Posted on November 12, 2008

Nonprofit Leaders Speculate About Impact of Economic Crisis on Philanthropy

Although few nonprofit leaders are predicting a big drop in giving from the more than $300 billion that was donated last year in the United States, many are preparing for leaner times ahead, the New York Times reports.

Historically, ups and downs in giving have not been as severe as broader economic swings, and even during some of the worst economic downturns philanthropy has remained strong. According to Patrick M. Rooney, interim executive director of the Center on Philanthropy at Indiana University, the most reliable indicator of individual giving is the Standard & Poor's 500 index, where a 100-point jump historically has translated into an additional $1.5 billion of giving by individuals who declare their donations on their tax returns. Using that rule of thumb and the value of the index on November 6, overall giving by individuals should decline by roughly $8.7 billion, or 4.6 percent, this year — far less than the stock market itself.

Nevertheless, the effects of the downturn are already being felt among donors large and small. Recent surveys in Indianapolis and Memphis by the Center on Philanthropy found that households with an annual income of less than $50,000 are likely to cut back on or eliminate their giving this year as a result of the downturn. And many big donors have seen their wealth decline precipitously. Former AIG chief executive Maurice R. Greenberg, who has given $700 million to charitable causes over the course of his long career, has seen his net worth fall by close to $3 billion and the value of the assets in the two foundations he controls decline by additional billions. Greenberg has said that he and his family planned to fulfill their charitable commitments, although it make take longer than originally planned.

But while individual giving, which comprises almost 90 percent of U.S. philanthropy, may be difficult to forecast, experts generally agree that giving by foundations should remain steady over the next year. Because the legally mandated payout rate for foundations typically is based on a three- or five-year rolling average, grant budgets in 2009 will reflect at least two years of solid growth in assets. Still, many foundations have suffered steep declines in their assets over the last year or so, and that is likely to affect their giving in 2010 and may result in decisions to postpone new programs before then.

"Our normal grant budget will continue unless some other shoe drops," said Vartan Gregorian, president and CEO of the Carnegie Corporation of New York, which saw its assets drop by about 15 percent in its most recent fiscal year. "We will meet our existing and planned commitments, but anything else will depend on what happens in the markets."