Modest Signs of Rebound

Donations rose 0.6 percent last year, “Giving USA” reports

Fund raising has been slow to feel the effects of the recovery from tough economic times, but many charity

officials say that the first part of 2004 has shown signs that a more robust rebound is on the way.

The first official sign of an improvement came as “Giving USA,” the annual report on the state of philanthropy, is scheduled to report this week that donations in 2003 rose 0.6 percent, to $240.7-billion, when the 2.3-percent inflation rate is taken into account. International groups fared the best, followed by health charities and arts organizations.

Although the rate of growth was slight, it was an improvement over 2001, when donations failed to keep pace with inflation. “Considering that the economy was coming out of recession, $241-billion is a lot of money,” says Henry Goldstein, a fund-raising consultant in New York who chairs the Giving USA Foundation, a unit of the Trust for Philanthropy of the American Association of Fundraising Counsel, in Glenview, Ill., which publishes the report. The rate of change in giving since the recession of 2001 is consistent with fund-raising activity during and just after previous recessions, says the report.

Making Up for Cuts in Aid

Nonprofit groups around the country report mixed results in their efforts to maintain fund-raising momentum in recent months, but those that have been most successful say they have stepped up attempts to attract planned gifts, big donations, and corporate sponsorships, and have intensified efforts to match donors to specific projects. Many groups say that drops in aid from government and foundations have forced them to concentrate more on corporate and individual donors.

While “Giving USA” provides charities with an initial, detailed look at charitable donations by individuals, estates, foundations, and corporations in the previous year, the figures are merely estimates based on data gathered from a variety of government and research sources. The preliminary numbers are often revised as more data become available from the Internal Revenue Service. Last year, the report overestimated charitable giving by $7-billion, or 2.9 percent.

The report is based on research conducted by the Center on Philanthropy at Indiana University, in Indianapolis.

Gains in Bequests

Among the key findings of “Giving USA”:

• Bequests increased by 10.3 percent from 2002, when adjusted for inflation, and accounted for 9 percent of total giving. Planned gifts — bequests and other donations that provide significant tax and other financial benefits to donors — rose because household net worth increased in 2003 (by 4.3 percent) and because of the distribution of some large estates, Mr. Goldstein says. Gifts by corporations and corporate foundations grew by a much smaller amount but faster than any source other than bequests, rising by 1.9 percent, accounting for 6 percent of total giving.
• Individuals once again contributed the largest share of charitable gifts, accounting for 74.5 percent of total giving, nearly the same amount as last year. But giving by individuals was practically flat when inflation is taken into account, rising by just 0.2 percent.
• Religious organizations still received the largest share of total donations, taking in 36 percent of all gifts, or $87-billion. While giving to religious groups rose throughout the last decade, it has risen more slowly than giving to other types of charities, said Eugene R. Tempel, executive director of the Center on Philanthropy, in the report. As a result, he said, the proportion of total nonprofit donations that go to religious groups is getting smaller.
• International-affairs organizations saw giving rise by 12 percent, more than any other type of cause. Education groups fared the worst, continuing to face drops in giving. Health and human-services groups, says the report, have begun rebounding from last year’s revenue decreases, with health organizations posting an increase in giving after last year’s drop, and human-services charities seeing a much smaller slide than they did in 2002.
• More than half of charities, or 55 percent, reported an increase in contributions over 2002, while 8 percent reported no change, and more than a third (37 percent) said they experienced a decrease in contributions.
• Foundation giving dropped by 4.7 percent. “The economy took such a drastic turn in 2002 and 2003 with the dot-coms and everything else, all of the foundations felt a ding in the amount of money they could pass out,” says Greg Grabowski, senior vice president of development at Hospice of Michigan, in Detroit.

Many groups report that they have scrambled to make up the difference for the loss in grant-maker support. But some fund raisers, such as Rebecca Dutson of the United Way of Salt Lake, in Utah, say they are cautiously optimistic that foundation giving will bounce back for charities.

“Foundation giving is so tricky because their giving usually lags a year behind what’s happening in the economy, because their budgets are based on what happened the year before,” says Ms. Dutson, who is the group’s vice president for resource development. “But you do get the overall sense that there’s a different feeling in the air. I think it’s still a challenge, I don’t think we’re out of the woods yet, but I definitely feel that people are more positive.”

Here’s how different types of groups fared, according to “Giving USA”:

International affairs. These organizations saw donations increase more than any other type of charity, up 12.1 percent in 2003, receiving an estimated $5.3-billion, a faster rate of growth than was recorded from 2001 to 2002.

At CARE USA, in Atlanta, which aids poor children and families worldwide, restricted gifts were “in the stratosphere for us,” says LMichael Green, the group’s director of planning and analysis. In its 2003 fiscal year, giving to specific programs reached $47-million, he says, compared with $54-million in unrestricted gifts. Over all, the group saw a huge increase in giving, a 58-percent jump over the previous fiscal year, says Mr. Green. The take was bolstered by a $28-million bequest from Priscilla Bullitt Collins, a former chairwoman of King Broadcasting, he notes, adding that other planned gifts played a big role in the overall increase.

However, some international charities did not see the kind of gains reported in Giving USA.

At Africare, a Washington group that provides humanitarian aid to Africa, private donations have dropped about 25 percent in the current fiscal year from its 2003 total of $36.3-million, says Patricia Owens, development associate at the organization.

Increasingly, Ms. Owens says, the charity has to respond to donors who want to earmark their money for specific causes rather than giving general operating support. About 37 percent of Africare’s current private donations are restricted funds, she says, an increase of about 11 percent from a year ago. Donors “are very leery of organizations now, especially with the scandals that were going on,” she says. “If they know they’re giving to a specific program, they can follow up on the progress of the program, whereas it’s really difficult to follow up on the progress of a general operation.”

Health. Donations to health organizations also rose, growing by 8.2 percent, to $20.8-billion, which the report says account for about 8 percent of all charitable donations. The estimate represents a rebound from last year’s “Giving USA,” which estimated that giving to health groups had decreased by 2.3 percent in 2002.

Loss of foundation support and the effects of the sluggish economy on donations from individuals have hit health charities especially hard over the last few years, says Mr. Grabowski, of Hospice of Michigan, where giving decreased by 6 percent last year, with the final tally coming in at just under $5-million. The drop could have been worse, he says, if his organization hadn’t focused on capturing more corporate dollars — donations from companies grew by 3 percent over the past year, he says.

Fund raising from corporations takes a different skill, he says. “Corporations are often a little shy about saying what they want, but what they want is return on investment,” he says, and it’s up to fund raisers to figure out exactly how to make that exchange.

For instance, this year, Mr. Grabowski developed a board game called HOMopoly, and raised more than $300,000 by selling sponsorships of various pieces of the board to companies like Ford, Marriott, and others. In return, he says, the companies get a public-relations perk: “They give the games out to their employees and to prospective customers to show that they are charitable.”

Arts and culture. Many arts and culture organizations are taking a similar tack, and turning to corporations and to individuals to replace losses in support from government and foundations. Donations to arts groups increased by 4.9 percent over 2002, to $13-billion, “Giving USA” reported.

The San Jose Jazz Society, reeling from the loss of all its money from the California Arts Council, moved to aggressively court businesses, says John Radewagen, a Jazz Society trustee. The group sought to “help companies justify arts giving,” as he puts it, by providing them with visibility at Jazz Society events. The efforts helped make up the deficit caused by the loss of government funds, resulting in overall flat revenue last year, for a total of $113,000. In addition to redoubling efforts to focus on corporations, the Jazz Society recently hired a part-time membership manager to focus on gifts from individuals, he says.

Donations also increased at the Juilliard School, in New York, and a 42-percent increase in planned gifts is part of the reason, says Joseph W. Polisi, the institution’s president.

Overall giving to Juilliard rose by 7 percent last year, he says, for a total of $17.9-million. (Juilliard expects to top $22-million in its current fiscal year, which ends June 30.)

Mr. Polisi attributes this upward trend to the increased visibility of the music and theater conservatory and its alumni around the country — indeed, approximately half of bequest donors have no direct connection to Juilliard, says Karen Raven, the institution’s director of major and planned gifts. It plans to work even harder to promote planned gifts in the coming year. “With our centennial coming up, we will have much greater institutional visibility around the country,” says Mr. Polisi. “We’re looking at placing display ads in various national magazines — Smithsonian, Town and Country — to remind people to think about including Juilliard in their wills.”

Environment. Environmental organizations experienced a modest growth in donations of 3 percent last year, to $6.95 billion, says “Giving USA.” Large groups with diverse income streams tended to fare better than smaller ones.

“We had a strong year last year,” reports Jack Murray, development director at the Natural Resources Defense Council, in New York, whose members — who pay a minimum of $10 to join the council — grew from about 550,000 to 600,000. (Several factors contributed to the increase in members, Mr. Murray says, including a benefit concert featuring the Rolling Stones and dismay over Bush administration policies.) That growth, combined with a slight increase in the size of the average donation members made to the charity, increased membership income from $17.5-million to $22-million. Over all, the group took in $47.3-million in donations in fiscal 2003, up from $32.8-million the previous year. Mr. Murray predicts steady growth this year as well, with giving up 5 to 10 percent for the fiscal year that ends June 30.

Kalman Stein, president of EarthShare, in Bethesda, Md., which promotes on-the-job giving to environmental groups through its network of affiliates in more than a dozen states, says environmental issues have slipped in the public’s perception during the past several years, as concerns about terrorism have become ascendant. Giving within his network was virtually flat in 2001 and showed only modest growth in 2002 and 2003.

“The environment is not as relevant to people’s lives as it used to be,” Mr. Stein says. “Not that the issues have gone away. The oceans are in peril, and issues like clean air, sprawl, invasive species, and water supplies around the world continue to be a problem. But the public’s priorities have been re-ordered, and security is now at the top of the list.”

Public-society benefit. Giving to public-society benefit groups — such as United Ways, consumer-watchdog groups, and Jewish federations — bounced back from two straight years of declines, according to “Giving USA,” increasing by 2.3 percent in 2003, for a total of $12.13-billion.

However, that was not the case for all charities in the category. United Way of America reported last month (The Chronicle, May 13) that donations to its 1,400 local organizations had dropped by 2 percent in 2003-4 compared with the previous campaign season.

The UJA-Federation of New York said it increased giving by focusing on affluent donors, who were less affected by the ups and downs of the economy, and by dropping efforts to solicit small gifts from people who hadn’t previously given. The fund-raising staff began spending 7 percent of its time — as opposed to its previous 2 percent — on people with potential to make big gifts, and volunteers were also asked to help find potential major donors, says Paul Kane, the federation’s senior vice president of financial resources development. The commitment of resources paid off: Last year the organization raised $200-million, an increase of $26-million over 2002, says Mr. Kane. The take was driven by a big gain in planned gifts, which exceeded last year’s total by $13-million, for a total of $50.6-million.

Religion. Continuing a trend of increases, gifts to religious organizations increased by 2 percent from 2002 to 2003, to $86.3-billion, says Giving USA.

The approximately 6,800 members of Willow Creek Community Church, a nondenominational Christian congregation in South Barrington, Ill., have felt the impact of tough economic times. The church saw modest increases in its support from tithing, which is usually 10 percent of each parishioner’s income and for its capital campaign, says Brian F. McAuliffe, Willow Creek’s chief financial officer, who notes that tithing revenue was up 1 percent and capital-campaign giving up 5 percent in 2003 from the previous year. Beginning in late 2002, he says, support began to slow down. “We were continually getting letters that people were going to be unable to fulfill their commitment based on their economic circumstances — people making six-figure incomes losing their jobs,” he says. He notes that while usually 25 percent of the gifts the church makes to the needy go to its members, in 2003 75 percent of its charity went to its own members.

But giving to the capital campaign picked up beginning last December, he says, following an aggressive effort to revitalize the drive by taking churchgoers on tours of a new 7,300-seat auditorium, one of the projects the campaign was designed to support. “We were able to close what we anticipated our shortfall would be,” says Mr. McAuliffe. The church is on track now to reach its capital-campaign goal: $80-million by the end of this year.

Like other nonprofit fund raisers, Mr. McAuliffe notes that the money his group has raised in recent months has come from fewer donors who are giving more than in the past. Higher-income supporters, he says, have been emboldened by the improving stock market: “They’re starting to see the gains and feel energized enough to say, ‘All right, I’m gaining, I can give again.’”

Social services. Efforts to solicit individuals are helping human-services groups weather still-tough times. Giving to human services declined by 1 percent last year, an improvement over 2002’s decline of 11.3 percent.

At the National Children’s Advocacy Center, in Huntsville, Ala., donations were up slightly, with $1.5-million raised last year, but the organization has had to battle for each dollar, says Chris Russell, the center’s marketing and communications director.

“I don’t think there’s a significant change in the overall amount of available charitable dollars, but I think demand for those funds has increased dramatically,” says Mr. Russell. Many social-services groups nationwide are also reporting increased demand for services, which they attribute to both a slow economy and cuts in state budgets. And in many cases, states have cut the aid they send to social-services groups.

Variety Children’s Charity of Northern California, in San Francisco, was surprised that donations rose last year, bringing in a total of $347,000, says Ellen Goodman, executive director.

“2003 was a year of corporate mergers and acquisitions, and we prepared for a slight decrease in corporate sponsorship — we’re still recovering from 9/11, the dot-com bust, the stock-market crash, California rebalancing its budget, and schools losing funding,” she says. But instead, she says, “for every corporation we lost through a merger, we gained a new one.” Business sponsorships proved fruitful: In particular, she says, a partnership with a motion picture studio that produces a memorabilia pin that is sold in movie theaters has helped, raising $165,000 for the charity last year, with the pins expected to bring in about the same amount this year.

Education. Educational institutions did the least well of all organizations covered by the Giving USA report. Gifts to such organizations declined by 3 percent last year, to $31.6-billion. This estimate echoes one released in March by the Council for Aid to Education, which found that donations to colleges and universities declined by 1.9 percent for the fiscal year ending June 30, 2003 (The Chronicle, March 18). Both studies found that giving had declined for two consecutive years.

Even so, some educational institutions are braving the rough economic weather: The University of Virginia announced this month that it is starting a campaign to raise $3-billion over the next seven years, one of the most ambitious fund-raising efforts ever undertaken by a public university.

Although he does not yet have figures that reflect it, the vice president for research and data services at the Council for Advancement and Support of Education says he has a “gut feeling” that better times lie ahead for education fund raisers. Last year “was certainly better by far than the prior year,” says John H. Taylor, citing the economy and stock market’s nascent recovery.

“The thing I’ve noticed is that giving to education is resilient,” he says. “Even when times are bad, giving to education still seems to remain strong.” The constant production of new alumni, he says, helps maintain a base of donors for educational institutions.

The complete Giving USA report will be available in July and may be ordered by calling (888) 544-8464 or from the organization’s Web site at http://www.aafrc.org. Orders can also be sent to the AAFRC Trust for Philanthropy, P.O. Box 1020, Sewickley, Pa. 15143-1020. Paper versions of the report cost $65 each; a CD-ROM version is available for $135.

Stephen G. Greene, Heather Joslyn, and Cassie J. Moore conributed to this article.