Philanthropy In 2009

The state of philanthropy in 2009 will largely be dictated by the deflating housing and credit markets of the past two years. Even as philanthropists face millions of dollars in losses, Americans will need to pick up the slack to keep charities and non-profit organizations alive.

Economic Impact On Philanthropic Gifts

Every American who has picked up a paper or watched the TV news knows that 2009 will be a difficult year financially. The media has run story after story about failing companies like General Motors© and Microsoft© that have laid off thousands of workers. News outlets have focused their attention on failing investment firms and banks like Lehman Brothers that have been bailed out by competitors and the Federal Government. The economic downturn has its share of villains including Bernie Madoff, an investment fund manager who defrauded his clients to the tune of $64 billion. These economic hardships will affect philanthropy in 2009 with the lingering question of how large the effect will be.

The drastic reduction in market value from September 2008 to the beginning of 2009 had an impact on endowments. Universities like Harvard and Yale along with hospitals and established charities used endowments over the past decade to maximize their investment dollar. These endowments grew because of the relative health of the stock market as well as an aggressive investment strategy by endowment managers. As the economy continues to limp along into 2009, these endowments will continue to shrink and lose value for their managers.

Local, state, and federal governments have responded to the economic downturn by cutting their budgets for 2009 and beyond. These cuts have two major impacts on philanthropic giving, not the least of which is the loss of funding for the arts, welfare programs, and education. The larger problem for philanthropies in periods of government budget cutting is the lack of matching funds. Public-private partnerships designed to fight local crime, disease outbreaks, and poverty have been sacrificed because of financial restrictions.

The Giving USA Foundation© (http://www.aafrc.org/) has conducted studies of past recessions to determine the influence of recessions on charitable giving. Foundation researchers have found that there is a general 1% decrease in giving during periods of economic downturn. Charitable givers tend to decrease their gifts by 2.7% during periods of prolonged recession, defined as a period of depressed economic growth longer than eight months. The charities most often hit by these cutbacks are private schools and educational groups that rely heavily on donations.

Cutbacks By Philanthropists

While 2008 was still a robust year for philanthropic giving, we can expect to see cutbacks by gift givers and charities in 2009. In addition to general budget cutbacks at non-profits and foundations, philanthropists will likely cut back on newer and smaller charitable efforts in favor of established charities. The startup costs for running new charities and donation drives may be too much for philanthropists to deal with during an economic downturn.

Philanthropists cutting back on small-scale charities are likely to hurt job and welfare programs in a time of need. These areas of charitable giving are cost intensive because of advertising, recruiting, training, and administrative costs. As charities begin to withdraw their investments from these programs, state and federal programs are slow to respond with assistance to families hit by the recession. The lack of a private component to job creation and welfare provision will lead to greater struggles for the nation’s low-income workers.

The aggressive investment strategy used by philanthropists in the past will have an influence on charitable giving in 2009. Investments in equity markets, derivatives, and other high-risk financial vehicles allowed philanthropists to increase their donations in past years. As charitable givers switch to safer investments with lower yields, the state of philanthropy will become ever grimmer as 2009 progresses. Conservative investment strategies will force some philanthropists to cut back on their charitable giving to keep more money in their accounts.

Top Philanthropists In 2009

Slate Magazine’s© (http://www.slate.com/id/2209476/) annual list of the 60 top philanthropists for the past year can tell us which major givers will stay in form for 2009. The most likely philanthropists to stay on top of this list in 2009 are families like the Gates (Bill and Melinda), the Perots, and the Knights (Philip and Penelope). The Gates and the Knights have given hundreds of millions of dollars through their charities in recent years, while the Perot family has substantial funds to offer. While Nike©, Microsoft©, and Perot family investments are not immune to the recession, these philanthropists should remain near the top in overall gifts in 2009.

Individual givers like Harry Alfond and Michael Bloomberg will likely stay near the top among philanthropists in 2009. Dexter Shoe Company© founder Harry Alfond gave $360 million to his Harry Alfond Foundation in 2008 to promote better education and medical care in his home state of Maine. New York City Mayor Michael Bloomberg donated $235 million of his financial largesse to 1,200 groups including Stand Up To Cancer in 2008. The broad philanthropic interests of both Alfond and Bloomberg along with their substantial wealth will make them leaders among gift givers in 2009.

Making A Difference In Philanthropy

The staggering philanthropic efforts of the Michael Bloombergs and Harry Alfonds of the world may seem out of reach to average Americans. Philanthropy involves charity of all kinds including gifts of time, energy, and enthusiasm for worthwhile causes. The simplest way for the average person to boost philanthropic efforts in local communities is to volunteer with cash-strapped organizations. Professionals who have nights and weekends to spend in community centers, nursing homes, and shelters can check out Idealist.org© (http://www.idealist.org) to find volunteer opportunities. Another great resource for philanthropy-minded people is VolunteerMatch© (http://www.volunteermatch.com), which allows users to connect with non-profits in need of their talents and experience.

Low and middle-income families looking to offer money to their favorite charities can find ways to cut back in other areas of their household budgets. Public radio stations and charities have long put their donation drives into the context of the costs of cups of coffee, newspapers, and donuts. If you look at the abundance of receipts in your wallet, you may see tens of dollars each month that could be given to your favorite charity.

Philanthropists of all income levels should look to maximize their financial gifts to benefit targeted charities. An annual charity drive featuring limited periods of donation matches can help you double your gift without going over your budget. The average philanthropist can keep the donation receipt and other paperwork to write off their gifts as tax deductions when giving to non-profits.