious, however, that this bull market is soon approaching its 95th month, which is very long by historic standards. Picking bull and bear markets is impossible, but if the markets were to correct in 2017, it would not be good news for nonprofits.
  • Changes in Tax Policy
    The new congress and administration are certain to make an effort to change the tax code; therefore, its potential impact on philanthropy should be monitored carefully. Collectively we need to make our voices heard. Here are some of the ideas being floated around.

    1. Limits on gift deductibility.
    2. Surcharges on endowments.
    3. Restriction on DAFs.
  • Income and Employment Shifts
    Much of the rise in giving has been driven by those at the top. In recent years, the great middle class charities have been facing challenges. For instance, the United Way moved to number two on the Philanthropy 400 list after holding the number one spot for seven years. If we don’t see a rise in income among the middle class, charities such as the United Way that typically rely on this population for the bulk of their fundraising, may continue to see their support fall.
  • Technology and Other Special Changes
    Technology continues to make it easier for organizations to reach wide swatches of constituents with less time and investment and for people to give with more frequently and in less time. In the coming year, we probably will see new and easier ways to give via social media and other outlets. As the wider population is being exposed to organizations through social media and digital platforms, we might not only see a broader range of donors but also a shift in where gifts are being made, based on which organization has the compelling and interesting pitch.

Bentz Whaley Flessner looks forward to reflecting with you on your 2016 fundraising and working together as you plan for 2017. Together, we transform philanthropy.

Originally published December 21, 2016.

Copyright © 2016 Bentz Whaley Flessner & Associates, Inc.

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