Giving USA 2023: Context is Key

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Clare Golla: [00:00:00] Giving USA's recent release of 2022 key findings is here, and it has set off some concern across the social sector because of headlines like Steepest Drop Ever, but we think there's more to the results than meets the [00:00:15] eye. So, to dig beneath the headlines, we've asked two experts to share their read.

Hi everyone. Welcome to Inspired Investing. I'm your host, Clare Golla, head of [00:00:30] Philanthropic Services at Bernstein. This podcast is where we strive to connect and share insights with listeners like you who are engaged in the nonprofit, philanthropy, and broader social sector. Today I'm thrilled to regroup with two widely recognized experts offering their [00:00:45] take on this year's Giving USA report.

Uh, Kristin Carlson Vogen is the Senior director and interim vice president of philanthropic services. At the Chicago Community Trust, and she's joined by Laura MacDonald, who's the immediate past chair of Giving USA [00:01:00] foundation and the founder of Benefactor Group. Laura, it's a three-peat for you on this show.

I don't know if you even realized.

Laura MacDonald: Think that's right.

Clare Golla: Amazing.

Laura MacDonald: But now I finally have the best job. Immediate past chair. [00:01:15]

Clare Golla: That's right. That's right. So now that the pressure's off, thank you both so much for joining. Really appreciate you being here today.

Happy to be here.

Great. So before we get started, I do just want to remind listeners of each of your roles so that they can better appreciate where each of you is [00:01:30] coming from.

So Kristin, why don't we start with you?

Kristin Carlson Vogen: Sure. So, I'm at the Chicago Community Trust, the Chicago Community Trust awarded. Over 1.5 billion in grant funding to more than 11,000 local nonprofit organizations last year, [00:01:45] including more than 1.45 billion in DAF grants. Of that of that amount, 277 million stayed here within this Chicago region, which is a 52% increase over the prior year.

I work directly with families and individuals to focus their [00:02:00] giving for impact.

Clare Golla: Great. Okay. So, you are someone who is working specifically with donors on an ongoing basis.

Kristin Carlson Vogen: Correct.

Clare Golla: Laura, let's hear from you. Thank you.

Laura MacDonald: So I established benefactor group in the year 2000 coming out of a career in some major [00:02:15] fundraising initiatives, like the first billion dollar campaign at the Ohio State University.

And in the last 23 years, we've grown to a firm that works with nonprofits all over the country, occasionally around the world. And their donors, um, solving big problems through strategic [00:02:30] planning or fundraising or, uh, search. As a part of that, I also became involved in the trade association, the Giving Institute, which is the sibling to the Giving USA Foundation, and had the privilege of working first on the editorial review board for the Giving [00:02:45] USA and ultimately, uh, rising through the ranks and having the great privilege of serving as chair for two years.

Clare Golla: Okay. Thank you so much. And by the way, for those listeners who aren't aware, this is the most widely distributed state of the universe [00:03:00] on philanthropic giving across the US a widely read by donors and practitioners alike. So, it's really a pleasure to be here with both of you. Um, so look, I mean, I'm going to just jump right in here.

The top line results of this year's report, you know, [00:03:15] it's, Donors down, dollars down. If you, you know, just look at the, at the top line. But if we look under the hood here, a different or a more nuanced story emerges. What are you saying to those folks in the social sector who are feeling uneasy, for instance, about [00:03:30] these findings?

Why don't I start with you, Laura?

Laura MacDonald: So, giving usa, the top line data is really an estimate of the sources and uses of philanthropy in America, and it's this amazing, longitudinal study that goes back to 1967. So, we can [00:03:45] see the impact of different kind of economic headwinds or tailwinds on charitable giving.

And I think those of us, we all live through 2022. We know that equity markets declined by 20%. By some measures, certainly inflation and the [00:04:00] pinch on Depo disposable personal income, and yet at the same time we saw a 9.2% growth in GDP, all of which influenced charitable giving for better or worse. We also know that in 2022, you know, we were following [00:04:15] up on 2020 and 21.

Two years in which there were enormous expressions of generosity. I mean, we reached the two highest peaks of charitable giving in 2020 and 21. And so the fact that in [00:04:30] 2022 we had in real dollar terms, the second highest amount ever given to nonprofit organizations. But I think that some of the most sensational headlines perhaps are not taken into consideration.

The [00:04:45] comparison to two years of extraordinary generosity.

Clare Golla: Fair, uh, great comment. So, context is key here. I think that's a key. Yeah. Message. Kristin, what are your thoughts?

Kristin Carlson Vogen: Yeah, Laura is right. Spot on. And I think a lot of it has to do with that, that psychological [00:05:00] understanding or that feeling of, of, of having.

Wealth or not, no matter how many zeros you have after you're in your net worth, those who just don't feel economically secure are going to be more reluctant to give. So, I think that's part of it. I think that the stock market, [00:05:15] absolutely. We saw that very different at the last half of the year compared to the first half of the year, just because of some of the challenges.

Although the first half of the year there was a lot of anxiety about what was going to. Becoming that didn't necessarily fully pan out, [00:05:30] but there was some concern. And so, I think that it's that, that psychological sense of how much do I really have? How much can I release to charity?

Clare Golla: Yeah. And you're working with donors every day, right?

So, you're, you're having those conversations, which I think is [00:05:45] important. And so, you know, Laura, interestingly within your, your conversation about context, I know corporate earnings were also up, right? So, Let's talk a little bit about the sources of giving this year. What were the differences, you know, between this year [00:06:00] and past years?

Laura MacDonald: So, we look at four sources, giving from individual donors, giving from foundations, so, Giving from corporations, including their corporate foundations and giving by the quest. And typically, what we've seen is that giving by individuals is by far the [00:06:15] largest share of charitable giving, and it still is. But this is the fourth consecutive year in which individual donors have represented less than 70% of all giving.

This year it's estimated that individuals gave about 320 billion or 64% [00:06:30] of total charitable giving. And giving by individuals is the only source that was down. Giving by corporations, foundations, and giving through request, were all up, but because they're smaller shares, they can't overcome that decline that we saw in giving by individuals.[00:06:45]

Part of what we think though is that sophisticated donors and high net worth individuals, Are changing some of their giving habits, and I'm sure Kristen has seen some of this where their gifts are no longer counted as giving from individuals, which is people giving from their checkbook or [00:07:00] transferring from their stock portfolio, but rather they've shifted some of their assets into a closely held family foundation or into a donor advised fund.

And so they're making decisions about what used to be their own money. They're still making the decision, but the transaction is happening [00:07:15] a little bit differently and I would, uh, be remiss if I didn't just put in a little bit of a dig. And that is that while corporate, the giving from corporations did increase, it went up 3.4%.

It's now almost $30 billion. It is still [00:07:30] significantly less than 1% of corporate pre-tax profits.

Clare Golla: I give that dig all day long. I am, I am with you, Laura. It's a fickle business, corporate philanthropy. We'll put, we'll put it that way.

Laura MacDonald: Corporate are up 6%. Corporate, uh, giving [00:07:45] was up 3.4%. Yeah. So, yep. You're right.

But I think there, you know, can we do more to inspire our corporate citizens down the street to be even participate even more robustly in this charitable giving economy.

Clare Golla: So here's a question. I've [00:08:00] already received some questions around this idea of giving to foundations, so maybe you could share a little bit about how that fits into this, these changes or shifts in giving patterns and behaviors and, and donors and what does [00:08:15] that really mean when folks are giving to foundations?

Laura MacDonald: I can talk about the data a little bit and then I think Kristin can talk about the on the ground. Absolutely. Yeah. But that is gifts to grant making foundations. So if your alma mater State University has a state university foundation and you [00:08:30] give to that foundation, that counts as a gift to education.

What we're talking about here are gifts to grant making foundations like your local community foundation. Now we try very hard to not double count money in giving usa. [00:08:45] So, you know, if it's a pass through, we try to count the net. Not both transactions and double up the estimate. But Kristin, maybe you have some things to add from your experience with donors.

Kristin Carlson Vogen: Sure. Well, I think especially in the past couple of years, in [00:09:00] 2022 for sure, there was a lot of privately held companies that were sold and right there that generates that sense of all of a sudden there's. Significant wealth event and the recipients of that wealth event, and there might be multiples [00:09:15] in one family, have to decide what they're going to do with that.

And if they don't already have significant connections to specific charities, or even if they do, but they have multiples of them. It is, uh, a different mindset to say, oh goodness, we should put this into some kind of a [00:09:30] vehicle that we will then be able to grant out over time. And so whether that is a private foundation or a donor advised fund, that's something that has to be evaluated.

And so I think that's what a lot of what we saw last year in particular, uh, just because there are, there's just this transfer of wealth that [00:09:45] we hear about. And so much of that is held up in privately held companies in particular.

Clare Golla: No, I think that's, again, this is going back to that, that theme of context is key, right?

We've seen that in practice here too, right? We're working with entrepreneurs, [00:10:00] business owners on their transactions, and that's when, you know, major dollars, uh, flow into a foundation.

Laura MacDonald: One thing I would say is that we've all heard the phrase short sleeve to shirt sleeves in three generations. There's some evidence that suggests that when a family chooses to [00:10:15] engage in philanthropy, uh, because it's so rooted in values, That can be one of the ways to thwart that dynamic of short sleeves in three generations because the family is sitting at the Sunday dinner table talking about what matters to them, and there's some sense that [00:10:30] that can be a great way to continue generational values and generational wealth.

Kristin Carlson Vogen: That's for sure. And I think where I've seen that work the best is when that starts at the very beginning. Because where I have seen it is that all of a sudden, oh my goodness, we're going to sell our company. We should become philanthropic. [00:10:45] And while that's wonderful and good, it's hard to instill it at that point in the, um, in the, the sub subsequent generations.

Not that it can't happen because it can. Where it's been most success or where I've seen it most successful is when those dinner conversations are happening [00:11:00] at the very beginning of that creation of not only the wealth that comes from it, but the companies that are being built.

Clare Golla: Yeah. Great points here. We do a lot of family engagement and engaging around philanthropy with.

Age-appropriate conversations and [00:11:15] activities and exercises for all ages. And so totally agree with you. It doesn't just happen, you know, upon a transaction and everyone's going to be interested. All right. I want to turn to, because this is an area that many of the nonprofits that we work with s scrutinize [00:11:30] and try to figure out, and that is the recipients of charitable contributions, uh, in 2022.

Where did we see some changes? And I'll start with Laura, and then I want to hear from Kristen what you're seeing in practice.

Laura MacDonald: Well, a [00:11:45] couple of things. We've seen traditionally that religion is the largest recipient of charitable gifts, and by that we mean almost exclusively houses of worship. Of all things, but when I started my career, uh, close to 60% of all charitable giving went to the church.

It's still the biggest slice of the pie, [00:12:00] and it's still growing, but it's growing more slowly and its lost market share to most other sectors. Mm-hmm. And so, it's now 27% of all giving goes to the church. Interestingly, we saw a flip flop education has usually been in the second position, but this year [00:12:15] human services eclipsed education.

And so human service agencies were the second largest recipient of charitable gifts. Uh, they declined a little bit, uh, six tenths of a percent, essentially flat, whereas giving to education declined by almost 4%. The other one we have to [00:12:30] dig a little deeper giving to international affairs. Giving to international affairs grew, uh, 11% in current dollars.

And I think we all saw the headlines of the, uh, Russia's invasion of Ukraine and the turmoil Yeah. And [00:12:45] need that, that created. And so, organizations like World Central Kitchen and their response were the recipients of great outpourings of generosity and lots of, in what we would call informal generosity, people renting an Airbnb in Kyiv with no intention of ever going to [00:13:00] that Airbnb but making sure that that.

Property owner had some revenue. The other one, and this one you really have to scratch your head about for a minute, but I think we've got some thoughts, is the other big winners giving to arts, culture, and humanities? So, it grew slightly in current dollars, 3% [00:13:15] over very grand growth in 21. So that growth trajectory continued.

And I think what we've traditionally seen is that in the face of something like the pandemic or the social unrest that we saw in 2020, donors might have shifted their philanthropic priorities to a time to, to [00:13:30] meet those very real and urgent needs. But then those who were arts and culture donors, you know, would, uh, as the economists say, revert to the mean, they would go back to, to funding that thing that's closest to their heart.

I think we have also seen as a society the importance of [00:13:45] arts, culture, and humanities play in strengthening the binds that tie us together in being a more civil union. And so, it's been interesting to us to watch, uh, how that has played itself out in more and more contributions.

Clare Golla: Yeah, we've [00:14:00] seen, I mean, just in practice on that last point, an enormous flow of larger, unrestricted gifts to more grassroots arts activist organizations.

But, um, it's not your grandma's art and culture [00:14:15] funding at all. Yeah. Kristen, I'd love to hear what you've, what you've seen, especially in Chicago, which has such a rich, robust arts community.

Kristin Carlson Vogen: Well, I mean, you are spot on. I think that the intersection of social justice, diversity, equity, and inclusion [00:14:30] and the arts and how it is that we can tell stories, that is, uh, we have a, one of our streams of, uh, work to reduce the racial and ethnic wealth gap is focused on building collective power and what's the best way to build collective power than to be able to share stories, collect and [00:14:45] share those stories.

And so even within our own, Strategy for how we're using our discretionary dollars. We're starting to look at that, but we are also seeing it on an individual basis. So those who have donor advised funds and are thinking about what they want to do. Whereas before they may have been thinking about [00:15:00] arts a little bit, then they were, they saw the social unrest and they wanted to give there and give to, to human needs and to Ukraine or to some of the other issues that we had.

They also then realized, wait a second. I really want to be able to help the arts. The arts community. You see on [00:15:15] stage there is an increasing visibility of who it is that is writing, who is directing, who is leading the organizations, and as those are becoming more people of color. That is something where dollars are starting to go into [00:15:30] those organizations for those purposes.

I think there is that sense of what our common humanity is, how it is that we can share that, how it is that we can make sure that there is a way of unifying us. It is through, through story and so that is, that is becoming much more clear [00:15:45] visual or audio or on stage.

Clare Golla: Quick question on, on another recipient category, which is the, you know, human services.

So, it's pretty flat this year. Obviously after inflation, we have to, you know, see a, see a decline. Human [00:16:00] services organizations. Inflation matters, right? I mean, they've got a lot of expenses. Did we see a big spike in human services during the pandemic and now it's kind of leveled out because that's a group that has a lot of concerns and [00:16:15] we are hearing a lot from

Laura MacDonald: giving to human services.

And current dollar terms grew, uh, over 7% from 20 to 21, and then from 21 to 22, it, it essentially was flat. I do think that inflation. There are many ways that it can have a negative impact [00:16:30] on an organization. One is that the donor who traditionally gave you a thousand dollars a year did not suddenly round up their gift to 1,080 in 2022.

And so the buying power of that donor's gift D diminished, and that's [00:16:45] very real. And clearly everything that the nonprofit organization had to buy also became more expensive. And so it, it does create a squeeze.

Clare Golla: Yeah, it's a challenge that we're talking about with a number of our nonprofit clients, and [00:17:00] fortunately, our forecast shows we're expecting that come down to median expected inflation.

Print will be somewhere around two and a half percent. That's really what we're expecting, and it won't be that long before we get there. Hopefully. In interest rates we're almost at the top, so [00:17:15] maybe some silver linings for some organizations that are really struggling with that. There are a few newer sections of the report this year.

There was mention of them. In the key findings and the full report will be out later in July, correct?

Laura MacDonald: [00:17:30] That is correct. And, uh, so there are a couple of things that, um, our colleagues at Indiana University's, Lilly Family School of Philanthropy, have been doing, and they're brilliant by the way, and, and terrific partners.

In this project, uh, I think the most exciting and [00:17:45] interesting one is this perennial chapter now on donor advised funds. Because in the past it was so hard to pick out what, what, what are the sources, what are the uses, where do we find them? That I think, especially for practitioners and donors who want to be smart about this, is a [00:18:00] tool in our toolbox.

Yep. There will be, um, clues in that chapter.

Clare Golla: That's great. And then there is also a chapter coming up and maybe Kristen, you could share a little bit about in practice. Other ways that folks are giving,

Kristin Carlson Vogen: it's just really important to identify [00:18:15] generosity versus charity because generosity, it encompasses many more things than writing a check that gets counted as a charitable contribution on your income taxes or is viewed through our lens of what is charitable.

And so I [00:18:30] think there is a lot more generosity. You're seeing a lot of GoFundMe for different types of, uh, situations that somebody may find themselves in, that you're not going to get a deduction for that it's not going to be counted as. Charitable and yet it is generous. You find people, you know earlier, Laura, you [00:18:45] mentioned about giving to houses of worship.

But what people are doing in those houses of worship now is they're doing other acts of generosity. So it might be that they are buying presents for, uh, for families who don't have the resources at the holiday time, or they might [00:19:00] be putting together a mitten tree and being able to provide the hats and the gloves and whatnot that might be needed.

And so those are forms of generosity. And it's very kind and it's very helpful, and we as humans that we're trying to reach out to other humans, which is really what philanthropy is all about.

Clare Golla: Yeah. I'm [00:19:15] excited to dig into this more because it is right on point with what we're seeing with clients to actually our next podcast guest, Sharon Schneider, wrote this book, A Handbook for an Integrated Life that really describes this, this [00:19:30] theme of.

Aligning your decisions along a whole bunch of different decision points across your life with your mission and vision and values. And so we're seeing this play out and we're also seeing it with clients who are looking at what are all of the different [00:19:45] entities that I have control over, whether it's, you know, my company and our practices there, my, you know, charitable giving, my day-to-day purchasing.

Kristin Carlson Vogen: Well and go ahead. And also investing. How is it that you, what are you investing? [00:20:00]

Clare Golla: Duh. The investment professional here doesn't mention, right. Aligning your investments with your values. Yeah. Abso, thanks Kristen. Thanks for that prompt. Sure, yeah, absolutely. That's the, yeah, that's the fastest growing part of our platform, right?

Our, our purpose driven [00:20:15] investments. It's, it's really extraordinary. So I'm glad we were able to have this dialogue on, you know, digging into some of the messages underlying that, you know, sort of those, those headlines. So, speaking of headlines, I'd love before we wrap up for each of you. [00:20:30] To potentially, if you had the chance, write your own headline on the results.

So Laura, what would you share if you were able to write your own headline results for this year's outcomes?

Laura MacDonald: I think I'd play around with [00:20:45] concepts and in fact we did, um, in some of our firms publishing that it's a mixed bag. A mixed bag, but I also think that, uh, in the face of. Economic and social headwinds and compared to extraordinary generosity in the [00:21:00] previous years that, uh, philanthropy has continued to demonstrate its resilience.

Clare Golla: Great. Good message. Thank you, Kristen.

Kristin Carlson Vogen: I think resilience is really important for people to keep their eye on. Uh, there's a lot of opportunities. There are a lot of ways that people can [00:21:15] continue to give. It may or may not be captured. The dollar amount's important, but being able to really continue on with what you're doing, cultivate the.

Relationships that you have already within, uh, for, for the nonprofit organizations within who it is that they, that is giving to them continue to cultivate [00:21:30] them, more than likely they will continue to fund you. And the more that you share with them what it is that you're doing, the more that likely that the dollars that come in are going to be larger.

Clare Golla: That's great. Thank you Kristen. And I know, speaking of our different [00:21:45] ways of giving, I believe there's going to be some sort of a discount provided today. Laura wanna share a little bit about that?

Laura MacDonald: Certainly. So, um, we'll be providing, uh, both a link and a QR code that any of your listeners can use to, uh, secure a [00:22:00] 15% discount on the full catalog of giving USA products.

About 18 months ago, we flipped to a subscription model. You can still buy a book if you want to. But I think the better value is to subscribe. We do a couple of special reports each year, like the donor [00:22:15] advised fund report, a more recent report on generational behaviors in giving, and then also have access to the entire back catalog of our work.

So a 15% discount use either the link or the QR code.

Clare Golla: Thank you. Thank you so much. And look, context is [00:22:30] key. Resilience continues, right? I love these messages and I just thank you both so much for joining us today. For more of what we've discussed today, do check out the QR code. In today's episode description, as Laura shared, you can, uh, receive a, a [00:22:45] discount and thank you all for listening.

If you'd like to learn more on Bernstein's Foundation and institutional advisory services, please see the link to our blogs in this episode's description. And if you've enjoyed this episode and you haven't subscribed to our podcast yet, [00:23:00] please go to iTunes, Google Play, or wherever you listen to podcasts and subscribe And rate us.

Please rate us. Also, please email us with your thoughts, questions, and feedback to insights bernstein.com and be sure to find us on Twitter Bernstein [00:23:15] pwm. Thank you.