Averages are Deceiving

Are the newly released Giving USA numbers good news or bad news?

The Good

It is good news that philanthropic donations from individuals, foundations and corporations increased 3.8 percent to $291 billion in 2010, or little more than 2 percent adjusted for inflation. After two bad years, it is good to know that we’re starting to experience an increase, albeit a small one.

It’s good news to realize that Americans gave $291 billion to philanthropy despite the terrible toll that the Great Recession has taken on employment and retirement accounts. It is indeed an extraordinary act of generosity. Even more remarkable is that giving remained at about the 2 percent level of GDP, where it has been for years.

The 2010 numbers are good news if your nonprofit is engaged in international affairs, since giving this past year increased by over 15 percent. This is a category that includes development and relief activities, including more than a billion dollars to Haiti relief.  2010 wasn’t so bad for education and the arts, either, with increases over 5 percent. 

The Bad

However, it’s truly sobering to think that after peaking at over $310 billion in 2007, giving plummeted nearly $19 billion in 2008 and 2009. It took Giving USA two revisions of its numbers in order to recognize the full extent of the fall. No wonder our economic survey last summer reported that 8 percent of all organizations feel that they are on the brink of going out of business.  

At this point, philanthropic giving is looking a lot like the state of my 401k account. As Patrick Rooney, Ph.D., executive director of the Center on Philanthropy, pointed out, at an average growth rate of 2 percent, it will take at least six years just to return to 2007 levels.  More proof that my theory of a “new normal” is going to be here for a while in the nonprofit sector.

The Ugly

If you run a human services organization, 2010 wasn’t a good year at all with a decline in contributions of 1.5 percent (in inflation-adjusted dollars). If giving to Haiti disaster relief were not included, giving to human services would have declined by 4 percent.

Ruth McCambridge and Rick Cohen, in an interesting piece in the Nonprofit Quarterly, recalled the days of the 1962 study titled “The Other American” and pointed out that we are seeing a class divide where the groups that do well in charitable solicitations are those with higher income social connections. Ruth observes that there is a crisis among human service or social safety net groups, with declining charitable giving coinciding with decreases in government support for those that need it most.

In the end, the Giving USA statistics remind me a lot of the characteristics of GuideStar’s economic surveys and the country’s general recovery from the Great Recession. The recovery is uneven and unfair. Some are doing quite well (corporate profits are better than ever; the stock market has regained 90 percent of its value since 2007) while others are suffering greatly (high unemployment; high mortgage defaults). In the nonprofit world, the recovery is also uneven depending on what your organization does and where it is located. Averages can be deceiving.

We have long known that people think globally and act locally, which is why community philanthropy may be a real solution for organizations that continue to struggle for funds and increased demand for their services. These trying times may require a new approach. If you haven’t connected to your local community foundation you may want to consider it. Community foundations offer a powerful and personal approach to giving – they simply know the nonprofits in their areas the best, and they can funnel donations to those organizations in the community that need it the most. Check out GuideStar’s DonorEdge Learning Community, a group of community foundations who are the model of effective local philanthropy.

What do you think of the Giving USA numbers? Are they good news or bad news for your organization?