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Financial Planning > Charitable Giving

Charitable Giving Will Grow in 2016 and 2017: Report

By Michael S. Fischer

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The nonprofit sector in the U.S., and in particular education, can look forward to growth in charitable giving this year and next, according to researchers at the Indiana University Lilly Family School of Philanthropy.

According to a report presented last week by Marts & Lundy, a fundraising and consulting firm, giving is expected to grow by 4.1% in 2016 and by 4.3% in 2017, both rates of change in 2014 inflation-adjusted dollars.

The report projected that total giving increases in both years would exceed the five-, 10- and 25-year annualized average rates of growth in total giving, and would fall just below the 40-year average growth rate of 4.4%.

The report’s data for predicted year-to-year growth rates in U.S. philanthropy for 2016 and 2017 included overall giving; giving by individuals/households, foundations, estates and corporations; and giving to education. It also included context and explanation for the economic factors and conditions that will significantly influence the predicted changes in giving.

Researchers projected that giving by all source types would rise in 2016 and 2017. Foundations will experience robust growth this year and next — 5.7% and 6.4%. Bequests are expected to grow by 4.8% and 4.9%, and corporations by 4.6% and 4.7%.

Giving by individuals and households, which represents nearly three-quarters of total giving in the U.S., is expected to grow by a more modest 3.7% and 3.8%, reflecting the unevenness of economic trends that shape households’ giving.

According to the report, several economic factors are expected to have a significant positive effect on U.S. charitable giving in 2016 and 2017, including projected growth in the S&P 500 Index, personal income and the net worth of households and nonprofits.

It noted that trends in the current year’s S&P 500 influence giving in the next year as higher-income households often budget their current years giving based on the previous year’s assets.

The report stressed that factors such as changes in tax policy or significant changes in the world or U.S. economy could affect the predictions for giving.

Donations to education, which historically has represented about one-sixth of all U.S. giving, are expected to grow by 6.3% this year and by 6.1% next year, the report said. Educational philanthropy includes support for higher education, private K-12 schools, public school foundations, libraries and many other types of educational organizations.

“We project stronger growth in giving to education in 2016 and 2017 than in overall giving or in any of the sources of giving,” Una Osili, the Lilly school’s director of research, said in the statement.

“This may be due in part to the increasing interest of donors, and especially wealthy donors, foundations and even corporations, in funding higher education, as well as a growing role for philanthropy in K-12 education.” Giving Patterns Shift

The report said changing demographics in the U.S. were causing shifts in charitable giving patterns. Rich millennials, for one, are likelier than other generations to use their wealth to create social impact, and are questioning how to leverage their philanthropy to most effectively create change.

Diversity in the population is also making the face of philanthropy less white. Some 40% of millennials are nonwhite, the report said, and the current youngest generation — so-called Generation Z — is about 50% nonwhite and comprises a considerable blend of races and ethnicities.

Diversity is also seen in the domains of religion and the LGBTQ community.

These demographic shifts are occurring at the same time as a changing economic climate and tumultuous political dynamics, the report said.

Technology is also affecting philanthropy by bolstering nonprofit transparency, engaging donors, enabling easier giving and philanthropic involvement, and leveraging peer-to-peer fundraising.

“The involvement of a new generation of philanthropists is now bearing fruit and institutions, particularly educational institutions that can inspire and engage donors in their future, have unique opportunities,” John Cash, Marts & Lundy’s board chairman, said in a statement.

“As the disparity between the very wealthy and the rest of our society grows, the new report demonstrates that nonprofits should focus their attention on all levels of giving and should pay special attention to the potential for securing leadership commitments from top-level donors.”

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