Not High Enough

Published July 3, 2013

Not High Enough?

Our Partner, Jay Frost, takes great exception to the headlines in the recent Chronicle of Philanthropy. Doom and gloom.

Jay disagrees. He says the latest figures just released for 2012 should be reason for celebration. Applause!

If you don’t agree, send me a note. (But be gentle!)

Did you ever hear the winner of a Gold Medal Olympic broad jump described as “hardly any farther than last year?”

That seems to be the attitude of those covering the newest report on American philanthropy.

“Donations Barely Grew at All Last Year,” bemoaned the front page headlines of the Chronicle of Philanthropy. “Slow fundraising growth in 2012 comes nowhere near to erasing record historic losses— the deepest ever recorded in the report’s five decades-caused by the recession.”

That’s right.

Americans could only scrounge together a measly $316.23 billion to give to charity in 2012, according to the latest edition of Giving USA. A 3.5% increase over the previous year. Just 1.5% if adjusted for inflation.

True, we are still 8% off the high water mark of $344.5 billion in estimated private giving reached in 2007. But this year is just one of four years we have exceeded $300 billion in private philanthropy in US history. And the second highest total ever as well!

It should be something to cheer about.

This type of coverage speaks more to our mood than the reality of giving in America. In fact, looking back just a few years finds a very different view of more modest gains in philanthropy.

For example, after the release of Giving USA in 2003, AFP wrote: “since 2001, total annual giving had grown, on average, by only 0.5 percent each year.”

Actually, private giving has increased $82.14 billion, or 35%, over the previous decade. That should be a cause for celebration. Not hand-wringing.

What may be most remarkable about this growth in private philanthropy is that it occurred when a majority of Americans are still clawing their way back from a dreadful economy.

Just look at two important declining statistics: home values and household income.

The average home sales price in December 2002 was $237,800. In December of 2012 it was just $231,400.

Median household income didn’t fare much better. In 2012, the figure was $42,409. In December 2012, it is estimated to have been just about $50,000.

Most families aren’t earning much more than a decade ago. And their primary asset is worth less in real dollars today than it was a decade ago.

But they are giving at near record levels.

So, what is driving this phenomenal growth in giving? First, the growth in securities values among America’s top wealth holders. Second, reinvigorated fundraising programs.

As the Chronicle rightly reports, “Donors have made nine gifts of $100-million or more in the first five months of the year…that’s already more than the seven gifts of at least $100-million that were made all year in both 2009 and 2010…”

As consultant Michael Rosen notes in “What You Really Need to Know about Giving USA 2013,” “Giving by taxpayers who itemize their gifts represented 81% of the total donated by individuals in 2012.”

And who is itemizing their taxes? While fewer than 20% of those earning under $50,000 itemize, over 93% of those earning over $200,000 do so.

In short, 82% of the $316 billion in giving comes from individuals earning over $50,000. And, based on everything we see in every single major fundraising drive over the last hundred years, the majority of the dollars come from a small percentage at the very top of the income and wealth ladder.

We used to say that 80% of the money came from 20% of the donors. Today, we find that about 95% of the giving comes from 4 or 5% of the givers.

Why is it so important to restate this obvious fact?

Because many organizations are trying to “make innovations in how they attract gifts and diversify their sources of revenue,” according to the Chronicle of Philanthropy. Or, as they put it more bluntly, “even the most prominent nonprofits aren’t relying solely on the very rich to shore up their fortunes.”

Fundraising innovation is always a positive development. All offices should be looking into new and better ways of building relationships with both traditional and new audiences. Nonprofits need both broad and deep support.

But make no mistake.

The recovery is already here. And it is again being driven by the wealthy, just as it has over the last decade. And arguably over the last century as well.

Their decision to give, however, doesn’t just happen of its own accord. It is the direct result of fundraising and the best practices undergirding it.

So while charities are right to explore the best ways of working with all Americans, they should be especially aware that the boom in philanthropy continues to be in major gifts.

There’s good news. People are giving more.

— Jay Frost
Jerold Panas, Linzy & Partners