The Pandemic & Philanthropy
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THE PANDEMIC & PHILANTHROPY WHAT HAVE WE LEARNED AND WHERE DO WE GO FROM HERE? January 2021 By Robert F. Sharpe, Jr. Founder & CEO, Encore 1 The Pandemic & Philanthropy INTRODUCTION of the raging pandemic. In “Philanthropy in America, A History,” Olivier Zunz noted that During the early days of COVID 19 “Not even the deadly influenza epidemic stopped the in the spring of 2020, the impact of the volunteers’ door-to-door solicitations. Because of the pandemic on philanthropic funding seemed flu, 40 percent of collectors in one state had to opt-out random and unpredictable. Some of the of the collection, but the others combed the countryside ramifications are now becoming clearer, and in their Fords wearing gauze masks as they rang certain patterns have begun to emerge. doorbells. Only a few days later, the campaign had gone over the $200,000,000 mark, significantly At the outset, it is important to exceeding its initial goal.” acknowledge the remarkable resilience the nonprofit sector has displayed during this That $200 million raised in just a few days time of historic challenge. Events many of us is equivalent to $3.6 billion in 2020 dollars. remember, such as the Crash of 1987, 9/11, To put that in perspective, it is estimated that and the Crash of 2008 and the ensuing Giving Tuesday 2020 raised an estimated Great Recession, all impacted the nonprofit $2.4 billion in a country with over three times sector, including its sources of philanthropic the 1918 population. support. But we have to go back a century or more to find anything commensurate in This paper will focus on what we now scope and scale to the COVID-19 pandemic. believe we have learned regarding the impact in broad terms of COVID-19 on U.S. Over 100 years ago, the U.S. faced a philanthropy. We include information we public health threat that had a far more believe may be useful to readers who serve devastating impact on the nation than in various nonprofit leadership roles as they COVID-19. The Spanish Flu took the attempt to understand how COVID-19 has lives of 675,000 Americans when the and will affect their funding efforts, and what country’s population was only 103 million. to expect when the crisis eventually recedes, That level of mortality would translate into and we attempt to cope with its legacy. 2.1 million deaths given the current U.S. population, nearly seven times the number All or parts of this paper are intended of COVID-19 deaths as of mid-December for development executives, marketing and 2020 as vaccines began to be administered. advancement officers, government and The country was also engaged in World War foundation relationship managers, in-house I and encountered a post-War recession a legal counsel, investment managers, program year later. management personnel, board members, Historical accounts reveal that and other volunteer leaders. An executive philanthropy rose to meet that challenge. summary of this paper and a version of the In November 1918, during the height of content intended for professional advisors the fall surge in the flu epidemic, a national published in the October 2020 issue of Trusts door-to-door campaign was mounted to raise & Estates magazine are available at www. $170,500,000 to meet social needs brought consultencore.com/covid. on by the Great War despite the impediment 2 The Pandemic & Philanthropy Our observations set out here are based Charities whose missions are not closely on input from many charitable organizations related to the effects of COVID-19 have across the country engaged in various service generally experienced more significant sectors and professionals who advise non- economic challenges. This is not because profit clients and philanthropically inclined their donors are not making charitable individuals. gifts during the pandemic, but rather these organizations and institutions are losing After careful analysis of this input by a “market share” to charities whose mission is team of Encore consultants and associates, more COVID-19 related. five primary factors have emerged that we believe help define the impact of COVID-19 Another group of charities has been on various sources of funding for the affected across the board by job losses or nonprofit sector. In this paper, we consider other economic factors due to the pandemic, these factors and their role in determining regardless of the nature of their missions. the impact of the pandemic. For example, consider a food bank located in a beach resort community typically It is important to note the factors we thronged by summer vacationers that saw summarize may all be relevant to varying the loss of the bulk of a season’s revenue degrees, depending on the weight placed on decimated by COVID-19 shutdowns. Where them in each instance. As in the case of a COVID-19 has severely eroded a large kaleidoscope, a change in the extent to which portion of a community’s economic base, each factor plays a role in relation to others charities are more likely to have had difficulty can dramatically change the picture one maintaining funding and to find recovery observes. more challenging even as the need for their services grows. 1. NATURE OF MISSION Those charities that do not engage One of the most important factors in in COVID-19 related activities but can understanding the impact of COVID-19 on characterize their mission as an “essential” philanthropy is the nature of the mission of societal service have, in some cases, been an organization or institution. Regardless more successful in reducing the negative of other pertinent factors discussed below, impact of COVID-19. in most cases, the mission factor has had the greatest influence on the impact of the Others whose missions may not necessarily pandemic on philanthropy. be deemed essential in times of a pandemic, such as admission fee-based cultural In cases where an organization’s mission institutions that have seen their program is directly or indirectly related to addressing revenues fall precipitously, have nevertheless the human and economic consequences of been successful in appeals for funds to ensure COVID-19, fundraising efforts have typically their survival with messages such as “imagine been less impacted. a world without X.” 3 The Pandemic & Philanthropy It is important to note that some nonprofits Many of the charts that have been widely whose missions were already being questioned distributed in the media have focused on total due to other economic, demographic, or numbers of cases and deaths on a state-by- sociological factors are experiencing an state basis. For our purpose of our analysis, acceleration of what was already looking both cases and deaths may be better viewed to be their ultimate fate. For example, some in per capita terms. educational institutions were already under stress pre-COVID-19 due to trends toward online learning, concerns related to tuition costs, and lower birth rates, all of which have been putting pressure on traditional demand. The addition of the impact of COVID-19 to the mix has served to exacerbate these challenges for some institutions. A study published in July 2020 evaluated 442 colleges and universities ranked by U.S News & World Report and assigned them to categories labeled “Thrive,” “Survive,” “Struggle,” and “Perish.” (The initial “Perish” category was subsequently renamed to “Challenged.”) A total of 50% of the institutions were listed in the “struggle” or “challenged” category because of COVID-19. 1 2. GEOGRAPHIC LOCATION Thus far, the impact of COVID-19, as in the case of the 9/11 attacks, economic recessions, and other events that have challenged the finances of the non-profit sector in the past, has varied greatly depending on geographic factors. The first cases of COVID-19 in the United States occurred in late January 2020. Since that time, it has become increasingly clear that the impact of the virus in terms of numbers of cases and mortality has, to date, been experienced unevenly across the country. 4 The Pandemic & Philanthropy For example, as of mid-January 2021, the reflected in regional economic activity, incidence of death from COVID-19 in New including the nature and extent of charitable Jersey (the state with the highest number giving. of deaths per capita) was one out of 442 residents. Compare this to one of 1,271 The uneven distribution of the effects residents of California and one of 3,949 in of COVID-19 across the U.S. means Vermont, where the chance of dying from that nonprofits that raise funds locally or COVID-19 was one-eigth that of New regionally in areas where the impact of Jersey. The national average at that time was COVID-19 has been less severe have not faced the same extent of reduction in funding one out of 863. that’s been experienced by those in harder-hit Only 17 states had experienced above- areas of the country. This will undoubtedly average mortality rates. Their combined influence the timing and extent of recovery population amounts to 33% of the total U.S. from this unprecedented health crisis. population, but these states accounted for Not surprisingly, organizations that raise 181,000 of the 379,000 total deaths as of funds nationally have experienced mixed mid-December, a disproportionate 48% of results that in the aggregate reflect where the total.2 their primary clusters of support are located, One might speculate that those 17 states with those with less exposure to the hardest- may have experienced higher mortality hit areas experiencing less severe impact. due to their older populations. In reality, the percentage of residents over 65 in those states averaged 16.6% compared 3.