1. 1 Philanthropy and Government Funding

2. 2 Outline Private giving Government support

3. 3 Individuals Give the Bulk of Donations Ref.: Oster 1985

4. 4 Religion Gets the Biggest Part of Donations

5. 5 Percent of Income Given by State* *Taxpayers earning $75,000-$100,000 Ref.: Chronicle of Philanthropy, 8-8-02

6. 6 What Is Associated with Charitable Giving? Ref.: PB&F 2002 Gender: Effect depends on income VariableMost common direction of effect on giving TaxesPositive IncomePositive WealthPositive RaceInsignificant EducationPositive AgePositive Family sizeNegative Marital statusPositive or insignificant

7. 7 The Role of Religion Charity measureReligious people Secular people t-statistic GIVES0.910.66293* VOLUNTEERS0.670.44137* VALUE OF GIFTS$2,210$64288* GIVES TO NON- RELIGIOUS CAUSES 0.710.61141* VOLUNTEERS TO NON- RELIGIOUS CAUSES 0.600.39121* Ref.: 2000 SCCBS

8. 8 Informal Giving Data: 2002 GSS

9. 9 Nature vs. Nurture A “God and Giving Gene”? –.25-.50 of “innate religiosity” appears to be genetic –Why not innate charity as well? Learning hypothesis –Giving is a learned behavior, and religious communities teach it

10. 10 Evidence in Favor of Learning Frequency of church attendance as a child Percentage of secularist adults who donate to charity Secular charities only Every week47%40% Almost every week41%37% A few times a year35%32% Never26%29% Data: 1999 Arts and Religion

11. 11 What Is “Religious”? 0% 10% 20% 30% 40% 50% 60% 70% 80% 90% 100% People who devote “a great deal of effort” to their spiritual lives People who devote “no effort” to their spiritual lives Gives to all causes Gives to nonreligious causes 0% 10% 20% 30% 40% 50% 60% 70% 80% 90% 100% People who belong to a house of worship People who do not belong to a house of worship Data: 1999 Arts and Religion

12. 12 Evidence in Favor of Learning Frequency of church attendance as a child Percentage of secularist adults who donate to charity Secular charities only Every week47%40% Almost every week41%37% A few times a year35%32% Never26%29% Data: 1999 Arts and Religion

13. 13 The Importance of Family 51% 56% 61% 46% 48% 50% 52% 54% 56% 58% 60% 62% 123 to 6 Family size Percentage volunteering

14. 14 Families teach giving behavior 56% 38% 0% 10% 20% 30% 40% 50% 60% Parents volunteeredParents did not volunteer Percentage of adults who volunteer

15. 15 Giving Rises with Income (Mostly)

16. 16 Age and “New Philanthropy” New philanthropists appear different from their predecessors –Younger wealthy give less than older wealthy, on average –New wealth comes from new sources –New philanthropy tends to be more “hands-on” and entrepreneurial –Relatively little geographical bounding Ref.: Brown 2000

17. 17 Planned Giving Instruments Pooled income funds –Pay lifetime annuities –Split between charity and beneficiaries Charitable lead trust –Dividends pay to charity till time t –After t, principal pays to beneficiary Charitable remainder trust –Dividends pay to beneficiary till time t –After t, principal pays to charity Ref.: Hodgkinson (Salamon) 2002

18. 18 Development Innovations Venture philanthropy –Foundation giving in search of large, immediate payoff outcomes across a wide variety of potential activities E-philanthropy –Donations given over the internet Credit card donations taken from websites Donation portals: collect donor information and donations for a commission Charity malls: For-profits that advertise on NPO sites and donate a percentage of sales to the charity Ref. Brooks 2002

19. 19 Institutional Philanthropy Foundations –50,000 and growing –$450b in assets Corporations –75% of corporate giving not from corporate foundations –Cash and in-kind giving Federations (pass-through organizations) –General: United Ways –Specific: American Cancer Society, March of Dimes Gift funds –Donor-advised and controlled accounts –Run by for-profit investment firms Ref.: Lenkowsky (Salamon) 2002

20. 20 Foundation Types Independent: 95% –Operating (6%) –Non-operating (94%) –Usually connected with family fortunes Community: 1% –Pool community assets Corporate: 4% Ref.: Lenkowsky (Salamon) 2002

21. 21 Outline Private giving Government support

22. 22 Direct Government Subsidies Are Large … Billions of 1997 dollarsPercent of total revenues All nonprofits207.831.3 Arts and culture1.59.7 Health137.742.2 Education23.119.4 Social welfare40.152.1

23. 23 …and Growing

24. 24 U.S. Governments Fund the Nonprofit Sector at an Unremarkable Level Data: Salamon, et al. (1999)

25. 25 Indirect Subsidies and Taxes Taxes foregone on deductible contributions UBIT Property taxes Tax credits

26. 26 Income Tax Revenues Foregone t=individual’s marginal tax rate m=gross income D=tax-deductible donations t(m-D)=taxes paid tD=indirect government subsidy 2002 estimate: $37.2b

27. 27 Corporate Tax Exemption and the UBIT As a general rule, organizations have incentives to invest in activities where their earnings are tax exempt but other organizations must pay tax Nonprofits to a significant degree can shift costs from exempt to non- exempt activities → UBIT payments to government are very low

28. 28 The Property Tax Exemption Could be thought of as a subsidy by the state, or as a reflection of the “sovereignty” of nonprofits Total US value of exemption around $6 billion (mostly in hospitals and education) Increased use of PILOTS: strategic move for nonprofits

29. 29 Nonprofit Revenues Are Interrelated Earned income Government support Private contributions

30. 30 Crowding In or Crowding Out? Crowding out –Lowered perceived need –Donors resemble tax payments –Less incentive to fundraise Crowding in –Subsidy is a signal of quality or guarantee of due diligence –Government grants only given as a match to private gifts