Reforecasting Reimagined

The American Alliance of Museums annual meeting is usually a time when colleagues reunite for an invigorating week of professional development and camaraderie, yet this year’s meeting was forced online like so much of our lives today. This year, Alexander Haas was honored to lead the session Reforecasting Reimagined during a full day of sessions organized to address new approaches required by current circumstances, sponsored by AAM’s Development and Membership Professional Network.

Among the major challenges that museums are facing in response to the pandemic is that of forecasting revenue projections for current and future-year budgets. This is the result of a confluence of challenges that have never come together in such a unique way, including the unexpected timing and immediacy with which museums were forced to close, the resulting loss of earned and contributed revenue, employee health issues, and speculation over whether donors and members will cut back or redirect their giving to other priorities.

Here are four recommendations to consider as you approach the exercise of reforecasting:

Don’t Make Assumptions About Your Donors
Given the recent volatility of the economy, it would be natural to assume that donors may not have the discretionary income to invest in philanthropy as they have in the past. Also, with the heavy emphasis on health and human services organizations in recent days, it might be natural to assume that donors might redirect their giving toward other priorities. In challenging times, donors tend to focus on the priorities they value most. Based on their past giving, those priorities include your museum. Don’t automatically assume that your donors are going to cut back or stop giving until you’ve communicated with them.

Take a Measured Approach
Take a deliberate approach to reforecasting based on an analysis of your potential renewals and cautiously optimistic estimates based on donors’ historical giving. The result will be much more realistic than an across-the-board cut using an arbitrary percentage or historical data from the years following the last economic downturn. It will require more work in the short term but is worth the effort.

Funding is Tied to Programs
Apart from general, upper-level and corporate memberships and special events, a significant portion of a museum’s annual giving is directly tied to institutional programming. Be sure that sentiment is represented in reforecasting discussions. Make sure that those making institutional decisions about the budget realize that if specific programming that has been historically supported by a foundation or corporate sponsor is eliminated or dramatically reduced, so is the potential for that funding being renewed.

Revise as You Go
Given the lack of credible information about the future, it is inevitable that the first rounds of revised budgets are likely to be highly speculative at best. Continue to recalibrate throughout the year as information becomes available – such as after reopening, as major donors and sponsors indicate their intentions during their renewal cycle, or after online special events that have occurred.

While the world continues to respond to the effects of COVID-19, even the most scientific approach to reforecasting could never anticipate how the events of the future will unfold. In our experience, the organizations that take the time to develop and put into place a thoughtful, rational plan with the flexibility to adapt to changing circumstances have the greatest opportunity for long-term success. In the months to come, do know that we are here to help as you reforecast your budget, revise your development program accordingly, and undertake your renewed fundraising plan for the future.

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Giving to charity continued to grow in 2018, but not as robustly as in the past. Overall giving increased by less than 1%, but the growth between 2016 and 2018 was a meaningful 7.1%. As has always been the case,  individuals and families contributed the lion’s share of giving at 68%, but their total giving declined 1.1% from 2017. The most significant increase in the percent given came from foundations, including gifts from family foundations and distributions through donor advised funds. Foundation giving increased to 18% of overall giving, a 7.3% increase over the previous year. Giving to the arts essentially held steady from 2017 and continued to represent some 5% of total overall giving.

Giving USA 2019 offers several important insights into the trends uniquely affecting museums and performing arts organizations. Here are a few takeaways to consider in planning for the upcoming year:

Larger gifts from high net-worth individuals should continue to be a focus.

According to the 2018 U.S. Trust Study of High Net Worth Philanthropy, 90% of high-net worth households gave to charity, with a quarter of them giving to the arts. The Quarterly Report, also referenced in Giving USA, found that the overall increase in giving in 2018 was driven by a 2.6% increase in gifts of $1,000 or more; gifts under that size declined by around 4%. While maintaining efforts to increase gifts at all levels, arts organizations should prioritize their focus on larger gifts from individuals, through upper-level membership programs, project-related major gifts, and campaigns.

Campaigns are an important tool for attracting major gifts.

Cultural organizations continue to benefit from campaigns, which crystallize institutional priorities into fundable opportunities for donors and encourage larger gifts. Theatre Communications Group recently reported that 40% of theaters were currently in a capital campaign, and another 38% completed a campaign between 2012 and 2017, leading to a 23% increase in overall giving and a 55% increase in trustee giving during this period. This year’s Giving USA also reports that organizations in every region of the country received multi-million-dollar gifts in 2018, supporting capital, endowment, and programmatic initiatives, listing a sample of 18 representative gifts of $10,000,000 or more. As fewer individuals are giving and a greater percentage of philanthropic revenue is coming through larger gifts, now is the time institutions should consider organizing and launching a campaign.

Don’t discount online giving.

Blackbaud Institute’s 2018 Charitable Giving Report showed that online gifts represented 9.5% of overall giving to arts organizations in 2018, and the 5.8% growth in online giving to the arts outpaced other non-profits by four times. While this noteworthy growth rate in overall online giving to the arts may be a function of the membership culture unique to museums, these trends illustrate the significance of making online giving a convenient option for donors and members, especially considering the decrease in smaller gifts.

Despite the complex issues that affect charitable giving in our country – from policy and tax law changes to social, economic and other factors – the voluntary, philanthropic support of arts and cultural organizations has never been stronger, with donors giving $19.5 billion to the arts in 2018. Reflecting on the numbers and trends outlined in this year’s Giving USA report, this is a time for optimism and opportunity, as we engage those donors whose generosity lights the fire of creativity, casts light on the human condition, and brings beauty and enjoyment through our nation’s arts and cultural organizations.

Takeaways From Giving USA To Help You Plan Better:

Giving to the Arts: The Numbers

Giving USA 2019: The Annual Report on Philanthropy for the Year 2018, was released in June, and amid a complex climate for charitable giving, individuals, bequests, foundations and corporations gave an estimated $427.71 billion to charities in 2018.

Giving to arts, culture and humanities organizations stayed relatively flat, increasing 0.3% to $19.49 billion.

• In current dollars, giving to arts, culture, and humanities increased 13.4% between 2016 and 2017, and increased 0.3% between 2017 and 2018. Cumulatively, current-dollar giving to arts, culture, and humanities increased 13.8% between 2016 and 2018.
• Adjusted for inflation, giving to arts, culture, and humanities increased 11.1% between 2016 and 2017, and declined 2.1% between 2017 and 2018. Cumulatively, giving to arts, culture, and humanities increased 8.7% in inflation-adjusted dollars between 2016 and 2018.
• Contributions to the arts, culture, and humanities subsector comprised 5% of all charitable donations in 2018.
• Donations to the arts, culture, and humanities subsector reached the highest inflation-adjusted amount record to date in 2017, and remains the highest to date.
• Donations to the arts, culture, and humanities subsector have amounted to between 3% and 5% of total giving over the past 40 years.

More information from the Giving USA 2019 report can be found here.

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According to the findings of Giving USA, 2018 was an uneven year for philanthropy, with some subsectors experiencing significant increases, while others saw significant decreases.

It was also a year that saw three unprecedented things: 1) a record year for giving at $427 billion, 2) for the first time since Giving USA began in 1954 individual giving was less than 70% of all giving, and 3) giving to Religion reached its lowest point in more than 40 years, falling to 29%.

Total giving increased in 2018 in current dollars, but just barely, at a rate of 0.7%. Adjusted for inflation giving actually decreased by 1.7%.

Five subsectors saw giving decline, while four saw increases. The biggest increase came in giving to International Affairs, while the largest decrease was in giving to Foundations.

As in previous years, giving by Individuals is the number one source of gifts at 69%, but declined by 1.1% from its 2017 level. Giving from Foundations, many of which are family foundations, increased 7.3%.

While Religion continues to be the number one recipient of gifts, giving to Religion continues to lose market share, reaching an all-time low of just 29% of the pie and actually decreased by more than 1.5% in current dollars. While the trend of a declining percentage of giving to Religion has been ongoing for years, the actual decline in current-dollar giving to Religion is a unique phenomenon; one that has never happened in a non-recession year.

Below, is a quick look at the numbers. We will share more in-depth information in our upcoming sector newsletters.
Sincerely,

David H. King
President & CEO

Quick Look At The Results

The Numbers for 2018 Charitable Giving by Source:

• Giving by individuals totaled an estimated $292.09 billion, decreasing 1.1% in 2018 in current dollars. The only source that decreased between 2017 and 2018.
• Giving by foundations increased 7.3% between 2017 and 2018, to an estimated $75.86 billion in 2018. Between 2016 and 2017 giving increased 12.0%. The cumulative change in current-dollar giving by foundations between 2016 and 2018 is 20.2%. This is the greatest percent increase of any source in this period.
• Giving by bequest remained virtually unchanged in current dollars between 2017 and 2018-to $39.71 billion. Adjusted for inflation, giving by bequest decreased 2.3% in 2018.
• Giving by corporations increased by an estimated 5.4% in current dollars from 2017 to 2018, totaling $20.05 billion. In current dollars, giving by corporations decreased by 2.0% between 2016 and 2017, and increased 5.4% between 2017 and 2018. The cumulative change in current-dollar giving by corporations between 2016 and 2018 is 3.4%.

The Numbers for 2018 Charitable Giving to Recipients

• Giving to religion decreased 1.5% in current dollars from 2017, totaling $124.52 billion in 2018. Adjusted for inflation, contributions to religion decreased 3.9% in 2018. Accounting for 29% of total giving, this is the first time that giving to religion has fallen below 30% of overall giving.
• Giving to education decreased 1.3% in current dollars from 2017-to $58.72 billion in 2018. Adjusted for inflation, contributions decreased 3.7% in 2018. In 2017, giving to this subsector reached the highest inflation-adjusted value recorded to date..
• Giving to human services decreased 0.3% from 2017, totaling $51.54 billion in 2018 in current dollars. Adjusted for inflation, contributions decreased 2.7% between 2017 and 2018. In 2017, donations to this subsector totaled the highest inflation-adjusted amount recorded to date.
• Giving to [grant-making] foundations decreased 6.9% in current dollars from 2017-to $50.29 billion in 2018. Adjusted for inflation, contributions to foundations decreased 9.1% in 2018.
• Giving to health organizations grew 0.1% from 2017, totaling $40.78 billion in 2018 in current dollars. Adjusted for inflation, contributions to health decreased 2.3% between 2017 and 2018.
• Giving to public-society benefit declined 3.7% in current dollars from 2017, for a total of $31.21 billion in 2018. The cumulative change in giving to public-society benefit between 2016 and 2018 is 2.1% in current dollars. Contributions to this subsector reached the highest inflation-adjusted value recorded to date in 2017.
• Giving to arts, culture, and humanities increased 0.3% from 2017, totaling $19.49 billion in 2018 in current dollars. Cumulatively, current-dollar giving to this subsector increased 13.8% between 2016 and 2018.
• Giving to international affairs increased 9.6% in current dollars from 2017-to $22.88 billion in 2018. The cumulative change in giving to this subsector between 2016 and 2018 is 5.2% in current dollars. Giving to the international affairs recorded the highest inflation-adjusted value in 2015, at $25.09 billion.
• Giving to environment and animal organizations increased 3.6% in current dollars from 2017, totaling $12.70 billion in 2018. Donations to the environment/animals reached the highest inflation-adjusted amount recorded to date in 2018.
• Unallocated giving represents 2% of total giving at $6.53 billion in current dollars in 2018.

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With Alexander Haas’s Museum Services team, Judy has worked on campaigns with the Georgia O’Keeffe Museum, Columbia Museum of Art, Reynolda House Museum of American Art, Memorial Art Gallery at University of Rochester, HistoryColorado, Cummer Museum of Art and Gardens, and Adirondack Museum.

Judy has been a ‘native’ Atlantan for over 40 years, arriving in the city from the Midwest with her family, and earned a BA in journalism from Georgia State University. Her twins are grown: her son is a chef in Atlanta and Florida; her daughter is in marketing in Dallas.

In this month’s Team Member Spotlight, Judy shares what she loves about working with museums and arts organizations, current industry trends and what brought her to Alexander Haas.

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Go here for more information about the reports.

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Read the full report here.

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