Religion gets the biggest piece of the charity pie, but its share is shrinking

Religious organizations received 31 percent of the $335.17 billion worth of American philanthropy last year, by far the biggest slice of the charitable giving pie.

But that nonprofit sector shouldn’t rest easy, says Patrick Rooney, chief researcher for the annual Giving USA report on philanthropy released this week. Religion’s share of total donations has been steadily shrinking compared with other nonprofit sectors.

Rooney met with about 160 representatives from the Kansas City nonprofit community for a data dive into the distribution of 2013 donations. He noted that the recession, generational differences and political trends were changing the sources, amounts and distribution of charitable dollars.

Nationally, charitable giving rose about 3 percent from 2012, adjusted for inflation. At that recovery rate, it will be a least another year before total giving returns to its 2007 pre-recession peak, according to the report.

Meanwhile, researchers found that religion’s receipts fell 2.4 percent in inflation-adjusted dollars between 2009 and 2013 and that religion’s overall share of philanthropic receipts has plummeted from its historic share of more than 50 percent of total giving.

“There’s no single reason. It’s the sum of many things, including that the institutional church is shrinking,” said the Rev. Keith Hohly, a bishop’s associate in the Central States Synod of the Evangelical Lutheran Church in America.

Like many religious institutions, the Kansas City synod office is paying attention, Hohly said, to the rise of the “nones,” the growing percentage of Americans who claim no religious affiliation in surveys. Many surveys indicate that young adults are less tied to organized religion and are shifting their philanthropy to other values or causes.

“People may still be giving money, but they’ve replaced ‘church’ with all kinds of other causes and organizations they care about,” Hohly said.

The dip in church-related contributions didn’t faze everyone in Rooney’s audience Thursday at the Kauffman Foundation. Jonathan Harrison, vice president of giver services at the National Christian Foundation’s Heartland affiliate, said contributions to his organization’s donor funds grew from $170 million in 2010 to $223 million in 2013.

“We are certainly seeing the opposite,” said Harrison, citing his donors’ “high sense of urgency and passion” to give money to fuel such programs as the AdoptKC initiative focused on adoption and foster parenting.

But Harrison and other fundraisers at the event were in full agreement with other philanthropy concerns cited by Rooney. In particular, they’re focused on when the charitable baton is passed from the baby boom to the millennial generation.

It’s not that the young adults aren’t donors. It’s that the recession and sluggish job market put whammies on their earning power. Even though they’re contributing about the same share of their incomes as older generations — about 2 percent of disposable personal income — they’re earning less, so their donation amounts are smaller.

Rooney, associate dean for academic affairs and research at Indiana University’s Lilly Family School of Philanthropy, said other charity sectors had recovered far better from the Great Recession and surpassed their record giving totals. The gainers in 2013 compared to 2007:

Education, up 8.5 percent.

Human services, up 17.5 percent.

Health, up 12.2 percent.

Foundations, up 1.3 percent.

Environmental and animal organizations, up 7.5 percent.

Individuals or households last year gave nearly three-fourths, 72 percent, of all charitable contributions, far eclipsing the giving of foundations, 15 percent; bequests, 8 percent; and corporations, 5 percent.

After a “dramatic growth” in household giving in the 1990s, it plummeted 19 percent in the recent recession, Rooney said. The economic slump also caused a shift in charitable preference to “feed the hungry, house the homeless” and other social services.

Now, he said, gifts are trending back to traditional recipients. Institutions of higher education are particularly benefiting from wealthy gifts. Gifts to arts and cultural organizations also are growing.

Serving partly as an educator and partly as an adviser to nonprofits that seek donations, Rooney emphasized the importance of focusing on “high net worth philanthropy.” The top 1 percent of Americans, ranked by net worth, provided 37 percent of the nation’s philanthropy.

Education institutions and donor-advised funds, in which donors control where and how their deposited money is distributed over time, are getting about half of high-net-worth contributions, Rooney said.

Several fundraisers at the event said they had heard from high-dollar donors who are worried about what might happen to federal tax deductions for charitable contributions.

Some proposals floated in Washington could change the deductible percentage, capping the value at 28 cents on the dollar. Some participants said they feared that limiting the tax deduction would lead to reduced donations to charitable organizations.

Jeffrey Byrne, a Kansas City nonprofit fundraising consultant whose company sponsored Rooney’s appearance along with U.S. Trust and Nonprofit Connect, said his biggest takeway from the USA Giving report was that private philanthropy was not filling the holes left by cutbacks in government funding.

“Nonprofits need to do a better job of educating their legislators,” Byrne said. “The ‘aha’ moment should be that government funding is shrinking and the philanthropic sector hasn’t replaced it and never will until we do a better job of advocating for ourselves — one on one and collectively as the nonprofit sector — and being more creative in our fundraising.”

This story was originally published June 20, 2014 at 7:00 AM with the headline "Religion gets the biggest piece of the charity pie, but its share is shrinking."