Changes in Funding
Funding is decreasing for nonprofits right now due to a myriad of reasons. Due to the changes in donor demographics, community-centric funding, foundation re-focus, and the economy/inflation, fundraising is changing like never before. Below, we answer some questions about categories that are impacting your organization’s fundraising efforts.
How does the economy impact funding?
It feels a bit silly to say, but economic factors, such as inflation, impact annual giving in significant ways. On a macro level, foundations are impacted when an economic downturn happens because they are reliant on giving from benefactors and investments made into the community. When these investments take a hit, the ability to give is greatly reduced. On more of a micro level, individuals are greatly impacted by inflation and insatiable economic circumstances. According to Candid, “Individual donors specifically cited inflation as a major reason why they expected to give less last year. As a result, nonprofits were hit hard in multiple ways. Because of inflation, the value of dollars donated declined, while costs, wages, and for some, demand for services grew” (2023). ConsumerAffairs Research Team stated, “Workers in their twenties today have 86% less purchasing power than baby boomers did at the same age” (2023). What does this mean for your nonprofit? The next generation of givers are focusing more on survival in living and are unable to give in the same way as generations before them. While they allot more in their budget than previous generations, they are making less and have more financial commitments (debt, rising cost in living, etc).
Humans are not made to do life alone, and organizations are unable to operate effectively without community members and organizations creating an ecosystem of philanthropy.
Relationship with funders is not the only way to increase funding, but collaborative initiatives that bring people together to solve community needs will be recognized by foundations from big to small.
How do donor demographics impact funding?
Age is a huge factor when one is looking at a diversified nonprofit budget. Relationship is the only way to get funding, and knowing one’s donor will create confidence when fundraising. While many have the desire to give, there is significant strain for younger givers. Gen Z is known to allot more in their budget for philanthropic activity, however they are not able to give as much as baby boomers were able to at the same age.
Minority groups, such as Black and Latino families are some of the highest givers in the United States. The NonProfit Times shared that Latino families empower multigenerational giving. This means that the value of giving is being communicated to one’s children, and they are embracing this value and giving back to the community through donating to various causes.
“Since 2010, Black families have proven to donate the largest proportion of their wealth to nonprofits” (Ashley & James, 2018). Orr Group states that these giving norms are going to play a major role in the future of philanthropy as the next generation enters.
Forty-eight percent of America’s top givers have Jewish background and many top foundations have Jewish roots (Elia-Shalev, 2023). This impact has been felt across the philanthropic world in advancing social justice initiatives. However, due to recent events with the terrorist attack in Israel, their focus may be changing. “We are fulfilling the pledges we’ve made to non-Jewish organizations but we will direct all new giving to Jewish causes, specifically those fighting antisemitism” (Winkler Group). Unexpected world events greatly impact giving in demographic groups, the war in Israel is just one example of this.
How does community collaboration impact fundraising?
Community-Centric fundraising, “prioritizes the community as a whole over individual contributions” (Orr Group, 2023). Relationship with funders is not the only way to increase funding, but collaborative initiatives that bring people together to solve community needs will be recognized by foundations from big to small. “As we navigate this new era of philanthropy, success lies in the sector’s ability to embrace change, foster collaboration, and ensure that our efforts continue to have a meaningful impact on the global stage” (Orr Group, 2023). Grant applications are incorporating more questions about how organizations collaborate with other community entities and ensure services are not duplicative. Humans are not made to do life alone, and organizations are unable to operate effectively without community members and organizations creating an ecosystem of philanthropy.
How do foundation missions impact funding?
It’s not just because of the election year… Many foundations are refining their missions to be more specific to social justice initiatives and groups they want to serve. “Due to the rise in homelessness and food insecurity in our country, grantmaking did lean more toward basic needs” (Candid, 2023). We are only beginning to see how long-standing foundations are changing strategic plans, invitation processes, and evaluation of applications.
Time will tell what trends come out of this transformation period, but right now we are seeing more competition amongst nonprofits for established grant funding. It is cliche to say, but relationships and strong evaluation metrics play the biggest role in strong funding applications. Foundations want to know you! They also want to know that what you are doing is actually having a tangible impact on the community to create lasting change.
Sources:
Candid. How inflation affects foundation grantmaking decisions. https://blog.candid.org/post/how-inflation-affects-grantmaking-decisions-foundations/#:~:text=Individual%20donors%20specifically%20cited%20inflation,some%2C%20demand%20for%20services%20grew.
ConsumerAffairs Research Team. (2023). Comparing the costs of generations: Gen Zers and millennials are paying nearly 100% more for their homes than baby boomers did in their twenties. https://www.consumeraffairs.com/finance/comparing-the-costs-of-generations.html
Orr Group. Philanthropy In 2024 And Beyond: Trends, Transitions, And Transformations. https://orrgroup.com/philanthropy-in-2024-and-beyond-trends-transitions-and-transformations/
The Times of Israel. Half of US’s 25 most generous philanthropists are Jews. Few give to Jewish groups. https://www.timesofisrael.com/half-of-us-25-most-generous-philanthropists-are-jews-few-give-to-jewish-groups/
Urban Institute. Despite the racial wealth gap, black philanthropy is strong. https://www.urban.org/urban-wire/despite-racial-wealth-gap-black-philanthropy-strong#:~:text=Of%20all%20racial%20or%20ethnic,accounts%E2%80%94to%20charity%20since%202010.
Winkler Group. Trends that Will Impact Fundraising in 2024. https://winklergroup.com/resources-and-events/trends-that-will-impact-fundraising-in-2024/