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by Robert F. Sharpe, Jr.
In recent weeks, many have raised questions about the ways current economic conditions
may affect charitable giving. History teaches us much of what we may expect and suggests proactive steps
we can take today to adjust our fund development efforts for the remainder of this year and beyond.
Looking back at the numbers
First, abundant evidence suggests charitable giving overall has not declined significantly during periods
of recession over the past 40 years. According to Giving USA Spotlight, Issue 3, 2008:
“Total giving has increased in current dollars in every year but one since recording began. The
exception is 1987, when a tax law change in 1986 prompted some people to ‘give early’ in order to
maximize the value of tax deductions they could claim. Economic changes, such as slowed
growth or a decline in gross domestic product, occur without economic recession. When the economy
shows stress, whether it is a recession or not, giving may grow more slowly. It is important to note
that giving still grows. In current dollars, before adjusting for inflation, giving has
increased an average of 8.4 percent in years without a recession. In years with a recession, giving has
increased 6.2 percent (also in current dollars).”
When adjusted for inflation, Giving USA reported in the same publication that giving holds steady
or declines only slightly during periods of economic recession:
“The average rate of change in giving during a recession is a drop of 1 percent. This decline compares
with the total 40-year average of [inflation adjusted] growth in giving of 2.8 percent for 1967 through
2007. During years without a recession, giving has increased an average of 4.3 percent.”
The report goes on to state that many charitable entities continue to see increases in giving even during
recessions:
“Not all charities, or even all types of charities, experience the ‘national
average rate of change’ in any year, let alone in recession years. In fact, Giving USA surveys from 2001
through 2007 found that in all years, 49 to 59 percent of charities saw growth in giving. Even in the
worst year surveyed (2002), less than half saw a drop in total gift dollars received.”
History reveals giving continues
Despite all of the evidence regarding giving during recessionary periods, some have questioned
whether we are now in an economic situation different than the past and whether the history of the last
40 years is still relevant. Are we in “uncharted territory?” Recently, commentators have likened the current economic situation to the
Panic of 1907 that lead to the Depression of 1908. In a September 2008 interview, former Federal
Reserve chairman Alan Greenspan stated the financial crisis that began with the collapse of the
subprimemortgage market last year “is probably a once-in-a-century event.”
Does this mean we may be encountering a more serious set of challenges to philanthropy than
any of the more recent recessionary periods? Is there a need to look farther back in history? Evidence
suggests that fund raising was alive and well even during the Depression of 1908. In fact, Texas Christian
University (TCU) announced the following in its 1908 annual report on its fund-raising efforts:
“Endowment is the key to the campaign. Resting awhile from brick and mortar, it is purposed
to concentrate on obtaining an impregnable financial backing, as the surest guaranty, not only for
permanency, but for the highest grade of work as well…One of the brightest hopes lies in the increasing
number of able people who are remembering TCU with large donations in the form of annuity
gifts, named endowment funds, and bequests…The day of larger accomplishments is at hand.”
In 1992, at a time when the U.S. was grinding through a deep recession and some were
actually predicting conditions approaching another Great Depression, The Sharpe Group prepared a historical
report outlining research on philanthropy during the Depression of the
1930s. “Philanthropy in Uncertain Times” examined fund raising in America during that era based on
contemporary reports and studies completed shortly after the end of World War II.
While no one knows the exact extent of the economic crisis we now face, we can take to heart some of
the lessons of the Great Depression.
Giving was, in fact, negatively impacted somewhat at the outset of the Great Depression. Note trends
in giving by living individuals included in a landmark 1950 report, Philanthropic Giving, published by
the Russell Sage Foundation. Totals have been adjusted to 2007 dollars:
Indications are that giving did not decline dramatically in the immediate aftermath of the crash of
1929. In fact, The New York Times reported on December 8, 1931 that giving to 155 Community Chests
(predecessors in many cases to United Way organizations) rose some
14.9% between 1930 and 1931. The 1950 Sage Foundation report also indicated that charitable giving
increased overall in 1931.
Bequests more important
Similar to more recent periods of recession, patterns of giving were uneven during the Depression, with
some organizations reporting better results than others. It was reported
toward the end of the Depression in 1939 that a number of educational institutions raised more funds during
the 1930s than during the preceding period of prosperity in the 1920s. The ways in which gifts were made
also showed a shift. An article in The New York Times in April 1939 reporting on gifts to higher education
noted that “although [outright] gifts showed a decrease in Depression years, the amount of bequests
showed a sharp increase.”
Other reports at the time also indicated that where major gifts were concerned, bequests became a
much higher percentage of reported gifts, peaking at some 70% of substantial gifts reported in 1933. By
the end of the Depression and the beginning of World War II, the percentage of bequests had returned
to more traditional norms of 10% to 20%, depending on the reporting source. It is interesting to note that
over the past 25 years, bequests to higher education as reported by the Council for Aid to Education (CAE)
have averaged 23% of individual giving
with charitable remainder trusts
and other life income gifts, bringing
that total to the 30% to 35% range over time, depending on whether
face value of trusts and annuities or
present value is reported.
All indications from data summarized
in the Sharpe report of
1992 as well as experience during
the ensuing 16 years indicates
that donors may be more likely to
make commitments in the form of
bequests and other planned gifts in
lieu of outright gifts during times
of economic uncertainty.
Mortality trends are presumably
not affected by economic
vicissitudes, so rates of bequest
realization are unaffected. Studies
also show that the time period
between making bequests and
receipt by charities may actually be
reduced during periods of economic
downturn as more older persons
revise their plans very late in life
based on changes in their economic
circumstances.
In fact, the latest data from the
Sharpe Estate Information Database,
a compilation of statistics
on thousands of recently received
charitable bequests, reveals the
average age at completing a will
that actually leaves funds to charity
is now 80, with a median age of
79. The average age at death is now
85, with a median of 84. While this
data may seem contrary to other
reports based on surveys of living
donors of all ages, prudent organizations
may wish to verify this
information on their own through
a study of a number of their most
recently opened estates.
Back to relationship basics
Regardless of whether this
economic slowdown reaches true
recession levels, those in fund development
may be wondering where
to go from here. While there are
specific ideas in the box below, in
general, gift planning professionals
should communicate the simple
message “Near, Dear, and Clear.”
Make every effort to be as
“near” to your donors as possible.
See every important donor face-to-face
as soon as is practical. If there
are geographic limitations, use the
telephone and any other means to
create a sense of “nearness.”
Do all in your power to be “dear”
to donors. In difficult times, donors
continue to support the entities
about which they really care. It is
difficult to create those types of relationships
in a short period of time.
It is much easier to strengthen the
ones that already exist.
Be prepared to make it “clear”
why funding is needed. If you do not
have a compelling case for support
in this environment, it will be very
difficult to raise funds.
In conclusion
No one can predict the future.
We can, however, do all in our power
to examine the current reality that
confronts us, even as it changes
on a daily, if not hourly, basis. History
tells us that Americans are
generous people. Charitable giving
provides intangible rewards for many
donors that are as fulfilling and
lasting as fortunes can be fleeting.
Taken together, the nonprofit
sector in America provides untold
billions of dollars of vital services
in health, religion, education, social
services, science, conservation, culture
and more, and as a sector is a
critical partner along with the private
and public realms.
Those privileged to serve in
positions of leadership in America’s
nonprofit community shoulder a
responsibility every bit as great, if
not greater, than those working to
restore America’s economic vitality.
Now is the time to look to the future
with confidence that can be gained
from the past and employed in
appropriate ways to assure that our
nonprofit sector remains strong and
capable of delivering the tangible
and intangible services that make a
society great, regardless of immediate
economic fortune.
Editor’s note: This article is excerpted from a memorandum distributed to Sharpe clients in
late October. The complete document along with the Sharpe report on giving during the
Great Depression and an article to help advisors with their clients may be accessed at
www.sharpenet.com/uncertaintimes.
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