The latest edition of the annual Giving USA report shows that total giving in 2016 rose 2.7 percent (1.4 percent adjusted for inflation) from the revised estimate of $379.89 billion for 2015. Published by the and researched and written by the , the report also found that charitable giving from individuals, foundations, and corporations — and to all nine major categories of recipient organizations — increased in 2016, just the sixth time in the last forty years that that has happened.
The numbers would seem to support the idea that many Americans, eight years after the start of the worst economic downturn since the 1930s, are feeling better about their finances. They do little, however, to explain the widespread anxiety and economic insecurity that fueled the political rise and election of Donald Trump as president of the United States. To help sort things out, PND spoke with Una Osili, director of research at the Lilly Family School of Pahilanthropy, about the report's findings and what they tell us about wealth, inequality, and the changing landscape of philanthropy in America.
Philanthropy News Digest: The big headline from this year's report is that total giving hit a record $390 billion in 2016. What's your favorite takeaway from the report?
A key finding is that individuals, who are responsible for 72 percent of all giving in the U.S., are the drivers of American philanthropy....
Una Osili: A key finding is that individuals, who are responsible for 72 percent of all giving in the U.S., are the drivers of American philanthropy. If you look at the last two years, individual giving has registered the highest growth rate over that period, and this year's report confirms the observation that individuals play a critical role in philanthropy.
PND: The report found that giving to all nine recipient categories was up in 2016, a rare occurrence. Which of those categories saw the biggest gains, and what does the fact that giving was up across all categories tell you?
UO: The subsectors that saw the largest growth were the environment and the arts, followed by international. In all three of those areas, we are seeing significant innovation in terms of fundraising approaches and the use of new methods to build relationships with donors.
The takeaway here is that innovation does matter, and organizations in those sectors are breaking new ground in how they think about donor engagement and using technology. It's also interesting that the environment, and international affairs as well, are very much top of mind with donors and funders as a result of the public policy debates we've been having.
PND: You mentioned that the increase in giving in 2016 was largely driven by the 4 percent jump in giving by individuals. How closely does individual giving track income and/or wealth inequality?
UO: In general, giving trends tend to reflect overall economic growth and household wealth and income trends. In other words, individuals give when they are economically and financially secure. That said, inequality is an important trend to examine alongside growth in income, because as the economy has recovered we've seen that household incomes at the top have recovered faster than incomes in the middle and at the bottom, and that has the potential to influence where we can expect to see growth in giving over time.
PND: As PND and other news outlets have reported, there was a spike in donations to the , , and other progressive nonprofit groups in the weeks after Donald Trump was elected president. Are you able to say what kind of impact, if any, the election had on last year's giving totals and trends?
It may be a bit early to unpack how the results of the election affected giving, but what the election did do was to raise public awareness of certain issues, whether it's the environment, civil liberties, or reproductive rights....
UO: I think it may be a bit early to completely unpack how the results of the election affected giving. But as I mentioned, what the 2016 election did do was to raise public awareness of certain issues, whether it's the environment, civil liberties, or reproductive rights. And I think the heightened awareness of these and other policy issues has the potential to influence giving going forward.
PND: In the release that accompanied the report, your colleague Patrick Rooney is quoted as saying that we saw something of "a democratization of philanthropy in 2016." What did he mean, and what are the main factors driving that trend?
UO: I think the point he is making is that giving in 2016 was more broad-based. As you noted, all nine major subsectors showed growth, including the arts, the environment, education, human services, and health. In addition, we did notice that in several categories it wasn't just mega-gifts that were driving the increase.
PND: Have you and your colleagues done any work on how donor-advised funds sponsored by large commercial firms might be changing the way Americans give?
UO: This year, Giving USA has a supplement on donor-advised funds that's included in the report. And one of the areas we look at is how donor-advised funds are growing, and the implications of that growth for charitable giving.
PND: And they are?
UO: Well, one is the idea that individual donors benefit from having an increased array of tools from which to choose. The question then becomes, How can nonprofits adapt to this changing landscape, and what are the public policy issues that will emerge within the growing popularity of donor-advised funds raise?
PND: What side of the debate do you land on? Are donor-advised funds a net-plus or net-minus for charitable giving?
UO: There’s definitely an opportunity for more research on donor-advised funds, not least because to date there really hasn't been much updated data on how donors are using them. I think the release of the report is an opportunity to raise awareness about the need for more research in this area.
PND: Back to the headline number of $390 billion. That's a big number, but as a percentage of GDP it's the usual 2 percent, in inflation-adjusted terms, that we've come to expect. Do you have an explanation for why the giving-to-GDP ratio never seems to budge?
UO: Well, $390 billion is a large number, and it's impressive on its own terms. However, the U.S. economy is much bigger than $390 billion, and it would take a lot more growth in philanthropy — holding all other factors constant — to actually boost that ratio.
PND: Have we seen an expansion of the giving-to-GDP ratio at any point over the last, say, twenty-five years?
UO: Well, in the 1990s, we did see giving as a share of GDP rise quite significantly. It went from about 1.7 percent in 1996 to about 2.2 percent in 2001. And then it fell back again during the Great Recession, when it went down to 1.9 percent. I know, these seem like small changes, but the uptick in the 1990s was quite interesting, because the 1990s were a period of economic expansion, and with that we witnessed significant wealth creation, in the tech industry and other sectors, as well as a significant number of foundations being created. So, what we saw in the '90s is that it is possible to move the needle on giving as a percentage of GDP, but it would take a lot more giving to make it happen.
PND: Have you collected any data on giving by region? And if you have, what does it tell you about how generous, say, newly minted billionaires in Silicon Valley are?
We are seeing with some of the younger tech donors that they are starting their philanthropy earlier in life, which is a very different pattern....
UO: Those numbers are hard to analyze and compare across regions and time. However, we are seeing with some of the younger tech donors that they are starting their philanthropy earlier in life, which is a very different pattern. They're starting in their twenties and thirties to make very significant gifts, and they're also thinking about their giving in new ways. Many of tech donors are looking at new forms of giving, whether that's impact investing, or collaborative models of giving, or something like what Mark Zuckerberg and his wife, Priscilla Chan, have done with the , which, as you know, is an LLC that does grantmaking, impact investing, and engages in political advocacy. So we're seeing the new tech donors opt for different models and seeking to innovate in philanthropy, just as many of them have done in their business careers.
PND: Have you and your colleagues adjusted your methodology so as to capture some of these newer giving models? I can't imagine it would be easy, but is it something you've discussed or would like to do?
UO: I'm glad you asked. The school has done some work in this area — I'm thinking in particular of a report we issued about three years ago on program-related investments and how they are changing the philanthropic sector. But the challenge is that while some types of impact investments — PRIs, for example, which are a formal part of our tax code and count toward a foundation's payout rate — have been well tracked over time, approaches like mission-related investments, where foundations can apply a specific percent of their assets toward their mission, are more difficult to track because each foundation may be defining their terms differently. Again, because of the growing interest in some of these newer approaches, I think it represents an opportunity for the Lilly School over the next few years.
PND: It's mid-June as we speak, and the stock market is up more than 20 percent since the beginning of the year. Is the stock market a good indicator of future giving, and would you be surprised, based on the performance of the major indices so far, if the headline number in next year's Giving USA report surpasses $400 billion?
UO: The stock market is one of our indicators in terms of correlation with giving over time, and as we begin to look at what is happening in 2017, we've seen, as you said, strong returns within the equity market. But there are still six months left in the year, so we'll just have to wait and see where we end up, especially because so many donors tend to wait till the end of the year to do a lot of their giving. We should also pay attention to other economic factors, including growth in GDP, personal income growth, and so on.
PND: And the four-handle on the overall giving number for 2017?
UO: Given the overall patterns we're seeing so far this year, there's a very good chance we'll not only hit the $400 billion mark but exceed it. But don't forget, there are still six months left in the year.
PND: Right. Past performance is not a guarantee of future results.
Mitch Nauffts spoke with Osili in June. The transcript of their conversation has been edited for length and clarity. For information on the Newsmakers series, contact Mitch at [email protected].