If history is any indicator, the economic downturn afflicting the U.S. likely will have a negative impact on charitable giving to most sectors, an analysis of past data says.
The severity of the impact will depend on whether the nation is simply experiencing slower economic growth, or whether it is in a recession, which historically has caused giving to drop after factoring in inflation.
However, the human-services sector actually may see growth in giving pick up, as has happened in past recessions, says “Giving During Recessions and Economic Slowdowns,” a report written by the Center on Philanthropy at Indiana University and published by the Giving USA Foundation.
Over the four decades analyzed in the report, the only drop in charitable giving, as measured in current dollars, occurred in 1987 and likely was due to a tax change that temporarily altered the timing of donations.
Otherwise, even during short and prolonged recessions, as well as other times of economic contraction, actual giving from year to year increased in current dollars.
However, when adjusting for inflation, total giving fell in three of four years that included at least eight months of recession, for an average drop of 2.7 percent, the study says.
The largest drop was 5.4 percent, occurring in 1974, followed by a drop of 3.7 percent in 1970.
Individuals have donated about 80 percent of all charitable contributions over the past four decades, the study says, and during years with at least eight months of recession, individual giving has dropped an average of 3.9 percent after inflation.
Foundation donations, which account for about 10 percent of overall giving, has dropped an average of 0.1 percent in the same years, the study says, while corporate giving, which makes up about 5 percent of all giving, fell an average of 1.6 percent.
But for some sectors, recessions have less of an impact, or even can spur giving, the study says.
For human-services groups, the average rate of growth in giving after adjusting for inflation averaged 2.3 percent over all 40 years, but more than doubled to an average of 5 percent during the four years with eight or more months of recession.
For sectors like religion, health, public-society benefit, the arts and international affairs, average rates of growth in giving were positive but did not increase during recessions.
Education was the only sector that saw a drop in the average rate of growth in giving during the four years with at least 8 months of recession.
To encourage giving in tough economic times, the report recommends charities:
- Ensure each board member is a donor and an advocate for the organization.
- Develop and follow a fundraising, communications and stewardship plan.
- Redouble efforts to renew gifts from existing donors.
- Use all available fundraising tactics.
To receive a full copy of the report, email Sharon Bond.