The United States experienced a rare decline in charitable giving last year. According to a recently released Giving USA report, total giving in 2022 fell to $499.3 billion, a drop of 3.4% in current dollars and 10.5% when adjusted for inflation. This decline is alarming to many nonprofit leaders, and rightfully so. This was only the fourth time in four decades that year-over-year giving did not increase, and one of the steepest declines ever recorded. Giving is the lifeblood of America’s nonprofits, many of which are already struggling to keep up with inflation. Fewer resources will translate into fewer services available for people in need.
How concerned should we be?
Historically, giving rebounds quickly after a decline. The one exception was in 2008 and 2009, when giving declined for two consecutive years during the Great Recession. Last year’s decline was a different scenario, and it is unlikely we will experience anything like that. More likely, 2022 represented a one-time “reset” in giving. During the pandemic, donors dug deep into their pockets and gave at record-setting levels. Americans always give generously when disasters strike, and – as I have been cautioning for many months – the extraordinary generosity we experienced during the pandemic was likely akin to “disaster-relief fundraising in slow motion” and not sustainable given current conditions. With the worst now behind us, it shouldn’t come as a surprise that 2022 giving fell back to pre-COVID levels, especially amid soaring inflation and a slump in the financial markets. The good news? If you remove COVID from the equation, in current dollars 2022 giving was up nearly 14% from pre-pandemic levels and held steady even when accounting for record-high inflation.
Some sectors did not even experience a decline. Giving to religious organizations, for instance, increased 5.2 percent in current dollars year over year. This is positive news, especially in the wake of the dramatic declines in church attendance coming out of COVID (according to Pew Research Center, 20 percent of survey respondents reported attending services in-person less often than before the pandemic). Overall, religious giving as a percent of the whole has been steadily declining for decades, but still tops the list of all sectors of giving – representing 27% of the total. Education – which has long captured the second biggest share of charitable gifts after religion – fell 3.6 percent and slipped to third place this year, receiving 13% of all contributed income. During the pandemic it was clear that donors prioritized giving to human services (according to one recent report, online giving for hunger and poverty relief organizations increased by a whopping 390% during the pandemic). As would be expected, with the end of the pandemic, giving to human services began to level off in 2022, but is still at a high enough level to edge this sector into second place by a small margin, with 14% of the total. Donors also shifted more of their giving to arts & culture last year. In fact, the total amount contributed to arts, culture, and humanities reached its second-highest value in 2022. This supports the view that 2022 represented a post-pandemic reset in giving, as donors begin to shift some of their giving from urgent human service needs back to other priorities that they care about, such as arts and culture.
What are the key takeaways from this year’s report?
If you set aside the headline and dig deeper into the data, you will find that there are four key takeaways from this report that point to longer-term trends that fundraisers need to pay attention to.
- Giving by individuals continues to decline. Historically, individuals typically give the bulk of all donations. Last year, donations from individuals accounted for just 64 percent of all gifts, the fourth year in a row they made up less than 70 percent of all giving. This is a trend we have been seeing in the data for multiple years. Accounting for inflation, individual giving declined 13.4 percent last year, which is the steepest decline we have seen yet, mirroring other data suggesting this trend is accelerating. Overall, this is driven by a dramatic decline in giving from middle-income households. Collectively, middle-income households have been the backbone of charitable giving for most of the past century. Unfortunately, giving from this critical segment of donors has been shrinking for over a decade as fewer and fewer middle-income Americans are donating to charity.
- Major giving continues to grow in importance. A decade ago, upper-income households made up less than a third of all charitable deductions. Today, giving from affluent donors is almost 60% of the whole. Giving instruments favored by these donors also continue to blossom. Donor-advised funds in particular are growing in importance, now accounting for almost 10% of total giving in the United States. Fidelity Charitable alone reported over 2.2 million contributions totaling $11.2 billion in 2022, a $1 billion increase over the previous year.
- Contributions from ultra-high net worth donors had a greater impact on total giving than in any previous year. Gifts of $500 million or more accounted for 5 percent of all giving from individuals in 2022, according to the report. More than half of this segment of giving — totaling almost $14 billion — came from just six households.
- Foundations provided more than 20 percent of all the money contributed to charity. Foundation grants are becoming an increasingly important source of income for nonprofits. Applying for grants is hard work, and the competition for these dollars is intense, and unfortunately many smaller nonprofits lack the internal competency and resources they need to win these grants. In cases like these, it makes sense to hire a grants consultant to help.
What does this all mean?
First, it shows that giving in this country is resilient. Americans are characteristically generous people. Despite decades-high inflation and a major slump in the stock market, Americans still gave almost $500 billion to charities last year, an amount that exceeds the GDP of all but 25 countries in the world.
At the same time, it is important to recognize that giving patterns change over time. Some changes are short-lived, related to changes in near-term circumstances. 2022’s overall decline in giving and shifts in donors’ priorities likely fall into this category.
Other changes are more significant, reflecting major trends that will have a long-term impact on giving. The most notable of these is the collapse in giving from middle-income Americans and the increasing importance of major giving. This seismic shift in the philanthropic landscape has the potential to swallow up uncountable numbers of nonprofit organizations if fundraisers don’t adjust to these new realities and prepare for what’s coming.
Are you convinced that your nonprofit organization is “future-ready”? If not, why not reach out and start a conversation with us about how our team can help you discover a better way to fundraise? We can help you rethink fundraising – in a phrase, to start “treating every donor like a major donor” – and help your fundraisers be better prepared for this coming sea-change in giving.
