Minnesota charitable giving plunges as wealthy pull back

A nationwide study released this week reports that the Twin Cities was one of the areas in the country that saw the largest decline in charitable giving through the recession and early years of economic recovery.

The Chronicle of Philanthropy study of IRS data found that the proportion of income that people gave to charities dropped across the country between 2006-2012, with the wealthy giving a smaller percentage of their income than in previous years.

Minnesota's charitable organizations and experts on giving say the plunge happened as donors of modest means were squeezed by the recession while wealthy donors didn't keep pace with their income growth.

The report found that people in Minnesota who make less than $25,000 a year gave charities about 8 percent of their income. Although total donations of the wealthy in the state during this period amount to more than $1.3 billion in 2012, those earning over $200,000 a year donated only 2.66 percent of their income to charities, according to the data.

The results are worrisome but not surprising, according to Trista Harris, president of the Minnesota Council on Foundations, which represents 175 organizations that together issue more than $1 billion in grants every year.

"Often during economic downturns, the wealthy give less [or] many give appreciated stock," Harris said. "Of course, a lot of nonprofits didn't have capital campaigns during the economic downturn because they wouldn't be able to raise the funds they needed to be successful."

Harris said a longtime trend is low-income people giving a larger share of their income than the wealthy.

"For populations that are more likely to be regular church attendees, there's the concept of 10 percent tithing, I think that bumps that percentage quite a bit, especially for low-income donors," Harris said.

Harris said there's also evidence that wealthy donors give more to arts and universities instead of social services, which often have greatest need when the economy is weak.

"Low and middle income people saw relatives and neighbors that were really hurt badly by the recession, and they really wanted to give close to home so supported charities that really helped friends and family be successful through the downturn," Harris said.

Minnesota Opera President Kevin Ramach said his organization saw a drop but actually broke fundraising records last year by receiving about $3 million.

"During the recession we saw more of a decline in smaller donations and a lot of our larger donors sustained their giving, and we've seen them all come back over the last couple of years," Ramach said, although he acknowledged that many people of modest means might support the opera by purchasing tickets rather than donating.

Some social service charities said their fortunes declined during the recession and early recovery.

Changes in the economy tend to affect the nonprofit sector later than the private sector, according to Janet Hallaway, director of development for Bridge for Youth, which serves homeless young people. She said declining donations and government support hit her organization hard in 2009.

"We did a ton of layoffs, it impacted our culture, it impacted how we deliver services," Hallaway said "And I would say, now looking at 2014, finally we've righted the ship and for the first time since 2009, we're in an innovation mode."

The Bridge for Youth is lucky enough to have a strong base of consistent supporters, Hallaway said, but could do more to solicit donations as the economy strengthens.

"Maybe we should be out there talking to people and asking people to consider giving more?" she said. "You don't get the money unless you ask."

Kelly Retka, major gifts officer at Second Harvest Heartland, a hunger relief organization that operates food banks in the state, said there was some attrition of donors during the recession, including a few large donors, but that that the organization was now seeing an upward spiral in donations.

Retka said major donors have increasingly been asking for donations that can provide the best return on their investment.

"They too underwent the recession and are feeling the pressures," Retka said. "One of the things that I think major donors are saying to us is help me understand the impact of each dollar."

But larger causes may be at work in why the wealthy aren't giving as much of their income to charities, according to Boston College Law Professor Ray Madoff, one of the country's leading experts in charitable giving.

She said the numbers in the Chronicle's study may just reflect how much wealthier the wealthy have gotten in last few years. The share of income controlled by the bottom 80 percent of the population has steadily declined since the late 1970s, according to U.S. Census figures. The top 5 percent of the U.S. population controlled 22.3 percent of aggregate income in 2012.

"As wealth disparities are increasing, charitable giving is failing to keep pace with that," Madoff said. "Perhaps they're giving more, but their giving is not keeping pace with the growth of their income."

Minnesota was ranked 39th in the country for the share of income residents give to charity, according to the Chronicle's data. The Twin Cities saw a 9.4 percent decline in charitable giving between 2006 and 2012 -- that's the fifth biggest decline in the country.

The Minnesota Council on Foundations' Harris said Minnesotans have some work to do to get charitable giving levels back to the state's traditionally high levels

"It's important that we make giving a piece of our budget, just like the water bill and the phone bill," Harris said. "It's something that needs to consistently happen because our community has consistent needs."