December 23, 2008
By John Von Kannon
Move aside, Motown. Make way, WaMu. There's a new mendicant
bellying up to the bailout bar: America's charities.
Many of the private organizations established to meet pressing
social needs and serve others now clamor for government aid. Those
who once saw themselves primarily as servants now see themselves as
"What about those of us in the nonprofit world? Where's our
bailout?" wails nonprofit executive Teresa DeCrescenzo in a Dec. 1
column in the Los Angeles Times.
"Where is the storm of media coverage, the persuasive rhetoric,
the public outcry to save critically needed services such as child
care, assisted living, home healthcare and hospital services? Who
is documenting our agony?"
Ms. DeCrescenzo is not alone. CQ Weekly reports that
the Council on Foundations, the trade association for grant-making
foundations, "is backing long-shot legislation that would create
incentives for a surge in charitable giving."
Do America's charities - which received $306 billion in
donations in 2007 - really need more federal attention? Or are
charity advocates just using the current economic situation to
wangle additional funds and advance their agendas?
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Today is certainly not the first time nonprofits have had to face
a challenging economy. A look at how they've fared in recessions
past might be instructive.
The Giving USA Foundation has tracked charitable giving for more
than 50 years. It recently issued a report on giving from 1967
through 2007. During that period, America endured four years in
which a recession lasted eight months or more.
Did charities wither and die as today's rhetoric suggests? Or
were they saved by compassionate political leaders in
Actually, neither. Even in recessionary times, it seems
charitable giving flourishes.
"Total giving has increased in current dollars in every year but
one since recording began," the foundation reports. "The exception
is 1987, when a tax law change in 1986 prompted some people to
'give early' in order to maximize the value of tax deductions they
That can't be right, Conventional Wisdom objects. Everybody
knows that people cut their discretionary spending when times are
tough. Charitable giving is the first to go.
But Conventional Wisdom is wrong.
"When the economy shows stress, whether it is a recession or
not, giving may grow more slowly . . . (but) giving still grows,"
the Giving USA Foundation found. "In current dollars, before
adjusting for inflation, giving has increased an average of 8.4% in
years without a recession. In years with a recession, giving has
increased 6.2% (also in current dollars)."
I've worked in the nonprofit world for 36 years in a variety of
capacities - fundraiser, consultant and trustee. This much I've
learned: Some charities do much better at attracting funding than
others - no matter what the economy is like. Those who count on
just a few sources of income tend to be most vulnerable in a
general downturn. Those who draw from a broad base of support tend
to do better.
There's a reason for that: Competition. It works in the
nonprofit world just as it does in the fields of business, sports
Charities that rely on a small number of large gifts just don't
have to make their case as often or as well as those who talk with
- and listen to - their supporters all the time.
Charities that rely on state, local and federal government
funding are especially vulnerable. Their fundraisers typically
specialize in filling out forms to show that they meet guidelines,
not in building relationships with "outside" donors.
When all your eggs are in a government-issue basket, you can be
in serious trouble when state and local tax collections dip.
Unfortunately, too many in the nonprofit world seem to have an
entitlement mentality. We do good work! Where is our funding?! (Or
to avoid paraphrasing, "Who is documenting our agony?")
Others seem to be trying to use the current economic crisis to
push their political agenda. Recently, the Johns Hopkins Nonprofit
Listening Post Project produced a study called "Nonprofit Policy
Priorities for the New Administration."
The report begins, "With a major economic crisis pressing in on
families throughout the country, America needs its nonprofit
organizations like never before." The authors polled nonprofit
executives to learn what government should do to help. The 17-page
report can be summarized in four words: Give us more money.
More specifically, the Hopkins project found executive support
for the following legislative "fixes":
Nothing surprising in those self-serving recommendations.
However, it was a bit jarring to see that more than 80% of these
nonprofit executives also called for restoration of the estate tax.
The report failed to explain how taxing away assets would increase
a person's ability to give to charity.
The "Nonprofit Listening Post Project" is doing it wrong. Rather
than listening to nonprofit executives as they spell out a
Washington wish list, the project should advise the execs to start
listening themselves - to any and all potential donors, not just
those in government agencies. That's the way to broaden your base
of support and withstand economic ebbs and flows.
One fundraising consulting firm advises charities that in tough
economic times it is especially important to be "near, dear and
clear" to their donors. Be on their minds. Be in their hearts. Make
a compelling case for why your charity is necessary. Those who
follow this advice won't need to go to Capitol Hill or a
statehouse, cup in hand.
The American people are generous. They support their charities
in good times and bad. And while some charities are suffering now,
the answer is not expanded federal spending or bailouts.
What the nonprofit world needs is economic growth, and that
comes through lower taxes, deregulation, free trade and limited
government. When the economy is growing and people have more money,
they will give even more of it away. And, while I'm not an
economist, I'm guessing they will also use part of it to pay for
their houses, cars and insurance.
John Von Kannon
is vice president and treasurer of The Heritage
First appeared in Investor's Business Daily
Move aside, Motown. Make way, WaMu. There's a new mendicant bellying up to the bailout bar: America's charities.
John Von Kannon
Vice President and Senior Counselor
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