As a proud member firm of the Giving Institute, we are dedicated to staying at the forefront of philanthropic analysis and trends. In this blog, we delve into the key findings of Giving USA 2023, offering a comprehensive exploration of the evolving dynamics, challenges, and opportunities in the realm of charitable giving.
A clear message emerges—the importance of adopting a diversified and balanced approach to philanthropy. This approach, which hinges upon cultivating authentic donor relationships and gaining a deep understanding of their impact, holds the key to navigating a rapidly evolving landscape.
Join us as we unpack the data and gain valuable insights into the path ahead for philanthropy.
Giving Is Down Over Prior Year but in Line With Pre-pandemic Giving
The big headline from Giving USA is that Americans gave less in 2022 than they did in 2021—both in current dollars and when adjusted for inflation.
But is it really fair to compare last year against 2020 and 2021? We don’t think so.
Instead, we see 2022 as a return to relative normalcy after two years of pandemic-based outliers. Giving is more in line with 2019, but the bigger picture is more disturbing. Total charitable giving has fallen only three other times in the last 40 years.
Complex Dynamics at Play
Like the economy itself, philanthropic giving in 2022 was a bit of an enigma.
Giving is highly correlated with stock market performance; the S&P declined 19.4 percent last year, which is likely the largest reason for the giving slowdown. A slight decline (0.1 percent) in disposable income is also to blame, as well as the highest rates of inflation since Reagan was president.
But on the opposite side, more Americans were working: unemployment in 2022 was the lowest it’s been since before humans walked on the moon. GDP grew nearly 10 percent, signaling a more robust economy than other factors suggest. The positives, however, were not enough to overcome other factors—primarily the market declines. The complex interplay of these factors leaves philanthropic giving in 2022 as a puzzle to unravel.
An Alarming Shift
We’ve moved away from the “donors down, dollars up” trend that has plagued philanthropy since 2008.
We’ve moved away from the “donors down, dollars up” trend that has plagued philanthropy since 2008. Unfortunately, that trend was replaced with one that’s even more concerning: “donors down, dollars down.” Over the past decade, the number of donors has declined by 19 percent. In 2022, donors dropped by 10 percent.
More Red Flags: The Addiction to Mega Gifts
This past year, five percent of all philanthropic giving came from only six donors.
If just one of these six had chosen not to give, our overall picture would have looked even worse.
The sustained reliance on gifts from the wealthiest Americans—at the expense of mid-level and lower-level gifts—is particularly troubling. Between 2016 and 2020, charitable deductions from donors with annual income under $200,000 fell 64 percent, largely because the 2017 Tax Cut and Jobs Act removed financial incentive to give. At the same time, charitable deductions from donors with annual income over $1 million increased 31 percent because the 2017 tax cuts provided these donors with more financial incentives to give.
Philanthropy is high on mega gifts and we need a more balanced approach. Think of a stock portfolio. One of the most basic rules is to diversify—never focus too heavily on one sector in case catastrophe strikes. In philanthropy today, most of our eggs are in the major gift basket. And this basket is too prone to factors beyond our control: the economy, the stock market, tax policy, inflation, not to mention the whims of the donors themselves.
Donor Retention Continues to Struggle
For the last decade, one of the biggest failures of the fundraising sector has been our inability to retain donors.
And we don’t seem to be learning from our mistakes. New donors that were gained in 2021 did not give again at the same rate in 2022, instead falling by 26.4 percent. Combined, new and new retained donors accounted for 81 percent of total donor decline year-over-year.
What We’re Seeing Differs from Much of the Data
It’s not all gloom and doom. The campaigns we have managed since the pandemic began are some of the strongest in our 19-year history. In fact, the last campaign study we conducted indicated that donors were willing to give more than the campaign goal amount we tested.
We’ve conducted hundreds of interviews with prospective campaign donors in the last two years. For the most part, their commitment to their philanthropic passions is more robust than before the pandemic; we’ve seen more seven-figure campaign gifts than at any time since we began leading campaigns.
Like the Giving USA data, however, we do see a concerning drop-off in mid-level giving. Rather than a pyramid, our campaign gift charts resemble an hourglass.
Giving by Foundations Is Catching up to Giving by Individuals
Foundations are giving more than ever before. In fact, $1 of every $5 given in 2022 came from foundations (21 percent); in 1982, only five percent came from foundations.
These gains come at the expense of individual giving. In the early 1980s, 81 percent of giving was made by individual donors as opposed to 64 percent in 2022.
Why the switch? Foundation giving began to increase in 2011 after dropping off during the 2008 Great Recession. And during the pandemic, foundations stepped forward to give substantially to solve myriad problems. Many foundations continue to give at these higher levels.
We should resist the urge to shift our attention to foundations at the expense of individual donors because individuals still make up the bulk of giving (73 percent when bequests are included in the calculation). And just as individuals require (and deserve) authentic cultivation and stewardship, so do foundations.
Giving to Education Dropped to #3 for the First Time Ever
Since at least 1981, the education sector has been the second-largest recipient of philanthropic gifts.
That changed in 2022, with gifts to human services taking its place. It’s far too soon to decide whether this is an aberration or a trend. Our prediction is that education will reclaim its number two spot again next year.
A Final Wake-Up Call
Only 1.7 percent of American disposable personal income was given to charity in 2022. This is the lowest rate on record—matched only by the year 1995.
Our takeaway is that we, as fundraisers, could do more to make our case to donors. Shift the focus from donors acquisition to donor cultivation and stewardship efforts. Make real, authentic relationships with donors so they recognize the true impact of their gifts.
Our efforts must overcome some factors beyond our control, namely the decline in religious affiliation and the increase in charitable crowdfunding.
Historically, we’ve been taught to give as part of worship—in a church, synagogue, or mosque. Children learn the act of philanthropy by watching their parents and other congregants give when the plate is passed. As attendance at worship services decline, we lose the opportunities to teach communal and generational giving.
The rise of charitable crowdfunding is another disruption to traditional philanthropy. Gifts to individuals through crowdfunding platforms are not included in the Giving USA data. Americans who give through GoFundMe sites are still practicing generosity but are cutting out the nonprofit intermediary.
About the Report
Giving USA: The Annual Report on Philanthropy, the longest-running and most comprehensive report on the sources and uses of charitable giving in America, is published by Giving USA Foundation, a public service initiative of The Giving Institute. It is researched and written by the Indiana University Lilly Family School of Philanthropy at IUPUI.
2022 Fundraising Showed Substantial Weakness Through Q4. (2023, April 16). Association of Fundraising Professionals. https://afpglobal.org/2022-fundraising-showed-substantial-weakness-through-q4
Giving USA 2023: The Annual Report on Philanthropy for the Year 2022, a publication of Giving USA Foundation, 2023, researched and written by the Indiana University Lilly Family School of Philanthropy. Available online at www.givingusa.org.
How Do We Give? (2020, March 17). National Museum of American History. https://americanhistory.si.edu/giving-in-america/how-do-we-give