Giving: an expected dip, a projected rebound

Sept. 11 may have produced the largest single outpouring of philanthropy in US history, but a burst of goodwill in the final months of 2001 was not enough to overcome a year of recession and a plunging stock market.

Charitable contributions dipped 2.3 percent in 2001 from the year before (adjusting for inflation), according to an annual report released Thursday by the Trust for Philanthropy, an arm of the American Association of Fundraising Counsel (AAFRC).

That's the bad news.

Leo Arnoult, chair of the trust, is quick to point out the good: Giving in 2001 topped out at $212 billion – or more than 2 percent of the gross domestic product. That's about the same ratio of giving to GDP as was recorded in the heady late 1990s.

Moreover, the dropoff was hardly unexpected. "There is a correlation between downward trends [in the economy] and giving," says Mr. Arnoult. "Seeing it come down in 2001 is not terribly surprising."

During every year of recession since the AAFRC began publishing its report in 1971, charitable giving fell between 1 and 5 percent.

Corporate donations took the biggest tumble in 2001, decreasing by 14.5 percent and reflecting a year of heavy corporate losses. Giving by individuals, which makes up more than three-quarters of total charity in the US, declined by much less: 1.7 percent.

On the other hand, donations from foundations increased 2.5 percent. Arnoult points out that foundations are required to donate 5 percent of their revenue each year. In 2001, however, "many foundations gave beyond what they were legally bound to give," he says.

On the receiving end, religious groups historically receive a large share; 2001 was no different, with denominations and congregations drawing more than a third of all donated funds.

Contributions to human services – such as the American Red Cross and the Twin Towers Fund – inched up more than usual, by 11.9 percent. Arnoult attributes part of that to improved fundraising.

Another significant change: A small but rapidly increasing portion of donations are coming in via the Internet. The Chronicle of Philanthropy reported in its June 13 issue that 126 large charities took in more than $96 million in online donations. (Although only 11 of those reported that 1 percent or more of their total revenue streamed in electronically.)

"Lots of anecdotal information indicates younger donors probably made their first philanthropic gift in response to Sept. 11 through the Internet," says Arnoult. "But," he adds, "[Web donations are] a small percentage of giving, and they tend to be smaller gifts."

Historically, giving has returned to prerecession levels one to two years after an economic downturn. The slowest recovery recorded came after the 1973-75 recession. Not until 1978 did charity surpass 1972 levels.

Arnoult anticipates a speedier-than-average recovery this time, assuming the economy continues to show signs of bouncing back.

Last year may have been a recession year, he says, but that's still within the context of tremendous long-term national prosperity.

"Giving [in 2002] should be up at least modestly," he predicts.

What's not clear, says Arnoult, is how great a role the Sept. 11 effect had on overall giving. Total donations to Sept. 11 relief funds were only 0.9 percent of the $212 billion total for 2001.

While some may have responded to the tragedy with a surge of generosity, just as many, says Arnoult, "may have pulled in their horns."