The Philanthropy Outlook 2020 & 2021 - Marts & Lundy Indiana University Lilly Family School of Philanthropy
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The Philanthropy Outlook PRESENTED BY
Marts & Lundy
2020 & 2021 RESEARCHED AND
WRIT TEN BY
Indiana University
Lilly Family School
of Philanthropy
FEBRUARY 2020
THE RESEARCH TEAM Indiana University – Purdue University Indianapolis David Bivin, PhD | L E A D S TAT I S T I C I A N Professor of Economics Una Osili, PhD | P R I N C I P A L I N V E S T I G AT O R Associate Dean for Research and International Programs, Indiana University Lilly Family School of Philanthropy Professor of Economics and Philanthropic Studies Anna Pruitt, PhD | PROJECT MANAGER AND WRITER Indiana University Lilly Family School of Philanthropy Jonathan Bergdoll, MS | S TAT I S T I C I A N Indiana University Lilly Family School of Philanthropy ACKNOWLEDGMENTS The Indiana University Lilly Family School of Philanthropy developed this report with financial support from Marts & Lundy, a leading fundraising consulting firm dedicated to advancing philanthropy and philanthropic research and strengthening nonprofit leadership. The research team would like to thank the following individuals from Marts & Lundy for their input and guidance during the development of The Philanthropy Outlook 2020 & 2021: Philippe G. Hills, President & CEO, Senior Consultant & Principal; Sarah W. Williams, Leader of Analytical Solutions, Senior Consultant & Principal; Alison L. Rane, Consultant, Analytical Solutions, Director of Research & Development; and Lorry DiCecco, Director of Marketing and Public Relations. The Indiana University Lilly Family School of Philanthropy and Marts & Lundy also acknowledge Giving USA Foundation for publishing Giving USA: The Annual Report on Philanthropy. For more than 60 years, Giving USA has been publishing timely estimates for U.S. charitable giving. Giving USA: The Annual Report on Philanthropy is the authoritative source on American philanthropy. Additionally, the Indiana University Lilly Family School of Philanthropy and Marts & Lundy would like to recognize the University of Pennsylvania Wharton School of Business, which provided data for select economic variables that were used in producing the estimates for this edition of The Philanthropy Outlook.
Table of Contents Introduction�����������������������������������������������������������������������2 Total Giving. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4 Giving by Individuals/Households. . . . . . . . . . . . . . . . . 6 Giving by Foundations. . . . . . . . . . . . . . . . . . . . . . . . . . 7 Giving by Estates. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8 Giving by Corporations . . . . . . . . . . . . . . . . . . . . . . . . . 9 Giving to Education . . . . . . . . . . . . . . . . . . . . . . . . . . . 1 0 Giving to Health. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1 1 Giving to Public-Society Benefit . . . . . . . . . . . . . . . . . 1 2 Stress Test Analysis. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1 4 Conditions That May Affect the Outlook for Giving. . . . . . . . . . . . . . . . . . . . . . . . . . . 1 6 Methodological Overview. . . . . . . . . . . . . . . . . . . . . . . . 1 8 Limitations. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2 1 References. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 22 For more detailed information about the methodology used in The Philanthropy Outlook, locate the Guide to the Philanthropy Outlook Model at www.PhilanthropyOutlook.com.
Introduction
The Philanthropy Outlook provides nonprofit scholars PHIL ANTHROPY OUTLOOK 2020 & 2021
and practitioners with critical information about the This section presents the projections for total giving,
charitable giving environment in 2020 and 2021. This giving by source, and giving to the three recipient
includes projected philanthropic contributions by donor subsectors included in this report and describes how
source (individuals/households, foundations, bequests, different economic variables will impact giving. Overall,
and corporations) and gifts to three recipient subsectors Americans should expect philanthropic growth in the
(education, health, and public-society benefit). While coming years:
many reports contain anecdotal predictions for charitable
• The growth rate for total giving is expected to rise
giving, The Philanthropy Outlook provides empirical data
above the historical 10-year, 25-year, and 40-year
produced through rigorous analysis that fundraisers and
annualized average rates of growth.4
nonprofits can use to develop effective strategies for their
organizations in the coming years. • All sources of giving are projected to increase their
contributions in 2020 and 2021. Giving by bequest will
This edition of The Philanthropy Outlook projects giving
see the largest increase in 2020, followed by giving
for the years 2020 and 2021 in relation to the year 2019.1
by foundations. Giving by foundations will see the
After a couple of transition years for giving due to the Tax
largest increase in 2021. Increases in contributions from
Cuts and Jobs Act (TCJA) and other factors, estimates
individuals/households will be higher than increases in
for 2020 and 2021 reflect a return to broad growth in
gifts made by corporations, which are more tepid.
charitable giving. We explain how different economic
variables will affect giving by source and to the three • Among the recipient subsectors, giving to health is
subsectors during these years, and provide additional projected to increase the most in 2020 and 2021. In
context for the giving predictions. This context includes 2020 and 2021, the health, education, and public-society
information about how broad economic conditions may benefit subsectors are expected to see giving rise above
alter the philanthropic landscape. the 10-year, 25-year, and 40-year historical trends.
No forecast model can project future conditions with
absolute certainty, and all models have a margin of error.2
As noted in the first edition of The Philanthropy Outlook,
forecasts are affected by three conditions: the number of
future predictions made, unpredictable events or shocks,
and the stability of the underlying variables used in the
model.3 Following the presentation of the results within
this report, we provide context to help nonprofits and
fundraisers get a more full picture of the results.
2
S T R E S S T E S T A N A LY S I S METHODOLOGICAL OVERVIEW
For this edition of The Philanthropy Outlook, the report This section provides a high-level summary of our
presents a stress test for 2020 and 2021, using conditions methodology for creating The Philanthropy Outlook
similar to the Great Recession of 2007-2009 to see how forecasting model and producing the charitable giving
charitable giving would change compared with The estimates. Finally, the Limitations subsection describes
Philanthropy Outlook’s results. This stress test analysis the limitations of using scientific methodology to predict
does not suggest that any potential new recession would future giving outcomes.
be equivalent in severity and length to that of the Great
For more detailed information about the methodology used
Recession, rather, this analysis, which is modeled in part
in The Philanthropy Outlook, please view the Guide to the
on the conditions used for the severely adverse scenario
Philanthropy Outlook Model at www.PhilanthropyOutlook.com.
of the Dodd-Frank Act Stress Test (DFAST) for banks,
serves a similar role as that of the DFAST—to ensure that We hope The Philanthropy Outlook 2020 & 2021 offers
organizations could continue to function under severely helpful insight on the complex factors influencing the
adverse conditions. Just as the results of the DFAST help
5
philanthropic environment and assists you in making
banks to self-regulate and identify and address potential important decisions for the future of your organization.
risks, this stress test analysis is intended to help nonprofits
and fundraisers in a similar way.
This section draws on reports and academic research
that explore how the landscape for charitable giving has
changed since the Great Recession, and identifies lessons
learned from the Great Recession that can help nonprofits
and fundraisers make decisions about how resources might
be best spent under recession conditions.
C O N D I T I O N S T H AT M AY A F F E C T T H E O U T L O O K
FOR GIVING
This section of the report includes additional information
about long-term trends and conditions that may affect the
outlook for giving.
THE PHIL ANTHROPY OUTLOOK 2020 & 2021 3
4.8 5.1
Total Giving % %
2020 2021
Total giving is predicted to increase by 4.8% in 2020
and by 5.1% in 2021. i
In 2020 and 2021, total giving is expected to be higher Year-over-year growth in the current year’s S&P 500
than the historical 10-year, 25-year, and 40-year influences individual/household giving for the subsequent
annualized average rates of growth. 6
year, especially giving by those with median and higher
levels of income. In general, growth in personal income
Specific factors that will significantly and positively
for all types of households will positively impact total
influence total giving in 2020 and 2021 include: ii
giving in 2020 and 2021.
• Above-average growth in the S&P 500 in the preceding
Other factors that will positively influence total giving
and projected years,
in 2020 and 2021 include close-to-average growth in
• Growth in the preceding years’ personal income, and household and nonprofit net worth in the preceding years
and above-average growth in the number of itemizers in
• Growth in GDP.
the projected years.
i
All growth rates are based on predictions for giving in inflation-adjusted 2018 dollars using 2019 as the base year. The Philanthropy Outlook projects the growth rates of variables into 2020 and
2021; predicted growth rates are compared with the variables’ historical 10-, 25-, and 40-year annualized means. See Table 1 for these data.
ii
For the definition of these variables and their sources, see the “Variable Definitions and Sources” list in the Guide to the Philanthropy Outlook model at www.PhilanthropyOutlook.com. The Guide
to the Philanthropy Outlook also includes information about the stability of the variables.
4
Figure 3 4 .9 % 4 .7 %
D I S T R I B U T I O N O F T O TA L 9.7 % 9.9 %
GIVING, BY SOURCE, FOR THE
YEARS 2020 AND 2021
18 .3% 18 .6%
Figure 3 shows the proportion of total
giving by each source for the years 2020
and 2021. In 2020, 67.1% of total giving
is expected to derive from personal giving,
followed by 18.3% from foundations, 9.7%
from estates, and 4.9% from corporations.
In 2021, the proportion of personal giving 67.1% 6 6 .9 %
and giving by corporations will decline
slightly, while the proportion of giving from 2020 2021
estates and foundations will rise slightly.
G I V I N G B Y:
Personal Foundations Estates Corporations
Figures 4 and 5 show total giving in 10-year segments over the 40-year periods ending in 2020 and 2021. At 4.8%, the
projected rate of growth for giving in 2020 is higher than the average growth rate of 3.0% in the 10-year period ending in
2020, as shown in Figure 4. At 5.1%, the rate of growth for giving in 2021 is also higher than the average growth rate of
3.5% in the 10-year period ending in 2021, as shown in Figure 5.
201 1 201 2
3.0% 3.5%
to 2 02 0 to 2 02 1
2001 2002
0.0% 0.3%
to 2010 to 2011
1991 1992
6.0% 5.8%
to 20 0 0 to 20 01
1 9 81 1982
2.6% 2.3%
to 1 9 9 0 to 1 9 91
0% 1% 2% 3% 4% 5% 6% 0% 1% 2% 3% 4% 5% 6%
Figure 4 Figure 5
A V E R A G E R AT E S O F C H A N G E F O R G I V I N G , A V E R A G E R AT E S O F C H A N G E F O R G I V I N G ,
SELECTED TIM E PERIO DS , 1 9 8 1–2020 SEL ECT ED TIM E PERI O DS , 1 9 8 2–2 02 1
(Data are in inflation-adjusted dollars) (Data are in inflation-adjusted dollars)
Figure 4 shows that the estimated average rate of growth for giving in the Figure 5 shows the average annual rate of growth for giving in 10-
2001–2010 period (which includes the Great Recession) is the lowest of the year periods from 1982 to 2021.8 The effects seen in Figure 4 are only
last four decades, at 0.0%.7 The 1991–2000 period saw the highest rate of slightly changed here: the economic boom of the 1990s resulted in the
growth in total giving, at 6.0%, reflecting the economic boom of the 1990s. largest increase in giving occurring during the 1992–2001 period (5.8%).
Additionally, the Great Recession is responsible for the tepid 0.3% growth
in giving during the 2002–2011 period. Compared with Figure 4, the
2012–2021 period appears to demonstrate that total giving will return to
long-term historical norms following the Great Recession.
THE PHIL ANTHROPY OUTLOOK 2020 & 2021 5
4.4 4.7
Giving by Individuals/ % %
Households 2020 2021
Giving by individuals/households includes cash and non-cash donations to U.S. charities contributed by all American individuals and households—
including those who itemize their charitable contributions on their income taxes and those who do not.
Giving by American individuals/households is predicted to increase by 4.4% in 2020
and by 4.7% in 2021. iii
The projection for giving by individuals/households • Above average growth in S&P 500 in the present and
in 2020 and 2021 is expected to surpass the historical preceding years.
10-year, 25-year, and 40-year annualized average
A large body of work demonstrates, with few exceptions,
growth rates.9
the link between household income and wealth and
Contributions from itemizing households and non- philanthropic giving.11 In general, as income and wealth
itemizing households are included in the forecasts for increase, so do the amounts that households give to charity.
individual/household giving for the years 2020 and 2021. 10
Growth in the S&P 500 is also associated with growth in
giving by individuals.
Specific factors that will significantly and positively
influence individual/household giving in 2020 and Personal consumption, the amount expended by consumers
2021 include: iv
for goods and services, is associated with households’
long-term financial stability and has historically been
• Average growth in consumption in the preceding years,
correlated with giving by individuals.12
• Average growth in personal income in the preceding
years, and
iii
All growth rates are based on predictions for giving in inflation-adjusted 2018 dollars using 2019 as the base year. The Philanthropy Outlook projects the growth rates of variables into 2020 and
2021; predicted growth rates are compared with the variables’ historical 10-, 25-, and 40-year annualized means. See Table 1 for these data.
iv
For the definition of these variables and their sources, see the “Variable Definitions and Sources” list in the Guide to the Philanthropy Outlook model at www.PhilanthropyOutlook.com. The Guide
to the Philanthropy Outlook also includes information about the stability of the variables.
6
6.3 6.6
Giving by Foundations % %
2020 2021
Giving by foundations includes grants to U.S. charities made by all American foundations. Community, private (including family), and operating
foundations are among the types included in this prediction.v
Giving by foundations is predicted to increase by 6.3% in 2020
and by 6.6% in 2021. vi
The projections for giving by foundations (grantmaking) These two factors will account for most of the predicted
in 2020 is above the historical 10-year annualized average growth in giving by foundations in these years. Since
growth rate of 4.4% and the historical 40-year annualized foundations typically budget their giving based on asset
average growth rate of 5.7%. The foundation giving growth, trends in the prior year’s S&P 500 impact giving
projection for 2020 is on par with the 25-year annualized in the current year. As such, above-average predicted
average of 6.3%, while the grantmaking projection for growth in the S&P 500 in 2019 and 2020 will influence
2021 is above the historical 10-year, 25-year, and 40-year strong foundation giving in 2020 and 2021.
annualized average growth.13
The majority of the projected increase in foundation
Specific factors that will significantly and positively giving for the years 2020 and 2021 will be influenced by
influence foundation giving in 2020 and 2021 include: vii
growth in the prior years’ GDP. However, growth in giving
positively influenced by rising GDP will be tempered by
• Average growth in the preceding year’s GDP; and
the projected rise in household and nonprofit net worth
• Above average growth in the S&P 500 in the present in 2020 and 2021. This tempering effect may be due to
and preceding years. 14 foundations restraining giving during positive economic
periods to save grant funding for economic downturns.15
v
This prediction does not explicitly break out directional changes in growth for each foundation type.
vi
All growth rates are based on predictions for giving in inflation-adjusted 2018 dollars using 2019 as the base year. The Philanthropy Outlook projects the growth rates of variables into 2020 and
2021; predicted growth rates are compared with the variables’ historical 10-, 25-, and 40-year annualized means. See Table 1 for these data.
vii
For the definition of these variables and their sources, see the “Variable Definitions and Sources” list in the Guide to the Philanthropy Outlook model at www.PhilanthropyOutlook.com. The Guide
to the Philanthropy Outlook also includes information about the stability of the variables.
THE PHIL ANTHROPY OUTLOOK 2020 & 2021 7
6.6 6.5
Giving by Estates % %
2020 2021
Giving by estates includes cash and non-cash donations (bequests) to U.S. charities contributed by all American estates—including those that itemize
their charitable contributions on their estate taxes and those that do not.
Giving by estates is predicted to increase by 6.6% in 2020
and by 6.5% in 2021. viii
The amount that an estate bequeaths largely depends These two factors will account for the majority of the
on asset health at the time of the donor’s passing. If the predicted growth in giving by estates in these years.
growth in assets held by estates slows, less will be given in
Giving by estates can vary greatly from year to year.
the form of bequests.
This volatility is mostly due to very large bequests made
The projections for giving by estates in 2020 and 2021 by a few estates in a given year. Therefore, a significant
are above the historical 10-year, 25-year, and 40-year increase one year will suppress the rate of growth in giving
annualized average rates of growth for giving of this type. 16
the following year. The projected increase in bequest
giving in 2020 and 2021 will hold unless substantially
The factors that will most significantly and positively
large gifts are made in 2019 or 2020.
influence estate giving in 2020 and 2021 include:ix
• Above average growth in the S&P 500, and
• Average growth in household and nonprofit net worth in
the preceding years.17
viii
All growth rates are based on predictions for giving in inflation-adjusted 2018 dollars using 2019 as the base year. The Philanthropy Outlook projects the growth rates of variables into 2020 and
2021; predicted growth rates are compared with the variables’ historical 10-, 25-, and 40-year annualized means. See Table 1 for these data.
ix
For the definition of these variables and their sources, see the “Variable Definitions and Sources” list in the Guide to the Philanthropy Outlook model at www.PhilanthropyOutlook.com. The Guide
to the Philanthropy Outlook also includes information about the stability of the variables.
80.4 1.4
Giving by Corporations % %
2020 2021
Giving by corporations includes all IRS itemized cash and non-cash donations to U.S. charities contributed by all American corporations and
businesses and their foundations.
Giving by corporations is predicted to increase by 0.4% in 2020
and by 1.4% in 2021. x
The projections for giving by corporations in 2020 and A slightly negative 1-year treasury rate may moderate the
2021 is predicted to be below the historical 10-year, positive results projected for corporate giving in these
25-year, and 40-year annualized average growth rates for years—decreased confidence in short-term investments
this sector. 18
may also mean that corporations are more likely to hold
back on increasing corporate giving.19
Specific factors that will significantly and positively
influence corporate giving in 2020 and 2021 include:xi
• Average growth in GDP, and
• Above average growth in the S&P 500.
These two factors account for the majority of the predicted
growth in giving by corporations in these years.
x
All growth rates are based on predictions for giving in inflation-adjusted 2018 dollars using 2019 as the base year. The Philanthropy Outlook projects the growth rates of variables into 2020 and
2021; predicted growth rates are compared with the variables’ historical 10-, 25-, and 40-year annualized means. See Table 1 for these data.
xi
For the definition of these variables and their sources, see the “Variable Definitions and Sources” list in the Guide to the Philanthropy Outlook model at www.PhilanthropyOutlook.com. The Guide
to the Philanthropy Outlook also includes information about the stability of the variables.
THE PHIL ANTHROPY OUTLOOK 2020 & 2021 95.1 5.5
Giving to Education % %
2020 2021
Giving to education includes all cash and non-cash donations from itemizing and non-itemizing American households to U.S. education charities,
including institutions of higher education, private K-12 schools, vocational schools, libraries, educational research and policy, and many other types of
organizations serving educational purposes.
Giving to education is predicted to increase by 5.1% in 2020
and by 5.5% in 2021. xii
The projections for giving to education in 2020 and 2021 These factors will account for the majority of the predicted
are higher than the historical 10-year, 25-year, and 40-year growth in giving to education in these years. However,
annualized average growth rate for giving of this type. 20
average growth in consumer expenditures on recreation
and average growth in consumer expenditures on nonprofit
Specific factors that will significantly and positively
services will temper these positive effects.
influence education giving in 2020 and 2021 include:xiii
• Average growth in personal consumption in the
preceding years,
• Average growth in GDP, and
• Average growth in consumer expenditures on health in
the preceding years.
xii
All growth rates are based on predictions for giving in inflation-adjusted 2018 dollars using 2019 as the base year. The Philanthropy Outlook projects the growth rates of variables into 2020 and
2021; predicted growth rates are compared with the variables’ historical 10-, 25-, and 40-year annualized means. See Table 1 for these data.
xiii
For the definition of these variables and their sources, see the “Variable Definitions and Sources” list in the Guide to the Philanthropy Outlook model at www.PhilanthropyOutlook.com. The Guide
to the Philanthropy Outlook model also includes a full list of the variables tested and included in each model, as well as information about the stability of the variables.
107.9 7.3
Giving to Health % %
2020 2021
Giving to health includes cash and non-cash donations from itemizing and non-itemizing American households to U.S. health charities, including
nonprofit community health centers, hospitals, and nursing homes; organizations focused on the treatment and/or cure of specific diseases; emergency
medical services; wellness and health promotion; mental healthcare; health research; and other types of health organizations.
Giving to health is predicted to increase by 7.9% in 2020
and by 7.3% in 2021. xiv
The current projections for giving to health in 2020 and These factors will account for the majority of the predicted
2021 are higher than the historical 10-year, 25-year, growth in giving to health in these years.
and 40-year annualized average rates of growth for giving
However, average growth in consumer expenditures on
of this type.21
service receipt sales of nonprofit organizations will temper
Specific factors that will significantly and positively these positive effects.
influence health giving in 2020 and 2021 include: xv
• Average growth in consumer expenditures on
healthcare services,
• Average growth in consumer expenditures on nursery to
high school education, and
• Average growth in household and nonprofit net worth.
xiv
All growth rates are based on predictions for giving in inflation-adjusted 2018 dollars using 2019 as the base year. The Philanthropy Outlook projects the growth rates of variables into 2020 and
2021; predicted growth rates are compared with the variables’ historical 10-, 25-, and 40-year annualized means. See Table 1 for these data.
xv
For the definition of these variables and their sources, see the “Variable Definitions and Sources” list in the Guide to the Philanthropy Outlook model at www.PhilanthropyOutlook.com. The Guide
to the Philanthropy Outlook model also includes a full list of the variables tested and included in each model, as well as information about the stability of the variables.
THE PHIL ANTHROPY OUTLOOK 2020 & 2021 115.1 5.0
Giving to Public-Society % %
Benefit 2020 2021
Giving to public-society benefit includes cash and non-cash donations from itemizing and non-itemizing American households to U.S. public-society
benefit charities, including independent research facilities, community development organizations, human and civil rights organizations, philanthropy
associations, commercial donor-advised funds, United Ways, federated charities, and other types of organizations.
Giving to public-society benefit is predicted to increase by 5.1% in 2020
and by 5.0% in 2021. xvi
In 2020 and 2021, public-society benefit giving is These factors account for the majority of the predicted
predicted to surpass the historical 10-year, 25-year, and growth in giving to public-society benefit in these years.
40-year annualized average growth rates. 22
However, average growth in consumer expenditures on
Specific factors that will significantly and positively education services in the preceding year, average growth
influence public-society benefit giving in 2020 and in personal savings in the preceding year, and above-
2021 include: xvii
average growth in the S&P in the preceding year may
temper this growth.
• Average growth in consumer expenditures on recreation
services in the preceding years, and Giving to public-society benefit organizations tends to
be affected by trends that influence consumer behavior
• Above-average growth in total giving, and
regarding luxury expenditures.
• Above-average growth in the difference in personal
savings rate in the preceding years.
xvi
All growth rates are based on predictions for giving in inflation-adjusted 2018 dollars using 2019 as the base year. The Philanthropy Outlook projects the growth rates of variables into 2020 and
2021; predicted growth rates are compared with the variables’ historical 10-, 25-, and 40-year annualized means. See Table 1 for these data.
xvii
For the definition of these variables and their sources, see the “Variable Definitions and Sources” list in the Guide to the Philanthropy Outlook model at www.PhilanthropyOutlook.com. The Guide
to the Philanthropy Outlook model also includes a full list of the variables tested and included in each model, as well as information about the stability of the variables.
12Table 1
H I S T O R I C A L A N N U A L I Z E D A V E R A G E R AT E S O F C H A N G E F O R G I V I N G
10-Year Average 25-Year Average 40-Year Average
T O TA L 2.0% 3.0% 2.7%
INDIVIDUALS 1.6% 2.5% 2.2%
F O U N D AT I O N S 4.4% 6.3% 5.7%
C O R P O R AT I O N S 3.3% 2.3% 2.8%
BEQUESTS 0.9% 3.9% 3.5%
E D U C AT I O N 3.4% 3.5% 3.2%
H E A LT H 3.8% 4.0% 2.4%
PUBLIC-SOCIET Y BENEFIT 4 . 1% 3 . 1% 4.3%
These data are drawn from historical giving data found in Giving USA 2019: The Annual Report on Philanthropy for the Year 2018. Data are adjusted for
inflation to 2018 dollars.
THE PHIL ANTHROPY OUTLOOK 2020 & 2021 13Stress Test Analysis
For this edition of The Philanthropy Outlook, the The Philanthropy Outlook’s current projection for growth
report presents a stress test for 2020 and 2021, using in total giving in 2020.27 All sources of giving would see
characteristics similar to the Great Recession of 2007- declines for 2020 and 2021 compared with the current
2009 to see how charitable giving would change compared projections. It is key to remember that this scenario
with The Philanthropy Outlook’s results. This stress test presents a comparison between the current projections, in
analysis does not suggest that any potential new recession which growth is expected to be strong.
would be equivalent in severity and length to that of the
Great Recession, rather, this analysis, which is modeled Giving landscape after the Great Recession
in part on the conditions used for the severely adverse As fundraisers and nonprofits consider how they may guide
scenario of the Dodd-Frank Act Stress Test (DFAST) for their organizations to be able to withstand the hypothetical
banks, serves a similar role as that of the DFAST—to conditions described in the stress test, it is key to consider
ensure that organizations could continue to function under the ways that the Great Recession has had a significant and
severely adverse conditions. Just as the results of the
23
lasting effect on charitable giving patterns.
DFAST test help banks to self-regulate and identify and
Overall, the percentage of households participating
address potential risks, this stress test analysis is intended
in charitable giving has declined by 13% from 2000
to help nonprofits and fundraisers in a similar way.
to 2016, according to data from the Philanthropy
Such a measure is helpful because the Great Recession Panel Study (PPS), a module within the University of
also demonstrated that the charitable sector is susceptible Michigan’s Panel Study of Income Dynamics.28 By
to the effects of economic downturns. In 2008, the S&P comparison, the share of households donating to charity
500 declined 40.8% over 2007, while GDP decreased from 2000 to 2008 held relatively steady. In addition, the
2.0% and another 1.4% the following year (all in real study found that American households gave a smaller
terms).24 The unemployment rate soared to 9.5% in June percentage of their income to charity after the Great
2009 (up from 5.0% in late 2007).25 At the same time, Recession compared with before.
total charitable giving declined 7.2% in 2008 and 8.0% in
Significantly, the Great Recession did not impact every
2009 in inflation-adjusted dollars.26 Giving by bequests,
segment of society at even rates. Some groups were hit
foundations, and corporations saw a decline in giving in
especially hard: notably, men held 78% of the jobs that
either 2008 or 2009, but giving by individuals was hit
were lost in the Great Recession, and unemployment
hardest, with a decline of 11.7% in 2008 and 5.7% in 2009
rates for men soared to 8.9% (compared with 7.2% for
in inflation-adjusted dollars.
women) in the first quarter of 2009.29 In addition, the
Given the enormous impact of the Great Recession on Great Recession hit at a time when people born in the
charitable giving, it makes sense for nonprofits and 1980s (generally considered older Millennials) were first
fundraisers to stress test their organizations and look entering the workforce. The difficult job market and wage
for ways to manage any potential risk. Under recession stagnation experienced by this demographic group has
conditions similar in scale to the 2007-2009 recession had long-term effects: a recent study found that the wealth
that would hypothetically begin in late 2019 and intensify level for this group is 34% lower than it would have been
through 2020, total giving would be 10.6% lower than had the Great Recession not occurred.30
14Accordingly, an analysis of the PPS data found that the or more closely followed the business cycle rather than
charitable giving patterns for both of the aforementioned broader economic trends.
demographic groups were negatively impacted by the
Great Recession: single men were 8.1% less likely to give R E S I L I E N T G I V I N G P AT T E R N S
after the Recession (compared with a 5.1% decline for Though individuals were significantly impacted by the
single women).31 Millennials were roughly 4% less likely Great Recession, some bright spots emerged. Nonprofits
to give after the recession than before and are not giving and fundraisers may consider strengthening their efforts in
at rates comparable to the rates of other generations at the the following areas to mitigate risk and ensure resiliency in
same point in their lives. the face of a potential recession:
While demographic-specific factors may play a role, • A recent longitudinal study of donor-advised fund
another study suggests that the Great Recession may have granting patterns found that payout rates (defined as
had a long-term negative impact on giving behavior more the ratio of total grant dollars awarded to assets), as
generally. The study found that the fall in charitable
32
well as flow rate (defined as the ratio of total grant
giving in the PPS after the recession could not be entirely dollars awarded to total contributions received by
explained by controlling for a number of different donor-advised funds in a given year), actually increased
variables, including shocks to income and wealth. One of during the Great Recession.35 These findings suggest
the study’s authors suggested that households may be more that donors with donor-advised funds may be uniquely
cautious about how to spend discretionary income in the situated to continue giving during a potential recession.
wake of the Great Recession, which may in turn lead to
• Donors and grantmakers appear to have responded
less charitable giving.33
to increased need during the Great Recession: giving
Lessons learned from the Great Recession to human services from all sources of giving actually
increased in inflation-adjusted terms in both 2008 and
It is also valuable for nonprofits and fundraisers to identify
2009, and giving to food banks in 40 cities increased
areas of the giving landscape that have proven to be relatively
31.9% from 2008 to 2009.36 Nonprofits and fundraisers
resilient in the years during and after the Great Recession.
might consider the importance of making a case for the
need that their organization fills, and may also consider
F O U N D AT I O N A N D C O R P O R AT I O N G I V I N G
the role that media coverage has in making donors
An analysis of the Million Dollar List, a database of gifts
aware of increased need during an economic downturn.
of $1 million or more, found that foundations actually gave
more gifts of $1 million or more during the recession.34
It is possible that foundations are more responsive to the
market, and therefore rebounded more quickly than other
sources the market improved after the Great Recession,
or that foundations responded to increased societal need
as a result of economic conditions. The same analysis
found that giving by corporations at the level of $1 million
THE PHIL ANTHROPY OUTLOOK 2020 & 2021 15Conditions That May Affect the Outlook for Giving
Changes to the variables used in the projection models income households have increased “social distance” from
for charitable giving have the potential to change the the rest of society as inequality increases, which translates
outlook for giving. For definitions of these variables and into a decreased impetus to give.
their sources, see Variable Definitions and Sources in
Offering a different perspective, one recent critique of
the Guide to the Philanthropy Outlook model at www.
philanthropy suggests that income inequality has had
PhilanthropyOutlook.com. The Guide to the Philanthropy
a positive effect on the assets of private foundations.40
Outlook also includes information about the stability of
However, this critique, along with others, raise concerns
the variables.
about the impact that income inequality might have in
This section of the report includes additional information philanthropy, arguing that mega-donors using private
about long-term trends and conditions that may affect the foundations and other philanthropic vehicles have the
outlook for giving. power to weaken or even circumvent civil society.41
Income inequality and critiques of Continued growth in income inequality could have a
philanthropy number of different effects in the coming years, especially
if mega-donors shift their giving behaviors, or if the
Multiple measures of inequality exist. One such measure, nonprofit community seeks to change policies and
the share of income held by the top 10% of families regulations internally or at the state and federal level in
in the United States, has been on the rise for several response to recent critiques.
decades.37 Another study of household wealth found that
the share of all wealth held by the top 1% of households Upcoming elections and new legislation
grew 9.9% from 1962 to 2013, and 33.0% for the next
Local, state, and national elections will take place in
4% of households. By 2013, the top 5% of households
2020. In general, political donations have not been
held 64.9% of all the wealth in the U.S. This trend has
found to have a negative impact on charitable giving.42
continued in recent years—the Gini index, which measures
However, a recent study by the Women’s Philanthropy
distance between incomes, increased a statistically
Institute identified changes in giving patterns around the
significant amount in 2018 over 2017.38
2016 presidential election: relevant progressive charities
There are multiple perspectives about the impact the rise received an increase in donations in the days immediately
in income inequality might have on charitable giving. following the election, and that increase was driven by
One recent study found that giving as a share of income women donors.43 This study raises the question of how
declined for high-income households in periods of high donor groups may shift their giving in response to political
inequality, and increased in periods of low inequality, events.
such as the period following World War II. The study
39
In 2020 and 2021, donors may respond to policy changes
controlled for income and a number of other factors,
proposed by potential presidential candidates should they
concluding that this trend is more behavioral and
be elected. For example, presidential candidates Senator
psychological in nature. The study suggests areas for
Elizabeth Warren (D-MA) and Bernie Sanders (D-VT)
future research, including exploring the theory that high-
have both proposed a wealth tax.44 There are different
16ideas about how mega-donors in particular may respond
to such a change in policy. Philanthropist John Arnold has
suggested that paying higher taxes may be perceived by
some mega-donors as a replacement for charitable giving.
Others have suggested that mega-donors would have an
increased incentive to take advantage of the tax benefits of
charitable giving under a wealth tax.45
Regardless, a new wealth-tax would likely create a major
incentive for donors to give in the year before the new
tax would go into effect.46 The philanthropic world saw
a similar situation in December 2017—experts urged
nonprofits to notify donors of the tax policy changes and
take advantage of the charitable deduction before the Tax
Cuts and Jobs Act went into effect.47 In addition, several
national donor-advised fund sponsors reported an influx
of new accounts in December 2017, which may also have
been a response from donors seeking to make a tax-
advantaged gift.48
Finally, new legislation may have an impact on charitable
giving in the coming years. For instance, several pieces
of legislation have proposed a universal charitable
deduction as a way for non-itemizing individuals to
claim a tax deduction for giving to charity.49 In late 2019,
Representative Mark Walker (R-NC) introduced a bill that
would allow a universal charitable deduction of $4,000 for
individuals and $8,000 for married couples. A universal
charitable deduction is expected to have a positive effect
on giving to charity.
THE PHIL ANTHROPY OUTLOOK 2020 & 2021 17Methodological Overview
To review our complete methodology, please view the for the years 2019 through 2021.50 The forecast for total
Guide to the Philanthropy Outlook Model at www. giving is produced as the sum of the four donor components.
PhilanthropyOutlook.com. Collectively, 34 different variables, plus lagged values for
many of these variables, were incorporated into the final
This edition of The Philanthropy Outlook produces forecasts
models for giving by donor and recipient subsectors.
for the annual growth rates and levels of individual/
household, foundation, estate, and corporate giving, as well In the initial stages of methodological development,
as giving to education, health, and public-society benefit all possible combinations of variables were compared,
18resulting in more than 100,000 regressions for individual/ one with the lowest root-mean-squared error (RMSE¬).51
household giving alone. Fewer regressions were needed We relied on historical data from Giving USA: The Annual
for the three remaining components. For each component, Report on Philanthropy and available IRS data.
the best model was selected by first considering its
See Figure 1 in the Guide to the Philanthropy Outlook
explanatory power through 2018. The models with the best
Model for a comparison of actual versus predicted growth
explanatory power were then re-estimated through 2007.
rates for total giving for the years 2007 to 2017, as well
One-year-ahead forecasts were constructed through 2018
as the “Variable Definitions and Sources” section for
for these models, and the best model was selected as the
THE PHIL ANTHROPY OUTLOOK 2020 & 2021 19a list of the candidate variables. We know that events When using the “base model” approach, we tested all
can sometimes have a delayed effect on giving. For that combinations of a set of subsector-specific variables.
reason, we considered previous-year and contemporaneous These variables were derived from the different types
values of the explanatory variables, as well as previous- of personal consumer expenditures, which allowed us to
year values of the dependent variables (i.e., historical evaluate variables specific to each subsector. Next, the
giving values). variables were tested with the lag of all personal giving
variables, and the resultant list was tested with the lag of
For the individual/household and corporate giving models,
all subsector-specific variables. This “revised model” was
it is not practical to test all variables at the same time.
then tested against all possible permutations of itself, along
Instead, we adopted a three-step approach. In the first
with variables from prior years’ models, which resulted in
step, only the current values of the candidate variables
the “final model” for each subsector.
were included in the regression. The best model within
this set was referred to as the “base model.” The selection Tables 2 and 3 in the Guide to the Philanthropy Outlook
procedure was implemented over all possible combinations Model describe the models for each source of giving and
of the lagged variables added to the base model. The best for giving to the recipient subsectors. Note that for each
model following this step was the “revised model.” source of giving, with the exception of giving by estates,
the adjusted R2s (coefficients of determination) are high.
In the third step, the selection procedure was run over
Moreover, the signs of the coefficients are generally
all possible combinations of variables in the revised
consistent with economic theory that giving responds
model. Any variables included in the final models from
positively to increases in the ability to give and general
previous editions of The Philanthropy Outlook were also
economic conditions. See Table 4 in the Guide to the
included for testing. The result was the “final model.”
Philanthropy Outlook Model to reference the ratio of
The estate and foundation models were estimated in a
RMSE to the standard deviation for each giving prediction.
single step because the number of candidate variables was
small enough that the previous and current values of the The forecasts of the different components were processed
variables could be evaluated in one program. using the final version of each model and covered 2019
to 2021.52 Implementing the forecasts entailed auxiliary
The models for estimating giving to the recipient
models for the explanatory variables (i.e., independent
subsectors were developed using a modified version of the
variables). These auxiliary models are described in the
aforementioned individual/household and corporate giving
Guide to the Philanthropy Outlook Model.
models. In general, giving to the recipient subsectors is
difficult to predict, as each of the subsectors experiences For a full list of variable definitions and sources, visit
unique conditions that affect giving. Moreover, because the Guide to the Philanthropy Outlook Model, www.
there are several subsectors that receive gifts from the PhilanthropyOutlook.com.
four major donor types, the subsectors experience more
variance in giving on a year-to-year basis than do the
sources of giving. To adjust for these factors, additional
steps were added to the original three-step approach.
20Limitations
The Philanthropy Outlook was developed using well-
established econometric methods. The models selected for
producing each component of The Philanthropy Outlook
are composed of a linear combination of growth rates (or
1-year differences) for key indicators. The results point
toward linkages between specific economic variables and
philanthropic giving. These linkages can be positive or
negative (inverse), as well as direct or indirect. With these
results, we cannot say that a particular variable caused
philanthropy to rise or fall; rather, they point us toward
what is likely to happen and why.
The Philanthropy Outlook is meant to be informational.
The Indiana University Lilly Family School of
Philanthropy and Marts & Lundy make no guarantees
about its accuracy. Similar to other types of predictions,
it is impossible to know ahead of time all the factors that
will affect giving into the future. While The Philanthropy
Outlook is based on scientific methodology, there are limits
to the use of such methodology to predict future outcomes.
We have confidence in the measures we have taken to
adjust for the Tax Cuts and Jobs Act (TCJA), including
our ongoing data partnership with the University Of
Pennsylvania Wharton School Of Business and the
incorporation of key variables directly affected by TCJA
in the models. However, the sweeping changes ushered in
by TCJA represent an out-of-sample change, with possible
behavioral effects that are difficult to estimate before final
data has been received.
THE PHIL ANTHROPY OUTLOOK 2020 & 2021 21References
1
The rate of change for the year 2020 is 8
Data for years prior to 2019 come from Giving 13
Prior-year projections are not included in
relative to the year 2019. The rate of change USA 2019: The Annual Report on Philanthropy this report. Data for years prior to 2019 come
for the year 2021 is relative to the year 2020. for the Year 2018, researched and written by from Giving USA 2019: The Annual Report on
the Indiana University Lilly Family School of Philanthropy for the Year 2018, researched and
2
“Error Term,” Investopedia, Retrieved Dec. 3, Philanthropy and published by Giving USA written by the Indiana University Lilly Family
2016, www.investopedia.com Foundation, www.givingusa.org School of Philanthropy and published by
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Growth in charitable giving is often driven
and Financial Time-Series with Non- from Giving USA 2019: The Annual Report on by prior-year growth in specific economic
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Forecasting, 20(2), 2004, 169-183; R. Fildes written by the Indiana University Lilly Family
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and Forecasting,” International Statistical
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Indiana University Lilly Family School of from Giving USA 2019: The Annual Report on
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Indiana University Lilly Family School of the Year 2018, researched and written by the Giving USA Foundation, www.givingusa.org
Philanthropy and published by Giving USA Indiana University Lilly Family School of
Foundation, www.givingusa.org. The figures
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Growth in charitable giving is often driven
Philanthropy and published by Giving USA
are all in inflation-adjusted dollars. The 10- by prior-year growth in specific economic
Foundation, www.givingusa.org
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in Table 1 of this report. 11
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Justin Pritchard, “Bank Stress Tests,” The
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a national charitable dataset going back to
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Annual Report on Philanthropy for the Year
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of Philanthropy, 2010, 2012, www.philanthropy. in this report. Data for years prior to
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iupui.edu 2019 come from Giving USA 2019: The
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12
“Chapter 5: Personal Consumption Year 2018, researched and written by the
7
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for the Year 2018, researched and written by
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Philanthropy and published by Giving USA
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Foundation, www.givingusa.org
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Howard J. Wall, “The ‘Man-Cession’ of 36
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this report. Data for years prior to 2019 come 2008-2009: It’s Big, but It’s Not Great,” Philanthropy for the Year 2018, researched
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written by the Indiana University Lilly Family org/publications/regional-economist/ by Giving USA Foundation, www.givingusa.
School of Philanthropy and published by october-2009/the-mancession-of-20082009- org; Rob Reich and Christopher Wimer,
Giving USA Foundation, www.givingusa.org its-big-but-its-not-great “Charitable Giving and the Great Recession,”
The Russell Sage Foundation and The
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Hillary Hoffower, “The Great Recession Stanford Center on Poverty and Inequality,
this report. Data for years prior to 2019 come created a domino effect of financial struggles 2012, https://inequality.stanford.edu/sites/
from Giving USA 2019: The Annual Report on for millennials—here are 5 ways it shaped default/files/CharitableGiving_fact_sheet.pdf
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Drew Desilver, “The many ways to measure
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Great Recession of 2008,” SAGE Publishing: Worsens, Widening To A New Gap,” NPR,
24
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Domestic Product,” Bureau of Economic 32
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Letters, 2017, 24 (21), 1542-1549, https:// to 2012. Nicolas J. Duquette, “Inequality and
25
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Giving USA Foundation, www.givingusa.org 34
Una Osili, Jacqueline Ackerman, and Yannan
Li, “Economic Effects on Million Dollar 41
Rob Reich, Just Giving: Why Philanthropy
27
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under a recession similar in scale to the 2007- doi.org/10.1177%2F0899764018800791 Anand Giridharadas, Winners Take All:
09 recession. Additional information about the The Elite Charade of Changing the World,
stress test conditions available upon request. 35
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McMullen, “Understanding Donor- Decolonizing Wealth: Indigenous widsom to
28
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vanguard-charitable191022. Understanding-Donor-Advised-Funds_
pdf?sequence=1&isAllowed=y working-paper-002.pdf
THE PHIL ANTHROPY OUTLOOK 2020 & 2021 23You can also read
