Elections and Economy Offer Challenges to Fundraisers in 2016

By Heather Joslyn — Twice during the most recent year-end giving season, fundraisers at the National Philanthropic Trust, which solicits and manages donor-advised funds, started the paperwork for incoming gifts it had been told would be in the $1 million range. Instead, the donors each gave $5 million.

“We have surprises every day,” says Eileen Heisman, who runs the trust.

While the organization’s final tally for 2015 isn’t available yet, Ms. Heisman exuded optimism amid the usual crush of last-minute gifts. The trust was taking in “a ton of illiquid assets,” like stocks, she says, and was finalizing some especially large commitments.

But will 2016 be so sunny? Hard to say. “I think we’re going to see the economy respond to the presidential election, and it might slow down a little bit,” says Ms. Heisman, a former political fundraiser. If major donors don’t feel their assets are appreciating, she says, they may pull back on giving. And indeed the stock market slid precipitously during the first week of the year, not long after Ms. Heisman’s comments to The Chronicle.

The unpredictability of this particular election adds an extra layer of uncertainty, she says: “People are cautious when they don’t know what the future’s going to hold.”

Ms. Heisman says charitable giving typically slows the most between the end of the primaries and the general election. But the good news, she says, is that once the votes are cast in early November, donors usually resume making nonprofit gifts.

Until then, she warns fundraisers to keep making their case to supporters and guard against frustration: “I remember working through those presidential election seasons and thinking, This isn’t as fun as I remember.”

Election-Year ‘Noise’

Many fundraisers are anxious about the impact of the election, fearing it will divert money from charities to candidates. But a big danger for nonprofits is simply the “noise” generated by so many appeals, says Shaun Keister, vice chancellor for development and alumni relations at the University of California at Davis.

“People who are so tired of being overwhelmed by solicitations from candidates, they’re just going to check out for a period of time — stop answering their phones, delete their email, and throw their mail out. Our solicitations in the nonprofit sector can get ignored. We’ve seen that in past elections, so the idea that it could happen again is very viable.”

But in some cases, charities might be able to borrow a bit of the candidates’ spotlight. For instance, Americans for the Arts’ political-action arm has asked 100,000 people to pose questions about the arts to the candidates during public events and record their answers, says Robert Lynch, Americans for the Arts’ president.

“In a funny way,” he says, “the arts might get a little boost from all of this positive political storytelling that we’ve got going on out there.”

Diana Aviv, chief executive of Feeding America, echoes that thought. “Politicians raise issues that sometimes people forgot about,” she says. “Organizations will have the opportunity to find new donors from the spillover effect of political discussion.”

If a charity’s issue is in the news, she says, organizations might craft appeals that build on that. Charities must avoid calling out specific candidates, Ms. Aviv says. “But if candidates X, Y, and Z are talking about these issues, you can say, Here are the facts, and you may want to know more about it on our website, and we encourage you to give if you care about this issue. You don’t need to make it partisan; you just need to use this opportunity.”

The notion that donors will withhold money from charities to support political candidates isn’t backed up by data, says Una Osili, director of research at Indiana University’s Lilly Family School of Philanthropy.

She offers a bit of perspective: Only about 12 percent of Americans give to political candidates, compared to the nearly two-thirds who support charities. Also, Ms. Osili notes, “Political donations are actually a small slice of the pie compared to charitable giving.” About $6.3 billion was spent on the 2012 election, compared with the $339.6 billion that went to charities that year.

The contentious climate of an election year could also intensify some ongoing policy debates that affect charities. Irv Katz, interim chief executive of the National Human Services Assembly, expects to see more challenges to nonprofit tax exemptions.

“There is the politicization of issues, such as the attacks on Planned Parenthood, but also the unwarranted, unnecessary complicating of the charitable process, such as the proposed requirement that nonprofits associate gifts with donors’ Social Security numbers,” he writes in an email to The Chronicle.

Generational Change: Donors

Several experts cited planned giving as an area with tremendous potential for growth. The oldest boomers turn 70 this year, and many have legacy building on their minds. “This is a moment that nonprofits really do need to take advantage of,” says Alicia Philipp, president of the Community Foundation for Greater Atlanta.

In 2016, charities should make the most of the benefits posed by the latest federal budget deal. Mr. Keister points especially to a tax provision, made permanent by the deal, that allows people ages 70 and up to give $100,000 to charity from their Individual Retirement Accounts without paying a penalty, which presents an opportunity for nonprofits with older donors.

Ms. Philipp urged nonprofits to help their older donors teach their children about philanthropy. “It’s really going to be of critical importance to this sector — how organizations survive and thrive in the generational shift. There are an awful lot of families not getting any support in how they bring their children along.”

Fundraisers need to both try to capture donations by boomers — who are now retiring, inheriting wealth, and setting up bequests and new foundations — while also appealing to the even more numerous millennials, says Ms. Aviv. “It’s up to the establishment charities to make the case anew, to not assume that just because they got support from the parents that they’ll get support from the children,” she says.

Ms. Aviv adds that while people in their 20s and 30s are typically passionate about doing good, they must be approached differently. “The millennial generation, they’re not writing checks,” she says. “If they can’t do it on their iPhone, they may not do it at all.”

Help Wanted — Lots of It

Nonprofits struggle to hire enough skilled fundraisers to meet their revenue goals. If 2016’s job market stays strong, look for that problem to get worse.

Five years ago, when the economy was in the doldrums, “I could hire someone in two months,” says Mr. Keister. “Now a search to get the right person might take four to six months.”

That prolonged search means time lost in connecting with donors, he says. “As long as the economy remains fair to strong, that’s going to continue to be an issue, because most organizations you talk to are adding staff.” He adds, “We’re not really producing more talent in the industry.”

To help fill up the talent pipeline, his university is this month launching an internship program, offering spots to current students “in hopes that we can get them interested in development as a career and hire many of them when they graduate.” In the spring, the university is also starting a certificate program in philanthropy.

An Unsettled World

The threat of terrorism is “distracting” Americans, says Ms. Heisman, and could have a dampening effect on support for charities, especially if people become afraid of gathering at public events. “It leaves a very odd taste in people’s mouths, just as citizens,” she says. “and your citizenry is what makes you be a donor.”

But the stock market’s performance — and the larger economy — will likely have a bigger effect on giving, experts say.

Signs for the economy’s continued health are mixed, says Ms. Osili. On the plus side, employment is up, the housing market is largely recovered, and corporate profits are robust. On the other hand, oil prices are down, some regions are struggling economically, and parts of the world are in turmoil.

“Large gifts have grown, in part because of the favorable stock market,” says Ms. Osili. “But what we’ve seen is that average American incomes have not rebounded in the post-recession economy. I think there’s almost a different outlook for major gifts compared to the annual fund and average giving. So the unevenness of the recovery has implications for fundraising.”

Charities, she says, will need “to cultivate and engage those smaller donors as their incomes rebound.”

A flat or falling stock market “will put into jeopardy some major gifts that would have come to us via stock,” says Mr. Keister.

If that happens, he says, fundraisers will need to “be nimble” and will have to open discussions with affluent donors about giving other types of assets, such as real estate, whose value has recovered in many parts of the country since the housing bust.

At the University of Texas Health Science Center at Houston, fundraisers are optimistic about 2016, buoyed by a $75 million commitment it received in November from the John P. McGovern Foundation. Still, some challenges loom, says Kevin Foyle, vice president for development and public affairs.

The downturn in oil and gas prices has had an impact on corporate giving in Texas, he writes: “Some companies have tightened their belts, have limited their annual holiday celebrations, and have held off on making significant contributions.

The Income Gap

Though a few people at the top of the income ladder, like Facebook co-founder Mark Zuckerberg, have made headlines with huge gifts and pledges, they are not the donors who sustain most charities, notes Kim Klein, co-founder of Klein & Roth Consulting, which advises small nonprofits on fundraising.

“The middle class has been the bulwark of private philanthropy for decades, and the middle class is now shrinking,” she says, noting widespread wage stagnation and a “sharing economy” she dismisses as full of “piecework” jobs.

That economic trend presents a big and growing problem for fundraising, she says: “I think we’re in for some hard times over the next several years.”

And yet the rich are getting richer. David Yarnold, president of the National Audubon Society, spends a week of every month seeking support in Silicon Valley, where he built his previous career as a journalist. “There’s wealth looking for guidance and ownership” among today’s moguls in technology and other fields, he says.

Few charities so far have fully taken up the challenge of working with these potential donors on shaping and executing their vision for doing good, he adds: “When combined with the number of boomers reaching retirement age, I think there’s more opportunity out in the world than there are ideas.”

As communities struggle with income inequality and other issues, charity supporters can develop donor fatigue, “because the problems just seem so big and incomprehensible,” says Ms. Philipp. “They can’t figure out how to begin to make a difference.”

And yet, she says, “there are increasing numbers of donors who care about fact that this opportunity gap exists in their communities.”

Technology’s Cutting Edge

Fundraisers will need to continue to seek ways to reach donors with new technologies. Emails are often deleted, unread, by donors who are deluged with messages, says Ms. Heisman. Apps like Periscope, which allows a user to send real-time video, may offer one way for charities to connect with supporters. “I haven’t heard of anybody using Periscope,” she says. “But I think this idea of using things like that to talk directly to donors is important.”

Mr. Yarnold also thinks 2016 will be a great time for charities to make better use of digital communication.

“Our challenge is whether we’ll be on the leading edge of change or whether we’ll keep limping along with publishing and organizing strategies developed in the 1980s and 1990s,” he says. He urges charities to experiment — “hand over the keys to the 20- and 30-somethings who live and breathe this stuff.

“There’s no quicker way to say ‘We’re run by boomers who still don’t get the primacy of communications’ than to go to most organizations’ websites.” 

New Frontiers in Giving

The recent pledge by Mark Zuckerberg and his wife, Priscilla Chan, to create a limited-liability company dedicated to social good, funded by tens of billions of dollars’ worth of Mr. Zuckerberg’s Facebook stock, underscored the trend of a “blurring of the boundaries” between the nonprofit and for-profit worlds, says Ms. Osili.

While most donors don’t have the means or inclination to follow Mr. Zuckerberg’s example, the broader notion of blending for-profit and nonprofit activities is “important to millennials,” says Ms. Heisman. And it’s part of a trend that includes vehicles like impact investing.

She advises a fundraiser in 2016 to “be a student of philanthropy. Figure out what an LLC is. Know what impact investments are.” And, she adds, learn how illiquid assets, which can make up a significant portion of a donor’s wealth, can be donated.

“People were so quick to criticize the Zuckerberg gift,” Ms. Heisman says. “But I think if you read between the lines, there was a really important message there: There’s a lot of different ways to improve the world. And charitable giving is not the only one.”

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