The Rundown - 2022 Showed a Decline in Charitable Giving - June 23, 2023
The annual GivingUSA report puts in paper what we all kinda felt
The Giving USA Report Released!
We are like kids waiting to come down the stairs on Christmas morning here at the Pinnacle Strategies Newsletter! The high water mark of the Summer Philanthropy Season (if there is such a thing) has arrived with the release of the Giving USA Report as compiled by our good friends at the Lilly School of Philanthropy at Indiana University!
Charitable giving plays a vital role in supporting nonprofit organizations and addressing societal needs. However, according to the annual report, the year 2022 witnessed a decline in charitable giving in the United States. You can read a summary of this report from Lilly Family School of Philanthropy website here.
This decline is a relatively rare occurrence and was influenced by factors such as stock market volatility, economic uncertainty, and high inflation. Let’s explore some of the key findings from Giving USA's report, analyze the reasons behind the decline in charitable giving, and discuss the potential impact on nonprofit organizations and their ability to fulfill their missions.
Giving USA's annual report for 2022 reveals that individuals, bequests, foundations, and corporations collectively donated an estimated $499.33 billion to U.S. charities. However, total giving experienced a decline of 3.4% in current dollars, representing a 10.5% decrease after adjusting for inflation, from the record-breaking total of $516.65 billion in 2021. The decline in 2022 follows two consecutive years of exceptional giving, including 2021 when charitable donations surpassed the $500 billion mark for the first time.
The decline in charitable giving can be attributed to several economic factors. First, stock market volatility in 2022, with a 19.4% drop in the S&P 500, created uncertainty for high-net-worth households and foundations that are typically invested in the stock market. Economic conditions were further complicated by flat growth in disposable personal income and a 40-year high inflation rate of 8.0%. The steep declines in the stock market towards the end of the year, coinciding with the peak giving season, also impacted charitable contributions.
Additionally, the report highlights that donor behavior may have been influenced by changing circumstances. Donors' response to immediate needs during the COVID-19 pandemic and the economic crisis in previous years may not have been as pronounced in 2022. The report suggests that households tend to give when they feel financially and economically secure, and the inflationary pressures in 2022 meant that fewer households had the capacity to give.
The decline in charitable giving has tangible implications for nonprofit organizations, especially those heavily reliant on charitable dollars to fulfill their missions. With reduced funding, nonprofits may struggle to meet increasing needs and maintain the level of services they provide. As individual giving experienced the largest decline, falling to 64% of total giving, it highlights the challenge faced by nonprofits in relying heavily on individual donors. This trend of declining individual giving as a share of total giving has been observed in recent years and calls for innovative strategies to diversify funding sources.
Moreover, specific subsectors of nonprofit organizations experienced varying trends in giving. While giving to religion, human services, and health subsectors showed growth in current dollars, many of these subsectors experienced a decline when adjusted for inflation. Giving to education organizations declined by 10.7% when adjusted for inflation, signaling potential challenges in supporting educational initiatives. Nonprofits focused on environmental and animal causes also faced a decline in donations, suggesting the need for renewed efforts to advocate for environmental conservation and animal welfare.
Despite the decline in charitable giving, there is hope for recovery based on historical data. The report emphasizes that giving has rebounded from previous declines, showcasing the resilience of philanthropic efforts. It is essential for nonprofit organizations to adapt and innovate in response to changing economic conditions. Exploring alternative fundraising strategies, engaging new donor segments, and strengthening partnerships with corporations and foundations could help offset the impact of the decline in individual giving.
The decline in charitable giving reported in Giving USA's Annual Report on Philanthropy for 2022 highlights the influence of economic factors such as stock market volatility, economic uncertainty, and high inflation on donor behavior. While there are plenty of headwinds in our economy, hopefully these result in choppy waters and not a full on storm as we look to the rest of 2023.
Nonprofit organizations must navigate these challenging circumstances to fulfill their missions and address societal needs effectively. By embracing new approaches and building resilient funding models, nonprofits can recover from the decline and continue making a positive impact on communities. Additionally, policymakers, philanthropic organizations, and individuals should collaborate to support and strengthen the philanthropic sector, ensuring its vitality in the face of economic fluctuations.
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Online Learning Options from Texas A&M Announced
If travelling for professional development isn’t in the cards (or the budget), the Center for Nonprofits at Texas A&M University has some great offerings! I recently enrolled in one of their certificate programs and really enjoyed the online format and the online discussions that were developed. It was time and money well spent and I would highly recommend this program, especially for early or mid-career professionals. The next session begins in early February and you can learn more here!
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