One of the benefits of being a consultant is that you have the advantage of “perspective”. Each year we work with over a hundred different nonprofits across a wide variety of sectors and locations. We also have a research department that studies giving trends and patterns in the marketplace. This gives us a view over the landscape of giving that is unique from most others in the industry. As a result, I am often asked what changes we expect to see in the future.
Looking forward, here are six trends that we recommend you keep an eye on going into 2022, as each of these has the potential to impact charitable giving in the New Year.
Fundraising staffing will continue to be a challenge
Early this year our firm conducted a nationwide survey of nonprofit leaders to provide insight into staffing challenges in the nonprofit workplace. That study made it clear that nonprofits are facing a severe shortage of qualified fundraisers. The situation has not improved since then. Indications are that a “great resignation” is occurring across the economy as workers affected by the pandemic are switching en masse to jobs with more flexible working conditions, better pay and benefits, and more opportunity for advancement. Fundraising is a people-based endeavor. Quality fundraisers are vital to keeping nonprofits healthy and growing. In this environment, you would be wise to invest in your team and keep them happy. Begin by assessing your compensation plan and comparing it to others. Also be sure to invest in the tools, training, and resources necessary to help your staff achieve success. The job market today is very tight, and if you do have a position opening vacant, consider contracting with a professional recruiter to help you find the right candidate to fill the role.
Inflation is not going away soon
Inflation has been running high for several months and does not appear to be abating soon. What difference will this make for you? First, it means your costs of operations are going up. When costs go up, revenue needs to go up too. If your organization relies on fundraising revenue, you will likely need to raise significantly more money just to break even. When overall giving is on the rise this may not seem like a big issue. But what if things tighten up in 2022, and the rate of giving across the country begins to falter or fall? Is your organization prepared to succeed in a more competitive fundraising environment? Inflation also impacts your staff. The federal government expects the cost of living to increase by almost 6% next year. Is your compensation keeping up with rising inflation? If not, you may be at risk of losing key staff. Pay attention to what happens with inflation in upcoming months and be prepared to respond accordingly.
Interest rates are going up
Federal Reserve policymakers have made it clear that they intend to raise interest rates at least three times in the next year. As a rule, higher interest rates put more money in the pockets of older Americans, who tend to have more savings than loans, and less in the pockets of younger Americans who are still in a phase of life when loans tend to outweigh savings. The net result of this is that older donors will likely have more money to give away in 2022 compared to their younger peers. Historically low-interest rates also tend to have a suppressive effect on annuities and trusts, which are centerpieces of most planned giving departments. Increasing interest rates will likely spur more interest in these traditionally important planned giving tools. Finally, analysts are uncertain about how rising interest rates are likely to affect financial markets, which is important because changes in the financial markets can have a significant impact on charitable giving. One thing they do agree on? Anything can happen, and lots probably will so be prepared to ride out some volatility in the coming year.
Important legislative and tax policy changes are on the horizon
Starting in 2020, the Coronavirus Aid, Relief, and Economic Security Act (the “CARES Act”) expanded the deductibility of charitable contributions to incentivize charitable giving during the pandemic. Subsequent legislation extended and expanded these incentives through 2021. A variety of other stimulus programs added to these giving incentives, resulting in very favorable conditions for charitable giving. All good things must come to an end, however, and almost all these provisions are set to expire when the ball drops on December 31st. While we expect giving will continue to increase, the pace of growth will likely subside with all those incentives removed from the equation. The New Year may also usher in some significant tax changes. The Biden Administration is proposing an increase on capital gains, which – if it takes effect – could be a boon for charitable giving as it would create a powerful incentive for affected taxpayers to support charitable organizations by donating appreciated assets like stock and real estate. Another Biden proposal would have a substantial impact on the way capital gains are taxed on transfers of wealth to heirs, which would have major ramifications for estate planning, including existing estate plans. Charities would be wise to keep an eye on both these and other tax law changes that may be coming later in the year.
Major giving increasingly important
Despite a massive economic crisis brought on by a devastating global pandemic, Americans dug deep into their pockets and gave more money to charity in 2020 than in any other year on record. According to GivingUSA, charitable giving in 2020 grew 5.1% over the prior year, one of the steepest year-over-year increases on record, shattering many people’s expectations. DickersonBakker conducted a major nationwide donor study earlier this year indicating that giving levels in 2021 may even surpass the record levels of giving we saw in 2020. Interestingly, research also shows that the total number of donors has been declining while total charitable giving has been increasing, which highlights the growing importance of major giving. Individual major donors have become the backbone of charitable giving, collectively contributing more than half of all giving in the United States. These trends will likely continue into 2022, and if your nonprofit does not have a cohesive strategy for increasing or developing major gifts you should consider making it a priority for the New Year.
Corporate and Foundation giving is on the rise
Foundation giving has been on a steady rise in recent years. While total charitable giving grew 5.1% last year, giving by foundations increased 17.0%. In fact, giving by foundations has grown in nine of the last 10 years and may soon account for 20% of all giving in the United States, potentially surpassing $100 billion in 2022. Foundations have very specific interests, processes, and policies, and are highly professionalized in their grant-making. In this highly competitive arena, you need the very best talent you can find to help you maximize and streamline your grant-seeking efforts. Most nonprofits don’t need a full-time staff person 100% focused on grants. You do, however, need 100% competency. That’s why more and more nonprofits are seeking outside counsel to help them build and manage their Foundation grant program.
While Corporate giving declined in 2020, it was steadily increasing pre-pandemic, and we expect it to resume its upward trajectory in 2022, as corporate profits return to normal, and more companies are placing an emphasis on corporate social responsibility in order to lure employees and customers. Half of all small businesses and two-thirds of medium to large corporations already have some form of philanthropic program in place, and that number will almost certainly grow in the future. A recent survey indicated that nonprofit leaders recognize this as well, as a majority of respondents ranked “increasing corporate giving” as their #1 fundraising priority for the future. Corporate giving is getting increasingly complex in today’s day and age, however, and smart nonprofits seek out professional counsel to make sure they are getting it right.
When it comes to charitable giving, we are living in a “golden age”. The United States is the most charitable country in the world, and the rate of charitable giving is at an all-time high. All indicators suggest that charitable giving will remain strong well into 2022. At the same time, the number of nonprofits competing for charitable gifts continues to increase as well. In this competitive environment, it is important to stay on top of emerging trends and to make sure you are capitalizing on every opportunity. Now is the time to review these trends and calibrate your fundraising plans accordingly.
We have a team of qualified experts at DickersonBakker who stand ready to help and would welcome the opportunity to partner with you. Why not contact us today to discuss how we can help you achieve your 2022 fundraising goals?