(Roughly) Daily

There’s a great deal of concern over whether or not the new tax bill will decrease charitable giving in the U.S.; as noted below, it’s painfully well grounded.  But there may be another threat to not-for-profits on the immediate horizon: competition from politics…

In very late 2016, following the election, and continuing into 2017, there was a surge in donations to not-for-profits like the ACLU, public broadcasting stations, Human Rights Watch, and the Sierra Club– organizations that addressed concerns that donors worried would be given shorter shrift in the new administration.  Patrick Rooney (Director of the Lilly Family School of Philanthropy at the University of Indiana) recounts:

American individuals, estates, corporations and foundations donated a record US$390 billion to charitable causes in 2016. [It is too early to know the tabulation for 2017.] Total giving grew 1.4 percent, adjusted for inflation. Donations from individuals amounted to nearly three-quarters of all giving and grew more than giving by foundations, corporations or bequests with a 2.6 percent gain to $282 billion…

We have, however, witnessed a shift in giving to groups devoted to animal welfare and environmental issues, as well as international affairs. These categories were so small that we couldn’t track them until 1987.

While they still draw less support than others – religious groups, at $123 billion, and educational institutions and organizations, at nearly $60 billion, still top the list – animal welfare and environment groups and international affairs organizations made big strides in 2016…

But as a result of the new tax bill, Dr. Rooney suggests, there will be roughly $21 billion less per year to charity.  That’s almost four times the amount of growth in the sector last year.  So, if Dr. Rooney is right, the not-for-profits that have lately had the wind at their backs may find themselves sailing into it starting in 2018.  

But that may not be the whole story.  Even as charitable contributions are under pressure, political contributions look poised to rise.  They were already astronomical: 2016 contributions to presidential campaigns were over $2 billion; congressional (Senate and House) races brought in over $4 billion; and state-wide races, over $1,5 billion (all, new highs, and all not counting an unmeasured amount of soft/dark spending).

2018 will, of course, be an election year– one for which interest and momentum are already building.  It’s not a presidential year, of course; still, it promises to be a big one. There’s every indication that Democrats are readying to field a record number candidates at every level in the mid-terms, and to fund them at record levels.  At the same time, it seems clear that Republicans are preparing to match their efforts.  Which is to say:  while there remain concerns about voter engagement, there’s every indication that there will again be an increased level of contributions to the campaigns.

So, the new tax bill is likely to reduce funding to not-for-profits, at the same time that political concerns are likely to make a greater demand on the “giving budget” of Americans.

Research conducted on the 2012 election (pdf), suggest that a donor’s political contributions do not decrease his/her charitable giving.  And with luck, that will hold true through 2018.  But the amounts in question, on both the charitable and the political fronts, continue to rise dramatically… and at some point, there is a limit to the amount that an individual can or will give– especially if that individual is not a member of the 1%… Those not-for-profits that experienced a “Trump Bump” in their funding in late 2016 and 2017 might find that, with the double-whammy of the new tax bill and “competition” from politics, they are facing head-winds in 2018.

I am a scenario planner by trade; I’ve learned the wisdom of contemplating all of the scenarios– the plausible futures– that we might face in order to be ready for any of them.  We certainly hope that there’ll be no hit to charitable contributions; but if this dark scenario unfolds, what do we do?

For the smaller donors who were the backbone of the Clinton and (before that, the Sanders and Obama campaigns), many of whom re-directed their support to charities after the 2016 election, there may come a set of choices:  First, for the many who will no longer itemize, do I continue to contribute though now I can no longer deduct the gift?  And second, for all, a Hobson’s Choice:  do I give to support the non-government organizations stepping in to try to fill needs (services, advocacy) from which government is retreating, or do I support an effort to reconfigure the government so that it pre-empt/address those needs?  The obvious right answers are “yes” and “both,” which may well require all of us to stretch to, if not beyond, the limits of our capacity to give.

For not-for-profits, this a moment to be cautious.  Dr. Rooney’s warning notwithstanding, it may be that Americans have the capacity to sustain their increased contributions at the same time that they increase their political giving.  But the strategically-robust position is to assume that they cannot, and to make plans– if only contingency plans– for level, even reduced contribution income.

Hope for the best; prepare for the worst.

* Isabel Allende

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As we dig deeper, we might celebrate Dr. Martin Luther King Jr. on this day marked in his honor.  The holiday was established in 1983 when President Ronald Reagan signed the bill creating this federal holiday.  Reagan had opposed the holiday, citing its cost, joining southern Republicans like Jesse Helms, who were more naked in their reasoning; but the enabling legislation had passed by a veto-proof margin.

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