Lessons from the 2024 Giving USA Report

The 2024 Giving USA Report has come out, providing a comprehensive look at the American philanthropic landscape in 2023. The report is a valuable resource for understanding the current state of philanthropy in this country—and trends that may indicate what the future holds.

Jeremy Beer, Senior Fellow at the Center for Civil Society, sat down with Les Lenkowsky, Professor Emeritus of Public Affairs & Philanthropic Studies at Indiana University, to unpack some of the most important takeaways from the report. They focus first on the two-year decline in charitable giving when adjusted for inflation; second on the shift in the share of charitable giving from individuals versus foundations; and third on the trend away from giving to religious nonprofits and causes.

Listen to their insights, and see the transcript, below:

 

 

Jeremy Beer: [00:11] Thanks for joining me as I speak with Dr. Leslie Lenkowsky, professor emeritus at the Lilly Family School of Philanthropy at Indiana University. Les, I wanted to talk to you about the recent Giving USA 2024 Annual Report, and then we'll talk about a couple of other things related to current affairs in philanthropy, as we have time. This report from the Giving Institute has been coming out for a long time, and I know you've played a big role in it.

I want to call out some themes that I saw in the most recent report that really stood out to me, and then ask you, what? What else stands out to you? We'll talk about each of these three things in turn, if you don't mind. The first is that we saw the second year of decline in overall charitable giving when you adjust for inflation. I want to talk to you about this two-year decline. The second thing is the continued shift in the share of charitable giving coming from individuals and foundations, with individuals’ giving declining and foundations’ increasing. And the third is the long-term trend away from giving to the category that Giving USA calls “religion.” Does that sound all right?

Les Lenkowsky: [01:45] Sounds great. Let me just say, I have worked with Giving USA for a long, long time, but I am actually not part of it. Whatever I say today is going to reflect my views, not the views of my colleagues who do the research and prepare the report for the Giving Institute.

Jeremy Beer: [02:07] Good, very good disclaimer has been entered into the record.

Les Lenkowsky: [02:13] My colleagues would shoot me if I didn't specify that.

Jeremy Beer: [02:16] I totally understand and should probably give some sort of similar disclaimer for myself. So, with giving being down when you adjust for inflation, total giving from 2021 to 2023 down by 10.3%—this seems like a lot.

Les Lenkowsky: [02:36] It is a lot. In fact, in 2022, giving declined more in inflation-adjusted terms than it had since the 1950s on a year-to-year basis. But I do want to qualify that a bit. I'm feel it’s kind of a glass half full, half empty. In 2023, giving increased in current dollars and the decline in inflation-adjusted dollars was far less than it had been in 2022. In other words, things were getting better. There's a very simple reason for that. Inflation in 2023, depending on whose measures you use, was around 4%. It was probably twice that in 2022, so as we reduce inflation, we see the effect in giving dollars, because inflation also affects disposable income.

We have a measure in Giving USA of individual giving as a percentage of disposable income, i.e., household income after you pay taxes. It decreased last year from 2% to 1.9%, which I think reflects the effects of inflation. Ater all, your household income goes to the increased price of groceries, rent, and so on, and there's less left over to give to charity. There’s no question about it: inflation is pernicious. It's very bad for charity. It also increases costs for a lot of charities. Charities are consumers, too, and have to pay salaries, buy goods, and so on. So, there's a double effect on charities, and we have been feeling that the single best way to get giving going again is to put an end to inflation.

Jeremy Beer: [04:50] To your point, even in current dollars, not adjusted for inflation, from ’21 to ’22 we saw a drop in charitable giving. It was a big drop, and from ’22 to ’23 we saw an increase again in non-adjusted dollars of 1%. Giving just couldn't keep up with inflation. The other thing that comes to mind is one more negative thing to put in the record here. I think the last time we saw a two-year decline in inflation-adjusted giving like this—tell me if I'm wrong—was back in the Great Recession, during the 2008–2010 time period. But then the stock market went down as well.

Les Lenkowsky: [05:42] Exactly right. In the Great Recession, we saw a real decline in income and wealth. We haven't seen that now. In fact, just the opposite. As you know, the stock market is going up. Yeah, that is partly explained by the answer to your second question about the shift toward foundation giving. Foundations’ giving, by law, is closely related to the returns they get on their endowments. Those have been going up this time. However, we do have inflation, and again, it's not just a matter of deflating the dollar. By some statistics, inflation has real consequences: it leaves you less money to give to charity. You may think twice before buying a raffle ticket or going to a bake sale. Inflation really cuts across virtually everything and doesn't have any offsetting effects. It just has to end, or else charitable giving will remain laggard, right?

Jeremy Beer: [06:53] Well, to your point again, let’s get to the second point. Now, this big theme comes out of the Giving USA data on the shift and the share of giving. More of it is coming from foundations, less of it from individuals. The other categories are kind of stable over time, at least compared to these two categories. Looking at the data, giving by individuals in real dollars, inflation-adjusted dollars, has increased by 135% since 1983; giving by foundations has increased by 1,040%. Does this speak to rising disparity between the mega rich and the rest of us in America? Would that be a reasonable interpretation?

Les Lenkowsky: [07:47] We certainly had growth of enormous fortunes since 1983. No one then would have heard of Bill Gates, for example, or Mark Zuckerberg. So, that’s undoubtedly been a cause. We have become a wealthier country, and all of us have benefited as a result of that. When I first became involved in philanthropy in the late 1970s there were, I think, two or three foundations with a billion dollars of assets or more: Ford, the Lilly Endowment, and the new kid on the block, the John D. and Catherine T. MacArthur Foundation. Today, Jeremy, if you took that $1 billion you've got hidden under your mattress and put it in a foundation endowment, you wouldn't even get to the top 100 in terms of assets.

Jeremy Beer: [08:45] Wow, is that true?

Les Lenkowsky: [08:47] Yes, we've had this enormous explosion. My favorite, mostly because it’s our Indiana hometown foundation, is the Lilly Endowment. This year, the Lilly Endowment’s payout rate will exceed the rate. The actual payout will exceed $2 billion; next year, it's likely to exceed $3 billion.

Why is that the result of obesity? Why? Because the bulk of the Lilly Endowment’s assets are in the stock of the Eli Lilly company, which has been one of those selling a product for weight loss, right? It also has pretty far along in the pipeline a product to help people with early stage Alzheimer's, which will be a big seller. As these products have come on, the foundations that own shares in the companies that make these products have benefited too.

Now, having said that, I think it's also important to remember that most foundations aren't anywhere close to a billion dollars in assets. Let's say there are about 100,000 foundations in the United States right now; those with very sizable endowments are probably no more than about one to two percent of them. Many people have created foundations for a variety of purposes, including as a way of preserving family unity across generations and as a vehicle to do certain sorts of giving. But these foundations are small. They really are as close to individual giving as if the money were coming out of the founders’ own checkbooks. And indeed, there are people who have foundations and also continue to give for certain purposes through their checkbooks. And the other big story is our donor-advised funds.

Jeremy Beer: [11:13] I was going to ask you about that. I don't see any estimate from Giving USA on how much of this foundation giving is from DAFs. I would really want to know that number.

Les Lenkowsky: [11:22] Well, you can find that out on the 990s. I know my colleagues have been talking about what they should do about this, and I'm not sure why they haven't moved on it. There may be a separate report that comes out of the Giving Institute on that, but a lot of the sponsors of DAFs are community foundations, like the Silicon Valley Foundation, and it will be reflected in those foundation numbers.

It’s really a kind of individual giving. I'm not quite sure how they categorize something like, say, the Fidelity Charitable Trust. It might be under foundation or it might be with the United Ways, which they categorize as public benefit or something.

Jeremy Beer: [12:20] I assumed it was foundation that would be something to find out.

Les Lenkowsky: [12:25] It may or may not, I would have to get into deep into the numbers with my colleagues in order to answer. And I should say, for your audience, that my colleagues at the Lilly Family School are glad to answer. A woman named Anna Pruitt is the editor, and if anybody has specific questions, I'd be glad to relay them to her.

Jeremy Beer: [12:53] I’ll put Les’s contact information in the transcript of this interview and in its publication on Philanthropy Daily. That's a great effect, regardless. I think we see a shift toward a higher share of charitable giving coming from institutions than from individuals. Even when you were to correct for DAFs, one of the consequences might be this shift away from giving to what Giving USA calls religion.

The Lilly Endowment, by the way, is one of the only exceptions to this. They actually do give to religion. That's right, most foundations, the vast majority of the really big ones we're talking about, don't. That’s partly, although only partly, what might be behind this statistic from Giving USA: back in 1984 to 1988, rolling five-year average giving to religious organizations constituted 57% of all charitable giving. In 2019 to 2023, the most recent five-year span, it was 26%, so that is a decline. It's more than halved since 40 years ago, 1984 to ’88, which is a really stunning shift in charitable giving in America.

Les Lenkowsky: [14:19] It certainly is. But there are a few explanations for it. The big one, which is a troubling one, is that we are less religious. I think everybody knows the numbers. Americans are either leaving religious affiliations entirely or going less frequently, which has a very substantial effect on giving. But in addition, it is likely that foundations aren't giving to religion, with some notable exceptions, like Lilly. People sometimes are confused a little bit and think because a foundation is a tax-exempt organization, somehow the Constitution applies. So, when they give to religion, they will often do it out of their own personal funds, rather than out of institutional funds. It's also the case that other areas have grown, what I like to call quasi-religious areas, like environmentalism and so on.

People are leaving traditional religions. We know this. This has a serious and long-term effect on American giving, and you're seeing it in the share of giving. But it's also the case that other areas are growing rapidly. And so we're talking at relative modes. I think if you look at the absolute amounts, even after adjusting for inflation, there's still a lot of money going into religion in the United States.

Jeremy Beer: [16:06] And it's true. I should point out, too, that many of the organizations that are not categorized under religion by Giving USA have a faith-based component in the arts, culture, and humanities, as well as public society, human services, education. Those get categorized differently. The stats are very clear at this point that people who are not only affiliated with a religious congregation but also attend services regularly give a lot more, according to Lilly's own data right? Maybe as much as twice as much per year on average. I guess we'll see if that that effect should start to show up in the share of disposable income given away to charity over time, right? Like that need to go down if, in fact, people continue to become less religious, right?

Les Lenkowsky: [17:09] Another factor that often gets overlooked here, we're all aware that our country is now has many more immigrants. I don't want to get into a debate on the policy issues, sure, but the percentage of immigrants in the United States is greater than at any time since the beginning of the 20th century. Well, many of these immigrants are coming from cultures that don't have much history of giving. They have low incomes themselves, at least initially.

Now, again, an open question is, as immigrants stay here, assuming they do, and as they become more American, will they absorb our traditions of giving, which certainly happened in the 19th century and early 20th century? Will it happen with the new immigrants of today? We don't know for sure, but one big difference is today's new immigrants are coming into a country where a large share of public services are provided by government. Yeah, yeah. Older immigrants came into a country where you really had to band together to provide a lot of services. So they did.

So while this is a very interesting and in some sense academic question, it's also a very practical one. And for people who work for charities or who assist charities through fundraising and so on, it's important to figure out ways of reaching out. Especially if you live in a part of the country with a sizable immigrant population, you should be reaching out to these new Americans and getting them to see the value of giving and volunteering, even when so many services are being provided by government.

Jeremy Beer: [19:22] That's a really good point, actually, I hadn’t thought about the effect of increased immigration potentially on charitable practices and habits well.

Les Lenkowsky: [19:33] And one other point I'd make, which may segue us into another topic of, is that we hear a lot about childless families and childless couples recently, yes, in recent days? Well, one of the things we know is people who have children are more likely to give than people who don't. That's true. I used to say that. So if you know somebody is the group between, say, 18 and 24, we know their volunteering and giving rates are pretty low. From 24 to 29, they're building their careers and so on. Giving and volunteering pick up when people get into their 30s and they have families, they have homes, they have communities, yep. Well, next year, we're going to have a smaller proportion of people who meet those characteristic if current demographic trends hold, and that'll affect giving.

Jeremy Beer: [20:38] Just another reason to worry.

Well, that's a bit of a segue to one, a topic we wanted to touch on, because it is in the news you mentioned earlier that the number of foundations with a billion dollars or more in assets has gone from just two or three when you started your career in philanthropy to over 100 now. And that has fed some fears that foundations and other institutions with large endowments have too much power and influence. JD Vance has been one of the people in public life who has addressed this issue and spoken about potentially making changes to the way endowments are handled legally or taxed. What have you heard about, or what's your thought about that, what he has said, or what people are scared about in the philanthropy establishment, with respect to all that?

Les Lenkowsky: [21:46] Well, the good news is, Senator Vance is taking philanthropy very seriously, more seriously than probably any other senator, with the possible exception of Iowa's Chuck Grassley. He has talked about, I'm not sure he's put it into legislation yet, raising the payout rate, the annual amount to be distributed by big foundations, from the current 5% to something closer to 20%. He's also raised something that will come up in the next Congress when we revisit the tax act of 2017, namely, increasing the tax on very large endowments. It's currently a little bit more than 1%, and I believe he would like to raise it to over 10%. Neither of these proposals has much support in Congress.

Both raise important questions. For example, donors who give to university endowments don't expect their gifts to be subject to tax payout rates. Even raising it that high, the returns on investments may not make much difference in asset accumulation. And in any case, if you don't like what the Ford Foundation is doing today, as Senator Vance does not, having them do it at a rate of 20% a year doesn't strike me as a particularly good idea. But anyway, I think it would be very good for to reconsider these rules related to endowments, given that, frankly, they have not had a serious reconsideration for close to 60 years,

Jeremy Beer: [23:43] I agree, Les, if nothing else, reopening this conversation, there's nothing sort of magical or set in constitutional stone with regard to a 5% payout rate and other tax rates. I really welcome a candid conversation about these things and to think through what the consequences might be, not just for whatever JD Vance might want, but you know, what would be best for the common good?

Les Lenkowsky: [24:12] It would be and especially, how do we, you know? How do we underpin what has been a very important tradition in American life of giving, volunteering, community-based help? We've moved a long way from that, and we need to rediscover it.

Jeremy Beer: [24:30] As we approach America's 250th birthday in 2026, that's a message I've been striving to put out there: what really has made America great, or made America exceptional is its robust, independent civil society; associational, mutual aid; and tradition. Whatever we can do to underpin and strengthen that, seems to me, would be very much worthwhile.

Les Lenkowsky: [24:55] I agree completely.

Jeremy Beer: [24:58] Dr. Les Lenkowsky, thank you so much for having this conversation with me today. Take care, and thank you!

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