Charitable Giving in 2008 Better Than Expected

Shelly Banjo writes in the Wall Street Journal that perhaps charitable giving did not fall off to the extent predicted in 2008.

GETTING PERSONAL:Charity Declines In 08 Less Dire Than Feared

Were doomsday scenarios predicting a 10% to 30% plunge in charitable giving a bit too extreme?

New totals for 2008 suggest those dire predictions were exaggerated, although the recession's full impact on philanthropy may yet to be felt.

Charitable giving dropped about 2% from a year earlier, or 5.7% in inflation-adjusted dollars in 2008, according to the annual Giving USA study released Wednesday. As a measure of gross domestic product, giving is still historically strong: The roughly $308 billion in charitable gifts was 2.2% of GDP, down slightly from 2.3% in 2007.

Still, it was the first decline since 1987 and the second since the group began tracking charitable donations in 1956. Gifts to private foundations fell by 19.2% and at many charities, donations weren't enough to replace funds lost by deep endowment declines and financial scandals.

The study doesn't break out quarterly results but anecdotal evidence suggests three quarters of strong growth in early 2008 may have propped up a dismal fourth quarter, said Nancy Raybin, chair of the Giving Institute. Deeper cuts of the recession, including job losses, auto company bankruptcies and the Bernie Madoff scandal, haven't been factored in.

"This is a snapshot in time, clearly the full impact of the economic downturn won't be reflected until 2010 and 2011," said Claire Costello, national practice executive for philanthropic management at Bank of America Corp. (BAC).

Giving was down across most sectors apart from religious organizations (up 5.5%), public and society benefit organizations, which include donor-advised funds and voter-registration groups (up 5.4%), and international affairs nonprofits (up .6%).

"Wealth drives giving - if people feel pessimistic about the future or lose jobs they aren't going to maintain the same level. People still give, they just give less," Raybin said.

Financial advisers say they're having more conversations with philanthropic families around how to continue to make an impact on a tighter budget. Donors are focusing on specific charities, doing more due diligence on charities, extending grant terms to existing pledges, and are setting expiration dates on foundations to allow for more immediate spending.

Families are realizing these are no longer "flush times where they can haphazardly give a little here and there" if they're going to make an impact - they're seeing it's time to get focused and do some planning, said Lisa Philp, head of philanthropic services at JP Morgan Private Bank.

"Financial advisers can help families shore up what core issues and organizations they care about most and focus on helping them make it through challenging times," Philp said.