Philanthropy depends on government: The independent sector can’t live without it

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U.S Capitol building.

Even before we consider issues such as tax policy, or the regulatory authority of states’ attorneys general to prevent fraud, or the many substantive laws and regulations that affect nonprofits’ missions and how they are achieved, there is a more fundamental way in which government is vital to philanthropy. We need government to preserve the independent sector itself as the foundation for whatever we seek to accomplish with philanthropy. 

Those of us who work in philanthropy and study it love to celebrate its power and significance. But decisions like the United States Supreme Court’s repeal of affirmative action remind us of the utter dependence of philanthropy and the independent sector on the government, even a government that is constitutionally committed to protecting our rights.

A decision by five men and one woman, speaking with the authority of the government, pronounced a new law of the land. What colleges had for decades taken for granted as the rules for pursuing their mission changed dramatically because the government made it so.

What else in philanthropy is similarly vulnerable to upheaval? The answer is: virtually everything (or a lot more than you think). Of course, the Bill of Rights enumerates rights that the government is constitutionally obligated to protect, including the freedom of association and speech, and the separation of church and state. These rights grant recognition and legitimacy to the activities that comprise the independent sector where philanthropy thrives.

However, the independent sector has no power to enforce these rights. We rely on a system of separate government institutions that share power, designed to prevent any one branch, or any one level of government in our federal system, from gaining too much authority and overstepping its bounds.

Governments are not naturally protective of rights of others. A lot of constitutional design thinking has gone into crafting government institutions that balance and constrain power and prevent its accumulation in a single person or body. We see how easily governments escape such strictures in a discouragingly large number of countries around the world today. We know the dangers when the same entity we expect to protect revered human rights also possesses the terrific coercive capacity to suppress dissent. The same scale and capacity of a government to enable and implement transformations that improve the quality of human life, millions at a time, are also capable of oppressing these same multitudes. 

You may respond that we should all vote and run for office. While that is good advice, it is only one possible response. In highly polarized situations, competing for electoral advantage may simply become a competition to seize the powers of the government to coerce adversaries one was unable to convince through other means.

I see three ways of responding to a government that is losing its liberal moorings. Shape it, resist it, or engage with other citizens to preserve rights and liberties by promoting the independent sector itself. There are important accounts of how nonprofits nurture a conservative movement in the judiciary, as there are accounts of philanthropy impacting the progressive orientations of many government agencies. Also, nonprofits work to improve how our federal, state and local governments work.

Then there are efforts to resist or minimize the impact of laws and policies that some find unacceptable or odious. These can famously involve civil disobedience. But we pay less attention to general efforts to preserve an independent sector, to protect and nurture a space that the government is duty-bound to protect, thus anchoring a fundamental part of the purpose of government in the advancement of the independent sector itself.

None of the strategies for engaging a government that is shedding its commitment to rights and liberties is without peril, but the most dangerous option of all may be to pretend that we can continue to ignore how vulnerable philanthropy, and the independent sector it supports, are to changes in how the government behaves. The fact that philanthropic resources are smaller in the nonprofit sector than fees for service and government support deepens the vulnerability.

In fact, the umbrella organization Independent Sector recently published a very timely report “The Retreat of Influence,” showing that fewer nonprofits are engaging in advocacy than in decades past. Compared to twenty years ago, declines in lobbying, advocating and even knowing when and how nonprofits are permitted to do so, are eye-opening. The report also demonstrates the vital need for better understanding how nonprofits interact with governmental entities at all levels.

But, for now, we note that the retreat from nonprofit advocacy is happening at a time when American political institutions have been deteriorating. A vibrant independent sector and a just government that protects rights and liberties are like mirror images of each other. There is a deeply reciprocal relationship, against a constant background of the superior coercive power of the government. Beyond being limited by its own constitution and laws, the shape and extent of governmental authority will be shaped by the civic energy of the independent sector. 

Finally, it is important to recognize that the advocacy we typically focus on (as does the Independent Sector study) relates to vertical engagement – how nonprofits communicate with and persuade formal governmental agencies. These efforts to influence or resist the government are vital, but so is horizontal engagement within the independent sector – when we work to learn and persuade each other without regard to what the government may be up to.

But alas, people to people engagement, however creative and dynamic it can be in changing minds, attitudes and practices, remains vulnerable to government disruption. If the government is not routinely reminded that the preservation of the independent sector is core to its purpose, we should not be surprised to see the power and vitality of our civic life continue to wane.

Similarly, if we do not conduct ourselves within the independent sector with a view to preserving its integrity, spaces open for government intrusion. There are no simple remedies, but I hope we share the conviction that as citizens we compose the government. And to do so in ways that protect all our rights, we need an open, independent space, where we can care for each other and invent ways of engaging each other that the government has not even begun to contemplate.

Giving USA 2023: Total U.S. charitable giving declined in 2022 to $499.33 billion following two years of record generosity

Group of volunteer helpers planting trees in mangrove forest for environmental protection and ecology.

Giving USA 2023: The Annual Report on Philanthropy for the Year 2022 finds that individuals, bequests, foundations, and corporations gave an estimated $499.33 billion to U.S. charities in 2022. Influenced by stock market volatility and economic uncertainty, total giving declined 3.4% in current dollars; after adjusting for inflation, giving was down 10.5%, from a revised total of $516.65 billion in 2021.

The 2022 results follow the two best years on record for charitable giving, including 2021 when giving exceeded $500 billion for the first time. Giving had been especially strong in 2020 and 2021 as donors rallied to help address increasing needs amid a global pandemic and economic crisis and recovery, and supported efforts to advance racial justice.

Giving USA, the longest-running and most comprehensive report on the sources and uses of charitable giving in America, is published by Giving USA Foundation, a public service initiative of The Giving Institute. It is researched and written by the Indiana University Lilly Family School of Philanthropy.

The decline in total charitable giving in 2022 is a relatively rare occurrence usually seen during years with difficult or unusual economic conditions. Total giving has fallen only three other times in the last 40 years in current dollars: in 1987, 2008 and 2009.

“Drops in the stock market and high inflation caused many households to make tough decisions about their charitable giving for the year,” said Josh Birkholz, Chair of Giving USA Foundation and CEO of BWF. “But despite uncertain economic times, Americans demonstrated how essential they view the nonprofit sector and its ability to solve big problems—by still giving nearly half a trillion dollars in 2022.”

“Declines in giving like those we saw in 2022 have a tangible impact on nonprofit organizations, especially those that rely on charitable dollars to support their daily work. Nonprofits and donors alike experienced the steady, negative impacts of inflation such as the growing cost of goods and high interest rates throughout 2022, and many of those challenges remain,” said Amir Pasic, Ph.D., the Eugene R. Tempel Dean of the Lilly Family School of Philanthropy. “However, Giving USA’s historical data also provide a case for hope: we have seen charitable giving rebound from each decline.”

Giving in 2022 occurred amid tough economic conditions – especially for giving by individuals.  Challenging economic conditions included:

  • A 19.4% drop in the S&P 500 (-25.4% adjusted for inflation), the first double-digit decrease since the Great Recession in 2008, creating economic uncertainty for high-net-worth households and foundations which are likely to be invested in the stock market
  • Flat growth in disposable personal income (-0.1% in current dollars or -7.5% adjusted for inflation)
  • 40-year-high inflation rate of 8.0%
  • The S&P 500 experienced steep declines toward the end of the year, when a large share of charitable giving takes place

“Despite the downturn in financial markets in 2022, there were some bright spots in the economy thanks to a strong labor market and 9 percent growth in GDP,” said Una Osili, Ph.D., Associate Dean for Research and International Programs at the Lilly Family School of Philanthropy. “The economic picture that emerges suggests that many households were stable—we did not see job losses or an increase in unemployment the way we did in the Great Recession. However, households tend to give when they are financially and economically secure – and the inflationary pressures meant that fewer households had extra to give. In addition, donors may not have been as compelled to respond to immediate needs as they had been during the early days of the COVID-19 pandemic or during the Great Recession.”

There was growth in three of the four sources of giving in 2022 in current dollars, but all four sources declined when adjusted for inflation. Giving by foundations and corporations posted positive two-year growth, even when adjusting for inflation. For the second year in a row, very large gifts by some of the wealthiest Americans represented nearly 5% of individual giving. Mega-giving from six individuals and couples totaled $13.96 billion.

2022 Charitable Giving by Source:

SourceUp/DownAmount in billionsAdjusted for Inflation
Total↓ 3.4%$499.33↓ 10.5%
Individuals↓ 6.4%$319.04↓ 13.4%
Foundations↓ 2.5%$105.21↓ 5.0%
Bequests↑ 2.3%$45.60↓ 5.3%
Corporations↑ 3.4%$29.48↓ 4.2%

2022 Charitable Giving to Recipients:

Type of recepient organizationUp/DownAmount in billionsAdjusted for Inflation
Religion↑ 5.2%$143.57↓ 2.6%
Education↓ 3.6%$70.07↓ 10.7%
Human servicesFlat at -0.6%$71.98↓ 8.0%
To foundations↑ 10.1%$56.84↑ 1.9%
Public-society benefit↓ 8.4%$46.86↓ 15.2%
Health↑ 5.1%$51.08↓ 2.6%
International affairs↑ 10.9%$33.71↑ 2.7%
Arts, culture, and humanities↑ 2.9%$24.67↓ 4.7%
Environment and animals↓ 1.6%$16.10↓ 8.9%

“Households were heavily impacted by economic uncertainty, the threat of recession, inflation, and changes in the stock market – and in turn, individual giving took the biggest hit of all in 2022. While in 2020 and 2021, giving was buoyed by stock market performance, in 2022, it appears individual donors were impacted by changing economic conditions,” said Wendy McGrady, Secretary/Treasurer of Giving USA Foundation and Executive Vice President and COO of The Curtis Group. “Additionally, individual giving has been declining as a share of total giving for several years. It dropped to 70% of total giving in 2018, which was considered low, and has steadily decreased since then, falling further in 2022 to 64%."

Professional Doctorate in Philanthropic Leadership prepares professionals to address society’s big issues

Philanthropy Matters recently interviewed Cindy M. Lott, Esq., Director of the Lilly Family School of Philanthropy’s Professional Doctorate in Philanthropic Leadership, and Stead Policy Fellow, about the new degree program and how it will benefit leading practitioners, philanthropy, and civil society.

1st PhilD cohort poses for a photo during their residency program.

Q:  The Lilly Family School of Philanthropy now offers the Professional Doctorate in Philanthropic Leadership (PhilD). What is the PhilD?

A:  The PhilD is the first professional doctorate for philanthropic and nonprofit professionals. Different than a traditional Ph.D. degree, which typically prepares graduates for academic positions, the Professional Doctorate in Philanthropic Leadership is designed specifically for practicing professionals. The Lilly Family School of Philanthropy is uniquely poised to offer this first-in-class degree, given our specialty in creating curricula and programs focused on the philanthropic sector: we offer undergraduate, master’s and PhD degrees, and now have our first cohort of the PhilD in process. A three-year program, the PhilD degree is offered online, with asynchronous requirements and many optional synchronous learning opportunities as well. We are now accepting applications for our second cohort, who will graduate in 2027.

Q:  As a degree for practicing professionals, what types of professionals would enjoy and benefit most from the PhilD?

A:  Professionals who have served as a senior leader for the public good, whether in the philanthropic, government or private sectors, already have a master’s-level or other graduate degree and wish to explore real-world solutions for current challenges through philanthropic and nonprofit solutions are excellent applicants for the PhilD. Every applicant will propose an applied research project (ARP) proposal, focusing on one of the myriad “wicked problems” in civil society as it intersects with the philanthropic and nonprofit sector, whether as an intractable issue, a recurrent problem, or an emerging challenge given the realities of our communities currently.

The PhilD welcomes applicants from a wide range of fields, including the private and government sectors, in addition to those with backgrounds in the philanthropic sector. Leadership through extensive volunteering, such as a long-term board member or trustee, may also be sufficient for the PhilD application requirements. As a cohort, the PhilD students will have rich and diverse backgrounds to share as peers, for lifelong professional connections.

Q:  What would experienced professionals learn through the PhilD program that they don’t already know after years of experience in their field?

A:  As a degree focused on applied research and in lieu of a dissertation, the PhilD curriculum and final project focus on applying new and existing research, educational components and real-world practice to produce actionable insights that advance the practice of philanthropy and deliver social impact. Many professionals and different organizational initiatives have worked on these major issues over decades; the PhilD is the professional doctoral program in philanthropy providing dedicated time and focus to harness the power of extant research with the realities of professional practice to formulate actionable solutions that will be disseminated into the field.

Recognizing the specific needs of practicing professionals who already have graduate degrees and years of leadership, our PhilD curriculum is led by a combination of both core and affiliated Lilly Family School of Philanthropy faculty and part-time faculty who hold terminal degrees and have deep expertise in philanthropic practice. With this integration of both academic and in-the-trenches resources, our PhilD students are offered an innovative opportunity to wed practice with research for exploring tangible solutions.

 

Q:  The first cohort of PhilD students began their studies in the summer of 2023. What types of titles, organizations, fields and professional backgrounds are represented in the inaugural cohort?

A:  This inaugural cohort is an incredibly diverse group of leaders, enriching the program with a spectrum of professional backgrounds and geographies. Among this cohort we have philanthropic and nonprofit organization presidents, founders, CEOs, managing directors, long-time board members and entrepreneurs; we have PhilD students who hail from storied foundations and nonprofits that have existed for over a century; we also have students who are innovating and creating new paths and organizations for philanthropic work in our communities. We have domestic and international students, and mid-career to senior career students. Emerging from many different subfields, the inaugural cohort is rich in substantive backgrounds spanning higher education, religious organizations, museums, family and community foundations, fundraising, consulting practice, justice and equity, international perspectives and human rights.

All of our PhilD students have been leaders; all are searching for research-based methods to inform their practice and help solve entrenched issues in the wider sector.

Q:  How can interested professionals learn more about the PhilD?

A:  We have many entry points for information about the PhilD: visit our website philanthropy.indianapolis.iu.edu/phild or email us at phild@iu.edu. For more on Professor Lott’s background, you can visit her faculty bio.

Q:  When is the next application deadline, and how can one apply?

A:  The application deadline for the 2024 PhilD Cohort is December 1, 2023. The link to the application can be found here. 

The Wall Street Journal:  The Retirement Tax Break That Will Pay You An Annual Income (subscription required)

The Wall Street Journal:  A Tax Deduction Won’t Save U.S. Charities (subscription required)

MarketWatch: Americans gave less money to charity last year as inflation and a down stock market squeezed wallets

The Conversation:  US charitable donations fell to $499 billion as stocks slumped and inflation surged

Nonprofit Quarterly:  Global Giving Quantified: The Lilly School’s Global Philanthropy Tracker

Inside Higher Ed:  Hope College Bets on Tuition-free Program