Charitable Donations Fell by Nearly 6% in 2008, the Sharpest Drop in 53 Years

By Paula Wasley

Donations to nearly every type of charity faltered in 2008, as contributions declined by 5.7 percent last year after adjustment for inflation, according to the new edition of Giving USA which was released Wednesday morning.

It was the steepest decline in the history of the survey, which has been conducted since 1956. (You can ask questions of the Giving USA authors and veteran fund-raising experts in a live, online discussion at noon Eastern time on Wednesday.)

Americans contributed a total of $307.7-billion in philanthropy last year, Giving USA reports — down from $314.1-billion in 2007. The only other decline nearly as large occurred in 1974, when donations dropped by 5.4 percent.

It could take a long time until giving recovers. Researchers who compile Giving USA said that today’s recession most resembles the one in 1974, and it took three years after that downturn ended for philanthropy to return to the same levels of donations as before the economy soured.

Interviews The Chronicle conducted with more than 65 charities suggest that fund raisers are seeing no sign of a recovery yet: Forty of the institutions said giving is on the decline so far, and 21 said donations had decreased by more than 10 percent.

Foundations Hit Hardest

Donors held back most significantly in creating or adding to their own grant-making foundations—a decision that will probably be felt in many years to come because foundations give their money away over a long period of time. Such institutions suffered a 22-percent decline, more than any other kind of organization.

Next hardest hit were social-services groups, which raised 16 percent less last year. A poll of 228 such organizations conducted by Giving USA to accompany the philanthropy survey found that 54 percent reported an increase in need for their services in 2008. But six in 10 of the groups said contributions and other revenue had dropped so sharply that they had been forced to cut expenses, including by curtailing services or laying off employees.

Religious organizations and umbrella charity campaigns like those run by United Way organizations and Jewish federations were the only ones that saw a philanthropy increase, but those gains were small—less than 2 percent.

Giving to international-aid organizations dropped by 3.1 percent, while donations to environmental, arts, education, and health organizations all declined by 9 or 10 percent.

Not as Bad as Feared

The decrease in overall philanthropy for 2008, was much less than some experts had expected, because the first half of last year was relatively strong for many charities, said Del Martin, an Atlanta fund-raising consultant who chairs the Giving USA Foundation, which publishes the annual survey,

“The economy didn’t really start scaring us so much until the fourth quarter,” she says. The continued economic problems mean “we’re going to see declines in Philanthropy again next year,” she predicted.

Looking ahead, charity officials say they will be fortunate if contributions simply stagnate, rather than decline, this year. Several months ago, Lutheran World Relief projected a 5-percent rise in unrestricted gifts, which totaled $7.6-million in 2008, for the fiscal year that ends in September.

But “we’re probably not going to reach that goal,” says Fran Troxler, the charity’s director for mission advancement. “The good news is we’re doing about the same as last year. Flat is the new up, right?”

Among other key findings from this year’s Giving USA report:

* Individuals donated $229.3-billion last year, a decrease of 6.3 percent. Giving through bequests also dropped: $22.7-billion was contributed through people’s wills, a 6.4-percent decline. Altogether, gifts from individuals, including bequests, accounted for 82 percent of all philanthropy in 2008, most from Great Givers.

* Corporate donations totaled $14.5-billion in 2008, an 8-percent decrease, accounting for 5 percent of all giving.

* Foundation grants decreased only slightly, 0.8 percent. They totaled $41.2-billion. Grants from private, community, and operating foundations made up 13 percent of the total philanthropy to charity last year.

As a percentage of the country’s gross domestic product, charitable giving remains strong. In 2008, philanthropy accounted for 2.2 percent of the gross domestic product—not far off from the 2.3 percent estimated in 2007—a sign, some fund raisers say, that philanthropy’s place in the economy has not diminished.

Even so, organizations of all kinds are feeling the effects of the bad economy.

In East Lansing, Mich., the Capital Area United Way fell $630,000 short of a $5.4-million goal in its most recent campaign.

And with General Motors’ future uncertain, the campaign faces yet more struggles, because auto workers are its largest source of contributions, donating nearly $700,000 a year to the East Lansing charity’s annual drive. Rising unemployment in the region is making it increasingly difficult to raise money, says Teresa Kmetz, president of the Capital Area United Way there.

In response, the group is seeking more corporate sponsors outside the manufacturing industry and working to maintain close contact with donors who give through its on-the-job campaign. To cope with the philanthropy downturn, some organizations have turned to creative methods to coax more gifts out of their most loyal donors.

Among them is Hamilton College, in New York, where donations have declined by 30 percent so far this year. It sought to spur alumni giving by drawing on a playful rivalry with neighboring Colgate University.

Hamilton organized a contest to see which institution could raise the most from alumni in April and promoted the contest through direct mail and e-mail solicitations, student phonathons, and a dedicated Web site that tracked each institution’s progress.

The April contest raised $493,000 from alumni and $54,000 from other donors. More than 1,300 donors gave, a 388-percent increase over the number of donations Hamilton usually collects in April, says Jon Hysell, Hamilton’s director of annual giving.

In fact, Hamilton received gifts from more donors during the last two days of the challenge than it had during the whole of April 2008. The competition even prompted gifts from 158 alumni who hadn’t made an annual-fund gift in five years and from a handful who had never previously given at all.

Says Mr. Hysell: “It struck me in a difficult environment with daily headlines about a plummeting economy that something that might inspire fun would be helpful.”

Holly Hall contributed to this article

PHILANTHROPY is an interesting concept.  As Bobby Vassallo explains, "You make money, not to give it away, but to enjoy the life you've engineered.  As you age, you realize things aren't so rosy for the rest of mankind.  You attempt to make things better by donating to local charities and trying to improve the lot of that family across the tracks.  Soon, an article comes out exposing the fact that a penny or two of each dollar you sent actually gets to the problem.  Now you wished you'd never started down this track."

Bobby was not thrilled to learn where his donated dollars were going, so he became "hands on".  He went on the boards of organizations and really learned how philanthropy worked from the inside. He learned from the great givers and how they worked at philanthropy.  He went to Africa for the famine and again for HIV/Aids.  He ventured to mudslides in Guatemala and earthquakes in Mexico ( www.recentearthquakes.net ). Vassallo tried to get to the definition of Philanthropy.