Charitable giving has reached historic levels in the U.S. following the 2007–2009 recession, but this generosity may mask potentially negative trends, the Institute for Policy Studies says in a new report.
Charitable giving data analyzed in the report indicate that charities rely on increasingly large donations from a smaller number of wealthy donors and receive shrinking amounts from donors at middle and lower income levels.
The report found that itemized charitable contributions from those making $500,000 or more increased by 57% in the decade to 2013, and for those making $10 million or more, itemized contributions increased by 104%.
In addition, the number of grant-making foundations chartered in the U.S. grew by 28% in the 10 years to 2014, to 86,726, and their assets increased by 35%.
During the same period, deductions for charitable giving from donors making less than $100,000 dropped by 34%.
The report said one researcher had estimated the number of low-dollar and midrange donors to national public charities had declined by some 25% from 2005 to 2015—groups that had traditionally comprised the vast majority of donor files and solicitation lists for most national nonprofits since their inception.
According to the report, the rate of decline in small donors strongly correlated with indicators of overall economic security in the U.S., including employment, wages and homeownership.
Mega gifts now make up a big part of individual charitable giving, the report said. Between 2009 and 2014, the average million-dollar donation rose from $8.1 million to $14.1 million.
Where do contributions from wealthy donors go? Disproportionately to three sectors they favor:
- Education, whose $57.5 billion accounted for 22% of individual giving in 2015, had a 9% inflation-adjusted increase from the year before
- Arts, culture and humanities, whose $17.1 billion was about 6% of all individual giving, had a 7% increase from 2014
- International relief, which increased by 17.4% to $15.8 billion in 2015. This sector stood out by also still receiving considerable gifts from smaller donors
“Since the last recession, the charitable sector has seen tremendous growth in giving,” the report’s co-author, Helen Flannery, said in a statement. “That’s a good thing, in theory.
“But the growth is from donors at the top of the giving ladder,” Flannery said, while giving from small and midlevel donors is “steadily falling. And more and more giving is going into warehousing vehicles like foundations and donor-advised funds, instead of to charities on the ground.”
Risks of ‘Top-Heavy’ Giving
The report said the rise of “top-heavy” philanthropy confronted nonprofits and the public with several risks.
Charitable sector groups face increased volatility and unpredictability in funding, making it harder to forecast income and budget; a greater need to cultivate major donors; and an growing bias toward funding larger or heavily major-donor-directed boutique organizations and projects.
As well, the rising power of a smaller number of donors increases the potential for mission distortion.
Risks to the public include tax-avoidance giving, warehousing of wealth in the face of critical societal needs and self-dealing philanthropy. Wealthy donors could also use their philanthropy to extend power and protect privilege, the report said.
The report recommended changes in charities’ internal practices, in incentives for individual giving and in public policy.
“The trends in philanthropy may be less visible than trends in income and wealth inequality, but they are following the same trajectory,” the report’s co-author Josh Hoxie said in the statement.
“Without intervention, these trends lead toward multi-generational wealth dynasties on one side and widespread austerity on the other.”