Individual Giving and the Pandemic

Individual Giving and the Pandemic

Cynthia Campbell, Director of PD&R's International and Philanthropic Affairs Division.

The United States continues to be the most generous nation in the world, according to the 2019 Charities and Foundations of America Annual World Giving Index Report. Some observers have expressed concern that the coronavirus will affect individual charitable donations. For some historical perspective, during the Great Recession, charitable donations declined by 7 percent in 2008 and another 6.2 percent in 2009, with a slight rise in the following years. The drop in giving was expected; many Americans had lost income and refrained from giving to secure their own finances. As the United States recovered from the Great Recession, total charitable giving also recovered, rising over the following years.

Now we have a new concern: the coronavirus and the economic consequences of the pandemic. We are already seeing the effects of the pandemic on individual charitable giving. A May 2020 survey by Charities and Foundations of America found that 73 percent of nonprofits surveyed have already reported a decline in contributions, and half of the respondents said that they expect to see revenue decline by more than 20 percent over the next year. Meanwhile, the need for services is expected to increase because of the coronavirus pandemic. Economists and fundraising experts predict that the drop in charitable giving will likely be more significant than that caused by the Great Recession, and recovery is likely to take longer, which could affect the support of programs for HUD-assisted residents beginning later in 2020 and through the next few years.

The organization conducted another survey of more than 400 organizations from late May to early June 2020. The results were stark: 16 percent of nonprofits surveyed failed to receive any funding in the previous month, and one in three said that they could be forced to close within the next 12 months. These findings have led many in the philanthropic community to worry that charitable giving will continue to decrease as the pandemic continues.

Another survey, conducted by the Association of Fundraising Professionals and the Center on Nonprofits and Philanthropy at the Urban Institute, found that charitable donations dropped by 6 percent among the 2,500 nonprofits surveyed in the first quarter of 2020. If this trend continues, the researchers estimate that more than $25 billion in donations will be lost by the end of the year.

Along with the effects of the pandemic, many are also concerned that the Tax Cuts and Jobs Act of 2017 (TCJA) may affect individual giving. The law lowers individual tax rates, which also reduces the value of charitable donations. Many taxpayers are no longer able to deduct charitable giving from their taxes, which could reduce their incentive to donate. Giving USA’s Annual Report on Philanthropy for the Year 2018 noted that individual giving dropped 1.1 percent. The Urban-Brookings Tax Policy Center estimates that in 2018, TCJA reduced the number of households claiming itemized charitable deductions from approximately 37 million to approximately 16 million. The good news is that this number rebounded by 4.7 percent in 2019, but it is yet to be seen if this trend will continue in the coming years. The pandemic and the financial insecurity that it has caused is of concern.

How will current events affect future giving? It’s important to first look at who is receiving charitable donations. According to Giving USA’s Annual Report on Philanthropy for the Year 2019, the top recipients of all donations are religious organizations — churches or other religious institutions. At $128.17 billion in annual donations, this category accounts for nearly one-third of all individual charitable donations. Most donations made to local religious institutions go toward salaries, building maintenance, and administrative costs. Educational organizations, at $64.11 billion, are the second-largest recipient of charitable contributions, making up 14.3 percent of total charitable giving. Human service organizations, those that support recipients of HUD assistance, received $55.99 billion, or about 12 percent of total charitable giving per year. Although it is not yet known how the switch to virtual services will affect giving to local religious institutions, anecdotal reports suggest that donations are down — by some reports, significantly down.

Will individual donors continue to support their local religious institutions and reduce other charitable giving? No one is sure how the distribution of individual donations will be affected.

The good news is that many major foundations have increased their philanthropy during the pandemic. We do not yet have exact figures on the percentage increase in major foundation giving or whether major donors will continue to increase their support. We will see these numbers reflected in Giving USA’s Annual Report on Philanthropy for the Year 2020.

In 2019, foundations provided $75.69 billion in donations, corporate giving totaled $21.09 billion, and individual giving accounted for $309.66 billion. Individual giving in the United States is critical to maintaining our social safety net, but major foundations also play a substantial role.

What do we take away from this information? It’s important to understand how the pandemic could affect the funding of the local organizations that provide additional support to our communities. Americans are incredibly generous, and there is hope that donors will return, but we should be prepared that, at least for the near future, the safety net provided by philanthropy may not be as robust as in the past.