posted on: Saturday, June 09, 2012

By Kevin Laskowski

The latest study from the Foundation Center (via Chronicle of Philanthropy) reports:

“Giving by U.S. foundations totaled an estimated $46.9-billion last year, an increase of only 2 percent from 2010 and a more than 2 percent drop from 2009…

However, when inflation is taken into account, giving was actually down from 2010, the Foundation Center study says, signaling a continued rough road for charities that rely on foundation grants for the bulk of their support.

The survey shows that if the Bill & Melinda Gates Foundation—the country’s wealthiest grant maker, with more than $37.4-billion in assets—had not been included, foundation giving would have decreased last year by about 3 percent, after accounting for inflation.”

The Foundation Center goes on to say:

“The poor overall market performance in 2011 and the slow and unsteady nature of the economic recovery mean that foundation giving is unlikely to gain much momentum this year. According to the Foundation Center’s latest ‘Foundation Giving Forecast Survey,’ giving by U.S. foundations should grow between 1 and 3 percent in 2012. With inflation averaging just under 3 percent, this suggests that foundation giving will likely remain unchanged at best based on real purchasing power.”

The struggles of nonprofits in recent years will likely get worse before they get better when it comes to fundraising among foundations. The Foundation Center adds that multi-year grants will be especially hard to come by as foundations expect to reduce their already low multi-year commitments. The research is well known: American giving closely tracks wealth and, insofar as the affluent hold much of their wealth in stocks, and foundations certainly do, total giving closely tracks market performance. Nonprofits cannot therefore expect dramatic changes in philanthropic giving without significant changes in the economy.

In short, foundations and the nonprofits that depend on them are at the mercy of the economy.

What does this mean for our notion of philanthropy as a truly independent sector?

In 1907, then-president of Johns Hopkins University Daniel Coit Gilman observed that the then-new philanthropic foundations were nothing less than “a new force in civilization.”

In 1999, scholar Kenneth Prewitt wrote:

“The state and the market are constituted to be wholly different from one another – the one being public and nonprofit, and the other being private and for-profit. The third sector, whether we call it the nonprofit sector or civil society, has the special property that it shares one trait with each of the other sectors. It shares with the market that it is private, that is, ‘outside of the state.’ It shares with the state that it is nonprofit, that is, ‘outside of the market.’”

It is part of the sector’s enduring mythos, plastered on annual reports and websites, recited in keynote speeches and carried in the heart of philanthropoids everywhere: philanthropy is a catalytic, strategic, innovative and, above all, independent force for benevolent social change that exists over and apart from the other sectors.

If, however, it is the marketplace that annually defines the boundaries of American philanthropy, how independent are we?

Kevin Laskowski is research and policy associate at the National Committee for Responsive Philanthropy.