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Foundation Giving Falls, Corporate Giving Climbs

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Two New York-based not-for-profit research organizations, the Foundation Center and Grantmakers in the Arts, have issued a report showing that while the Sept. 11, 2001 terrorist attacks had a deleterious effect on arts and culture philanthropy during 2001 and 2002, the drop in giving wasn't as steep as first feared. Meanwhile, a new survey from the American Association of Fundraising Counsel's Trust for Philanthropy (written and researched by the Center on Philanthropy at Indiana University) suggests that charitable giving by corporations slackened in 2001, but then, in a surprise, rose dramatically in 2002.

"Arts Funding IV: An Update on Foundation Trends" and "Giving USA 2003" have been released as governors and state legislatures from coast to coast continue wrestling with falling revenues and debating how diminishing fiscal resources ought to be reflected in appropriations for the arts for the next fiscal year and beyond. Indeed, the relationship between the findings of these reports and the ongoing battles to save, cut, or gut public arts funding is crucial to nonprofit groups: The more funding cuts seem a fait accompli, the more important it becomes for other philanthropic sectors to step in to provide relief. While nonprofits have looked to foundations, not corporations, to fulfill this role since the economic downturn began, these reports suggest the opposite may prove a more fruitful view.

The most sobering news in "Arts Funding IV" is that arts and culture philanthropy from foundations, after climbing to a new peak in 2001, declined by 3.5% in 2002, to approximately $4.05 billion. True, that decline does seem relatively small—especially when one factors in the cumulative effects of the 2000 stock market crash, the terrorist attacks 18 months later, and over three years of economic stagnation. Still, the 3.5% decline happens to be five times steeper than the 0.7% decline in philanthropic giving overall. And therein lies a statistical irony: Between 1995 and 2001, arts philanthropy from foundations grew 157% in the United States, while the overall growth rate in all philanthropy from foundations climbed 149%. So the steeper the rise, in other words, the sharper the fall.

"Arts Funding IV" also advances some equally disheartening news with regard to how many foundation grants target the arts. In 2001, for example, grants for the arts from foundations accounted for 11.8% of the overall number of grants made. That's down from 14.9% in 1998 and even smaller than the 12.0% figure recorded in 1995. Figures for 2002 will be released next year.

Are Captains of Industry Steering the Ship?

While it's unquestionable that giving by foundations has foundered because of how the extended stock market slump has affected investment portfolios, one would equally expect charitable giving by corporations—which are at least as sensitive to the economic blues as foundations, if not more so—to fall as well. Yet "Giving USA" reported that of the four areas of philanthropy it keeps track of—giving by individuals, corporations, foundations, and through bequests—corporate largesse turned in the best performance of them all last year, jumping 8.8%, after being adjusted for inflation. The comparisons are startling: Individual giving rose 0.7%—but fell 0.9% after adjusting for inflation; and bequest giving climbed 2%—or just 0.4% after adjusting for inflation. For giving by foundations, the report used statistics from the Foundation Center showing a decline of 1.2%—or 2.7% after adjusting for inflation.

Giving USA then totaled up all the numbers and concluded that charitable giving in 2002 reached an estimated $240.92 billion. It also revised the estimate for charitable giving in 2001, placing it at $238.46 billion.

So at a time when corporate profits are generally at a flat-line, what factors does "Giving USA" cite to explain the remarkable rise in philanthropy from corporations? There are four, and they range from "the continued fulfillment of pledges first made in 2001" to growth in "in-kind giving." Add to the mix a rise in grant making by foundations that are operated by corporations and "better reporting from corporations of deductible contributions," and it would appear that beleaguered nonprofits may have a savior in their sights.

Or is this revelation about corporate philanthropy merely a tiny ripple in a stagnant pond? After all, "Giving USA" also examined each category of philanthropy as a percentage of overall charitable giving, and found that 76.3% of giving comes from individuals, 7.5% comes from bequests, 11.2% comes from foundations, and 5.1% comes from corporations. So while the rise in corporate giving is good news for charities, its status as the smallest piece of the pie implies a limited effect on nonprofits' economic health.

What, then, is the nonprofit world to do—and where are arts charities in all this? A partial answer can be found in an analysis released on Mon., June 23, from the National Assembly of State Arts Agencies (NASAA), which reported state arts appropriations of $408.6 million for the 2002 fiscal year, and expects a drop to about $354.9 million for the 2003 fiscal year, a 13.1% decline. The report found 62% of the drop in public arts funding, or $34.9 million, to be coming from budget cuts in Massachusetts and California. The fact that foundations are less able and willing to pick up the slack may help explain why anger is building in the arts community in many states. In California, arts advocates are mailing in dollar bills to the California Arts Council, their names boldly inscribed in red ink.

"There is a national crisis in state budgets, and in some states the impact on state arts agency funding has been devastating," said Jonathan Katz, CEO of the NASAA, in a statement accompanying "Giving USA." Meanwhile, the June 12 edition of The Kansas City Star noted that the Missouri Arts Council might lose up to 75% of its budget, and the Fort Collins Coloradoan reported that the Colorado Council on the Arts could soon lose funding from the National Endowment for the Arts because the state agency "may not be a functioning entity" after this year's budget war is over, with the Legislature enacting an 80% cut and Gov. Bill Owens ordering the council to knock back its overhead to just $40,000 for the year.

The increasingly gloomy fiscal picture that the arts are facing is also beginning to attract attention overseas. Recently, the British Broadcasting Corporation published an article assessing the proposed state-by-state cuts in public arts funding, noting draconian possibilities in Oregon (20%), Minnesota (32%), Michigan (50%), and Virginia (45%).

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