The Philanthropy Outlook 2019 & 2020 Projects Giving by Individuals, Bequests, Foundations and Corporations Will Grow and Offers Potential Scenarios, Factors to Watch
Total charitable giving is predicted to increase by 3.4 percent in 2019 and by 4.1 percent in 2020, according to The Philanthropy Outlook 2019 & 2020 released today. The report is researched and written by the Indiana University Lilly Family School of Philanthropy at IUPUI and presented by Marts & Lundy, a leading strategic management consulting firm.
"A multitude of factors are influencing the prospects for charitable giving in 2019 and 2020, including the macro-economic climate, the potential for the current government shutdown to affect the economy, stock market volatility and donors' responses to the 2017 tax policy changes," said Una Osili, Ph.D., an economist who is associate dean for research and international programs at the Lilly Family School of Philanthropy. "Although no one can know exactly how the interaction of these factors will impact giving in the next two years, The Philanthropy Outlook includes measures to account for their potential effects."
"As long as the economy remains strong, Americans should expect to see overall growth in charitable giving in the next two years, driven in part by steady economic growth, particularly growth in personal income. Many other economic indicators that affect giving, including employment and Gross Domestic Product, are positive as well," Osili added.
"It is encouraging to see that total giving is projected to grow in 2019 and 2020 even in the wake of recent changes from the Tax Cuts and Jobs Act," said Philippe G. Hills, president and CEO of Marts & Lundy. "However, it is still too soon to determine exactly how the recent tax changes may impact future donor decisions, and nonprofits need to be mindful of its potential impact, as well as the impact of other economic and policy factors put forth in The Philanthropy Outlook. The Lilly Family School of Philanthropy's unique ability to thoroughly examine and analyze the multifaceted, dynamic charitable giving landscape makes this report an exceptional resource for philanthropy professionals."
The Philanthropy Outlook uses empirical data produced through rigorous analysis to develop projections for total giving, giving by source and giving to three types of recipient nonprofits (education, health and public-society benefit organizations), and describes how different economic variables and other factors will impact giving in 2019 and 2020. The report examines the complex environment for philanthropy and emerging trends related to giving by high-net-worth individuals/households.
The study's key findings include:
- Total charitable giving is predicted to grow (3.4 % in 2019 and 4.1% in 2020), rising above the historical 10-year, 25-year, and 40-year annualized average rates of growth.
- Giving by individuals is predicted to grow (2.1% in 2019 and 3.4% in 2020), but will trail the rate of growth for total giving.
- Giving by foundations (7.0% in 2019 and 6.1% in 2020) and giving by estates (5.4% in 2019 and 5.6% in 2020) are expected to experience strong growth, outpacing growth rates for total giving in 2019 and 2020.
- Giving by corporations is also projected to grow (3.2% in 2019 and by 2.6% in 2020), but will lag behind rates of growth for total giving.
- Strong growth rates are projected for giving to education (3.5% in 2019 and 5.7% in 2020) and giving to health (5.2% in 2019 and 4.4% in 2020). These types of nonprofits have traditionally been associated with high-net-worth giving.
- Giving to public-society benefit nonprofits (1.3% in 2019 and 4.0% in 2020) will see slower growth than the other two recipient subsectors studied.
Three Potential Scenarios
To understand the full scope of the dynamic giving environment expected in 2019 and 2020, the macro-economic climate and ongoing donor responses to the 2017 federal tax law changes must be taken into account. While the ways in which the confluence of these factors will play out for American philanthropy cannot be fully known at this time, The Philanthropy Outlook draws on recent economic forecasts and analyses of the law's anticipated effects to present projected growth and three potential scenarios that provide context for the baseline projections outlined in the report.
- Under the Uneven Growth Scenario, estimates for total charitable giving would make much of the regressive effect of the 2017 tax law less apparent. Since high-net-worth individuals/households are already responsible for a large portion of individual/household giving, enough economic growth-even if concentrated almost entirely among the wealthy-would result in growth in individual/household giving. The picture for corporate philanthropy is less clear: strong economic growth may not do enough to offset the decrease in tax incentives for corporate giving, particularly if overall consumer sentiment is weak. Foundation giving would be strong due to the performance of the Standard & Poor's 500 and GDP.
- Should the Flat Growth Scenario occur, total giving could stagnate or possibly decline because growth in the market and the economy would flatten by 2020. Individuals/households-still unclear about how to maximize the benefits of giving under the 2017 tax law-may put off making charitable contributions until they are more certain, dampening growth in individual/household philanthropy. Due to S&P 500 and GDP growth realized in previous years, foundation giving would not immediately decline. Corporate giving may increase slightly, although this would largely depend on companies' reactions to the new corporate tax rates.
- In the Economic Downturn Scenario, while current economic expansion is expected to continue into 2019, some forecasters expect the positive effects of the 2017 individual and corporate tax cuts to decline rapidly after the first two years, leading to recessionary conditions by the end of 2020. This scenario would result in reductions in charitable giving essentially across the board.
Donors, fundraising professionals and policy makers need rigorous data and reliable information to help them plan for the future. In addition to the projections and scenarios, The Philanthropy Outlook 2019 & 2020 includes discussion of specific tax policy changes and of economic factors expected to affect giving.
About the Lilly Family School of Philanthropy
The Indiana University Lilly Family School of Philanthropy at IUPUI is dedicated to improving philanthropy to improve the world by training and empowering students and professionals to be innovators and leaders who create positive and lasting change. The school offers a comprehensive approach to philanthropy through its academic, research and international programs and through The Fund Raising School, Lake Institute on Faith & Giving, the Mays Family Institute on Diverse Philanthropy and the Women's Philanthropy Institute. Follow us on Twitter @IUPhilanthropy or "Like" us on Facebook.
About Marts & Lundy
Marts & Lundy is the one of the world's most innovative and successful strategic management consulting firms. With offices in America, Canada, Australia and the United Kingdom, Marts & Lundy offers the world's best-known philanthropic organizations an unparalleled depth of expertise and breadth of perspective on philanthropy. Since 1926, the firm has served thousands of mission-driven organizations with annual giving and campaign strategies that generate hundreds of thousands to several billion dollars. Founded in the belief that philanthropy has the power to transform not only institutions but, more importantly, the world, Marts & Lundy remains steadfastly committed to contributing innovative thinking and thought leadership to philanthropy. Visit our website. Follow us on Twitter @MrtsAndLndy and on LinkedIn and Facebook.