Both millionaires and middle-class donors are likely to face such serious financial blows from the pandemic that charities may only be able to count on the ultrawealthy — and that will leave many organizations in the lurch.
After disasters like the 2001 terrorist attacks or Hurricane Katrina in 2005, high-net-worth donors stepped up and contributed to charities helping those most in need.
That’s a lot less likely now. Major downturns in the stock market hit the fortunes of millionaires hard, and that might affect charities’ long-term financial security.
Most millionaire donors, especially those whose giving is tied to equity investments, are likely to wait on the sidelines to see what happens to the stock market, says Laura MacDonald, vice chair at the Giving USA Foundation and principal at Benefactor Group, a fundraising consultancy.
Also likely to pull back: upper middle-class donors, who are so often a charity’s most loyal and reliable supporters. If these donors lose their jobs and need to dip into their cash reserves, or if steep stock market declines profoundly affect their investments, they may have to pull back on charitable giving, say philanthropy experts.
MacDonald recommends fundraisers focus on ultra-high-net-worth households, people in high-wage jobs that are likely to continue and folks with donor-advised funds or closely held family foundations. She also advises charities to monitor congressional deliberations on a universal charitable deduction, along with its consideration of measures to give cash stipends to a broad swath of Americans. It’s possible those actions might lead to a resurgence of small gifts, says MacDonald.
‘In Need of Help Themselves’
And for donors whose incomes put them squarely in the middle class, the financial impact could be devastating. Many of those donors have been the most reliable supporters of social-service groups aiding those most in need.
“All these kinds of economic effects might mean that they’re in no position to give and that, in fact, they’re in need of help themselves,” said Melissa Berman, chief executive of Rockefeller Philanthropy Advisors.
Not everybody is expecting a long-term decline in giving. Melissa Wyers — now executive director of EveryAction and who during her career has worked with charities to raise money during crises like the 2001 terrorist attacks, Hurricane Katrina, and the Great Recession — says she thinks it’s possible that giving by wealthy and middle-class donors will drop for the next two to three months, then start to return to normal.
“Given that the economy was strong up until this, it isn’t inconceivable that we could have the start of an economic recovery over the summer and have a fairly normal or good fall fundraising period,” said Wyers. “It is by no means certain. Lots more unexpected things could happen, but it is possible.”
The big question is whether things will return to normal for the year-end fundraising push.
