By John Lippincott, Of Counsel, Marts & Lundy, President Emeritus of CASE

As you plan your fundraising efforts for this year and next, you can do so with a high degree of confidence that there will be steady growth in all of the major sources of philanthropic giving in the United States.  

That’s according to the most recent edition of The Philanthropy Outlook*, a one-of-a-kind report that predicts giving for two-year periods based on detailed economic analysis.

INCREASE IN TOTAL GIVING
The Outlook projects an increase in total giving of 4.8 percent in 2015 and 4.9 percent in 2016 – healthy and stable rates of growth. (These are inflation-adjusted figures, which I will use throughout.)

The projected growth rates are just a tad below the 30-year average rate of 5.1 percent and the 2014 rate of growth of 5.4 percent. However, it is important to remember that giving was flat in 2013, so the average annual rate of growth for the past two years is less than three percent. In that context, the 2015 and 2016 rates look quite positive.

Where specifically will the growth come from in the next two years? Let’s take a look at the major sources of philanthropy addressed in the Outlook.

MAJOR SOURCES OF GIVING
Essentially the growth in giving will come from the same sources and in roughly the same proportions that the recently released Giving USA annual report showed for 2014.

• Giving from individuals, households and estates will represent nearly 80 percent of philanthropic support both this year and next.
• Foundation giving will account for a bit over 15 percent
• Corporations will make up the remaining 5 percent

The Philanthropy Outlook projects only minor shifts (all less than one percent) within the major sources of giving. Of far greater importance is that giving from all sources is expected to grow.

INDIVIDUAL GIVING
The one source whose proportion of total giving shows a slight decline is individuals and households. However, that’s only because other sources are growing at a faster rate.

The projected rates of growth for individual giving are 4.4 and 4.1 percent in 2015 and 2016 respectively. This is actually a slight improvement over last year’s rate of 4 percent and also above historical averages.

One of the key drivers of growth in giving from individuals is household net worth – no surprise there. A bit surprising is that the other key driver is nonprofit net worth. The authors of the study suggest that this is because a healthy nonprofit sector is inherently more attractive to donors and has the resources to invest in attracting those donors.

FOUNDATION GIVING
Foundations will be the fastest growing source of philanthropy during the next two years. The Outlook projects very healthy growth rates of 7.2 percent and 6.7 percent in 2015 and 2016 respectively. This builds on the strong growth of 6.5 percent in 2014 and is well above the growth rates for total giving this year and next.

The above average increases in foundation giving are driven by a healthy stock market and healthy gross domestic product (GDP). A growing economy increases the value of foundation portfolios, which in turn drives higher payouts in support of nonprofit organizations.

BEQUESTS
Bequests will post uneven rates for growth in the next two years. The projected growth rate in 2015 is 2.7 percent — well below the rate for total giving and a huge drop from the 13.6 percent rate in 2014. The growth rate then rebounds to 6.3 percent in 2016.

So what’s going on here? Obvious factors that influence estate giving are household net worth and the performance of the stock market. However another important factor is previous year estate giving. The settlement of some large estates in any given year may set a pace that is unlikely to be sustained in the subsequent year.

To better understand this point, consider the fact that the average rate of increase between last year’s big jump and this year’s modest growth is still a very healthy eight percent per year.

CORPORATE GIVING
Corporate giving will increase at rates of 6 percent in 2015 and 4.8 percent in 2016. Of all the sources of philanthropic support this can be the most volatile. Last year corporate giving registered a big jump of 11.9 percent. In stark contrast, it dropped 10.6 percent in 2103.

There are two key factors that drive corporate giving – GDP and corporate savings. Some of the volatility occurs because these factors can be inversely related. As GDP picks up, corporations invest more in their operations and, therefore, reduce their savings.

CAVEATS
As with any set of predictions, there are caveats.  

The Philanthropy Outlook is based on a set of variables, some of which are more stable than others. The S&P 500, for example, is an important variable for all giving sources, and it is an unstable predictor – that is, there is a fairly high likelihood it will not follow the pattern on which the study was built.

The other caveat is that “stuff happens.” In any given year, stuff happens at the macro level and the micro level that may influence overall patterns of giving as well as giving to your particular organization.

Those caveats notwithstanding, there is significant value in the information found in The Philanthropy Outlook.

IMPLICATIONS
For fundraising professionals, the principal value of the Outlook is as a planning tool. The research suggests that for this year and next, you should plan for external growth in American philanthropy.v Whether you realize that growth internally will, of course, depend on factors specific to your organization. Perhaps the most important of those factors is your level of investment in your fundraising operation.

You also need to plan to adjust along the way. As noted earlier, some of the predictors are unstable and a variety of other external and internal factors can influence giving to your organization. Therefore, your planning should allow for necessary adjustments over time. With that in mind, you should refer to the next release of The Philanthropy Outlook to see if there have been any significant shifts from this year’s predictions.

You also need to plan to adapt. That is, you need to take the findings in this report and adapt them to your particular organization, fundraising track record and donor community. If foundation support is a greater than average proportion of your total donations, then you may want to plan for higher rates of growth than an organization that is more heavily dependent on corporate giving.

Think of the predictions in this report like the predictions in actuarial tables. The average life expectancy for an American at birth is 79 years. Is that useful information for a variety of planning purposes? Absolutely. Does that guarantee you will live to be 79?  Absolutely not.

The information becomes even more useful when you start to break it down and adapt it to your particular circumstances. For example, if you are 65, the actuarial tables suggest you will live to be 84. That’s important information in making decisions about retirement income, including social security and annuities, as well as decisions about estate planning. It is no guarantee that you will live until you are 84, but it does increase the likelihood that you will have sufficient income for your old age if you plan accordingly.

And if you plan accordingly based on The Philanthropy Outlook, it increases the likelihood that you will benefit from the projected growth in giving. That growth is going to benefit some nonprofits, why not yours?

Finally, these predictions mean you need to plan to engage. With roughly 80 percent of the money coming from households and estates, the need to engage with prospective donors is paramount. As we all know, philanthropic investment follows personal engagement.

Having good data is extremely important for planning purposes. Building strong relationships is extremely important for delivering on those plans.

So if you plan for growth, plan to adjust, plan to adapt and plan to engage, you will greatly enhance the likelihood that your fundraising program will enjoy the kind of healthy and stable growth predicted by The Philanthropy Outlook.
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 *The Philanthropy Outlook is presented by Marts & Lundy and researched and written by the Indiana University Lilly Family School of Philanthropy. To download your free copy, please follow this link: The Philanthropy Outlook. If you would like a printed copy, please email Angie Sheffer, sheffer@martsandlundy.com.