Are Americans – and Angelenos – becoming less generous? If so, what does that mean to the charities and nonprofits striving to address homelessness, addiction, mental illness and many other issues in our community?
Nationwide, charitable giving rose by a lackluster 1.6% in 2018, a dramatic pullback from 2017’s increase of more than 8%. These figures come from a new study by the Fundraising Effectiveness Project, using data provided by 4,500 nonprofits across the country.
Especially worrisome was the study’s report of a 4.4% decline in gifts below $250, typical for individual American donors; a 4% drop in donations between $250 and $1,000; and a 4.5% reduction in the total number of contributions. The tepid overall increase of 1.6% only resulted from greater giving at the $1,000 and higher level – primarily the province of the affluent – which rose by 2.6%.
Some of this pullback may result from the effects on donors of short-term turbulence in the financial climate. The Tax Cuts and Jobs Act of 2017 raised the standard deduction, meaning millions of taxpayers no longer qualified for the charitable tax deduction and may have been less inclined to give.
Reduced giving was likely also affected by the stock market’s sharp decline in the fourth quarter of 2018, during what is traditionally “giving season.” Shaken by the reduction in the value of their portfolios, middle-income donors may have closed their checkbooks, triggering the drop in smaller gifts.
However, there were earlier signs of trouble for our city’s nonprofits. A 2016 study by UCLA’s Luskin School of Public Affairs found that charitable giving in Los Angeles fell by more than $1 billion between 2006 and 2013. While the Great Recession likely skewed the data, it is also true that our region lost about 165,000 white-collar, managerial-class jobs over the past 20 years as companies moved out of the region. Over this same period, the local population rose by approximately a million people.
Those of us in the nonprofit sector may pore over these details, but all Los Angeles residents concerned about the well-being of our community must ask a broader question: how will reduced charitable giving affect the nonprofit programs and services that are a vital social safety net for the neediest among us?
Los Angeles remains challenged by growing inequity among our population, a middle-income workforce under economic pressure, and the crisis of homelessness. Public and nonprofit agencies already struggle to meet even some of these needs.
When well-run businesses are confronted by changing conditions, they must adapt. The same is true for the more than 30,000 nonprofit organizations in our county, a large number of which are small startups. The same creative energy that has launched countless for-profit ventures in media, technology and other fields has spawned many innovative nonprofit programs and services. It is precisely our area’s smaller, early-stage nonprofits that are most impacted by the decline in giving at the $250-and-under level.
Unfortunately, hard choices must be made when resources are limited. We need to recognize that, no matter how visionary their programming may be, some underfunded small entities will fail. Rather than seeing them simply close their doors, we should encourage them to merge their most viable services with similar size nonprofits or larger social enterprises that have the capacity to continue to deliver them.
We can also stretch available dollars by working more collaboratively. Donors who have similar goals can focus and leverage their giving power. The public sector, including local, state and federal governments, can work more closely with private enterprise and nonprofits to jointly achieve shared goals. We already see this kind of partnering to address homelessness in our city, but much more is required.
Nonprofits can explore and embrace new business models, including earned-income strategies, which can make them less dependent on philanthropy. Admirable local examples include Chrysalis, which serves as an employment agency for homeless and working-poor clients and uses the fees it receives to help support its operations, and Father Gregory Boyle’s Homeboy Industries, which operates successful apparel, café and bakery businesses whose revenues help cover the cost of training and supporting its clients. Other nonprofits may be able to emulate their entrepreneurial approach.
Finally, those with the ability to give must continue to do so, and do more if we can. The Jewish Community Foundation of Los Angeles, which I am proud to lead, distributed a record $123 million in 2018, up from $100 million the year prior, with nearly $70 million, or 57%, of last year’s total support directed locally to a wide range of causes. Our donors, who are blessed with compassionate hearts and the resources to act, understand that each of us must do our part to create the community we want for ourselves and our children.
The recent changes in charitable giving present a real challenge to nonprofits locally and nationwide. But I have confidence in the ability of the leaders of these organizations in our city to innovate and adapt. Each of us – whether affluent or of modest means – needs to do our part to help them build a stronger Los Angeles for us all.
Marvin I. Schotland is president and chief executive officer of the Jewish Community Foundation of Los Angeles.