Both Politics and Philanthropy Are Local

Community_855x550

We are fascinated by data and forecasts. Witness the presidential campaign all the way from party primaries through the general election. Surveys fed predictions until “day after” results revealed a different result and deep countertrends within the political sphere. Now we are analyzing and parsing these results to better understand how the national experts missed the underlying trends.

Could something similar be happening in the philanthropic sector?

We recognize the power of good data, and we are blessed with more data every year. Giving USA is our long-running annual report of philanthropy in the U.S., first released in 1956, and the forerunner of more recent, more specialized reports and forecasts. This summary of philanthropy in the States is foundational and much-anticipated and valued every year.

In recent years, Marts & Lundy has sponsored The Philanthropy Outlook, a forecast of charitable giving researched and written by the Indiana University Lilly Family School of Philanthropy. The assumptions underlying each publication are detailed and scholarly – and we stand behind forecasts of overall growth in the philanthropic marketplace.

Marts & Lundy also tracks and reports mega gifts within sectors. Before 2015 we tracked gifts $1M and higher. Starting in 2016, the threshold for counting became $10M because the number of top gifts was rising rapidly. Primary recipients of $10M+ gifts are colleges and universities with a respectable number going to health sciences, independent schools, cultural organizations and environmental causes. This national data appeared to be good news for philanthropy overall when viewed as leading indicators of where philanthropy was heading.

We’ve also been witness to the year-over-year growth in philanthropic activity since the Crash in 2008. Looking at the gross numbers, optimism was justified. We recognized that mega gifts were driving success in increasingly bigger campaigns, and we assumed mega gifts were a leading indicator of overall philanthropic growth.

While our gross projections for philanthropy nationwide hold up nicely when examined, the reality for nonprofit managers is much more local. Most organizations want to know first what’s happening in their markets, be it regional or metropolitan, and then what’s happening in their particular sector.

In fact, in recent months, and with much more data, we are seeing countertrends within these more general reports and forecasts that raise questions about the correlation of gross national numbers to local and regional fundraising.

Here are some recent findings that bear watching:

  • Gifts at the top of the pyramid – think $1M and higher – are masking a drop-off in total dollars from donors in the mid-range: $25K to $100K. (Reference the Institute for Policy Studies’ article, “Gilded Giving: Top Heavy Philanthropy in an Age of Extreme Inequality.”) As the top households in the States command a greater share of assets, the middle class is shrinking. Mid-range giving is also shrinking. This is a trend to watch for organizations that depend on gifts from this middle band.
  • Financial stresses on the middle class are growing and include increased medical costs per household, support for parents and adult children, and retirement insecurity.
  • Commitments of $10M+ are not increasing at a predictable rate and are not distributed evenly across sectors. Marts & Lundy’s Special Report on $10M+ Gifts to Arts, Culture & the Environment in 2016 reveals extreme variability in the mega-gift category. Colleges and universities dominate this category as top gift recipients, and that’s no surprise. Few cultural and environmental organizations operate at this scale or happen to have prospective donors in the top 2 percent of the nation’s households. Larger, established institutions in a handful of high-wealth communities have the edge, attracting $10M to $100M gifts.
  • Performing arts organizations, in particular, are dependent on local patrons with varying gift potential, be they subscribers and single-ticket buyers, for the majority of their support. Philanthropy for the arts depends on a local base of engaged and capable donors. (See the New York Times, “Fortunes of Orchestras Are Tied to Their Patrons.” Also note the recent “rescue” of the Fort Worth Symphony by a local patron.)

Like politics, most philanthropy is local. This may be obvious in hindsight but it wasn’t immediately obvious as we referenced national reports and forecasts to support capital and comprehensive campaigns. Philanthropy is not distributed evenly across regions and sectors – and it never was. The larger and better-positioned institutions command a greater share of the nation’s philanthropy. This trend, I predict, will continue.

Knowledge is the key. Know your donor marketplace and the households most likely to reward your case for support. Invest in research. Invest in donor models built on your donors and prospects. Invest in individual giving to maximize gifts at every tier.

Prep for every campaign – be it annual, special, capital or comprehensive – as if your institution’s future depends on it. Because it does.

Every nonprofit operates in a defined marketplace. And every forward-looking nonprofit has the right to aim for more than a “fair share” of its philanthropic pie, be it local, regional or national. For the great majority of nonprofit organizations – those that are not national universities or causes – local means the city or region we serve every day year after year.