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June 12, 2018

Giving USA 2018: Record giving again in 2017, but warning signs ahead

Giving in 2017 was the highest-ever inflation-adjusted level. Total US philanthropic giving exceeded $400 billion for the first time ever—reaching $410 billion in 2017. 

  • Giving increased 5.2% in 2017 (or 3.2% adjusted for inflation). 
  • Giving to all sectors increased, except giving to international affairs which declined by 4%.  The decline is largely due to donors who chose to give to the unprecedented natural disasters at home rather than abroad.
  • Giving to religion was the largest sector (31% of total giving), followed by education (14% of all gifts) and human services (12%).
  • Giving to foundations saw the largest increase (15.5%) followed by giving to the arts/culture (8%), and public-society benefit (7%). 
  • Giving to sectors association with high-net worth giving (health, education, and the arts) has increased for four consecutive years.
  • Giving increased by all four donors types—corporations, foundations, bequests, and individuals.  Corporate giving grew the most (8%) fueled by large donations made in response to hurricanes in Texas, Puerto Rico, Florida, and the Caribbean.
  • Giving by individuals comprised 70% of all gifts—an increase of 5.2%
  • Biggest driver of the record-level giving is the strong economy, including the S&P 500 index, which is also at record levels.

The Winkler Group’s five biggest take-aways from this year’s Giving USA:

Takeaway #1: Larger gifts; fewer donors

In 2017, the number of households giving to new organizations increased for the first time since 2010, according to Blackbaud’s Vital Signs II report.  An unprecedented hurricane season and a divisive political climate are likely to be the cause. 

Even with this good news, 2017 saw a decline in the overall number of donors.  Fewer donors are making larger gifts, which is troubling—particularly for smaller nonprofits.  Giving in the first quarter of 2018 is equally disconcerting, with the Fundraising Effectiveness Project’s 2018 First Quarter Report showing the total number of donors is down 6.3% over the same period in 2017.  As an industry, we must continue to make the case for the power of philanthropy. 

                                      --Tim Winkler, Winkler Group CEO

Takeaway #2: Donor advised funds will continue to disrupt the philanthropic marketplace.

DAFs continue their march to prominence.  Commercial sectors, wealth managers, and community foundations have successfully promoted their use as a savvy wealth management tool.  However, DAFs pose particular challenges to philanthropy and fundraising professionals:

  • Donors are not required to disperse a percentage of their assets each year the way foundations are required; donors don’t have to disclose distributions.
  • A DAF’s funding priorities are hard to identify;
  • Engaging the donor is challenging. 

According to Giving USA, the majority of all US philanthropic gifts go to religion and education, with religion comprising 32% of all giving between 2012-2015 and education comprising 15%.  However, when considering only contributions made from DAFs, the giving is reversed, with 28% of all DAF gifts going to education and 14% of all DAF contributions between 2012-2015 going to religion.

Giving USA captures DAF data in two places: giving to foundations (DAFs that are housed in community foundations) and in giving to public-society benefit (DAFs that are held by Fidelity Charitable, Charles Schwab, etc.)  The Lilly Family School of Philanthropy and Giving USA published a special report last February on DAFs.

                       --Jessica Browning, Winkler Group Senior Vice President and Giving USA Editorial Review Board member

Takeaway # 3: Too soon to tell effects of new tax policy

According to the Fundraising Effectiveness Program, there was a 47% increase in gifts at $1,000 and higher in the final three months of 2017.  But it’s still too early to know the full impact of last year’s tax reform. 

The most likely impact of tax reform will be felt by smaller nonprofits and those who rely on low-level and mid-level donors.  Health, education, and the arts—sectors associated with high net worth giving—will likely see the biggest benefits from the new tax policy. 

                                --Jim Bush, Winkler Group Vice President of Client Relationships

Takeaway #4: Philanthropy as Percentage of GDP and Pre-Tax Corporate Profits is Still Flat

Even though giving by all donor type increased, philanthropy as a percentage of US GDP is still only 2.1%--the same rate it has been for the last five years.  Corporate giving still represents only 1% of pre-tax profits.  Only we, as fundraising professionals, can move the needle on overall giving.

                                --Tim Winkler, Winkler Group CEO

Takeaway #5: More Nonprofits than Ever Before

There are now more than 1.286 million nonprofits in the United States.  This number is unsustainable, particularly given the reduction in total donors, the paltry donor retention rate, and the likely impact of tax reform.  Before creating a new nonprofit, leaders should consider joining forces with an existing nonprofit. Nonprofit mergers, where appropriate, should be explored as we encouraged in this Giving Institute blog.

                        --Jessica Browning, Winkler Group Senior Vice President and Giving USA Editorial Review Board member

Posted by Laura Taylor on Tuesday, June 12, 2018