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What Would a Double-Dip Recession Mean for Foundation Giving?

September 26, 2011

(Steven Lawrence is director of research at the Foundation Center.)

The future looked brighter back in April when the Foundation Center estimated that giving by the nation's private and community foundations would grow modestly this year and again in 2012. Of course, that prediction was made before the release of two big summer thrillers, European Debt Crisis: The Saga Continues and Congress Goes to the Brink. Investors also learned that a roller coaster isn't just a ride at an amusement park.

Is the economy on the brink of, or in, a double-dip recession? Only economic historians will be able to answer that question, and not in a timeframe that is especially useful for planning. But given that none of us working today have lived through such a prolonged period of economic malaise, it's fair to say that the events of the last few years have us all a bit bewildered.

How then to assess the prospects for foundation giving?

All we have to go on is history and recent experience, which both suggest a less gloomy future than might be expected under these difficult circumstances. In the double-dip recession of 1980 and 1981-82, foundation giving grew modestly in both years -- even after adjusting for inflation. Not a bad outcome, especially coming on the heels of the stagflation that marked much of the 1970s. But let's be honest, in the current context that feels like ancient history.

Fdn_giving_all_fig6 

It may be more useful to consider how foundation giving fared during what ultimately may be considered "part 1" of the Great Recession. According to our April report Foundation Growth and Giving Estimates, foundation giving declined in 2009 before leveling off in 2010. Yet the 2.1 percent overall reduction in giving recorded was just a fraction of the 17 percent decline in foundation assets registered the year before.

Yes, many foundations cut back on their giving -- some dramatically. But there were also many foundations that held their giving steady despite steep losses in their endowments, as well as donors who put substantial resources into their existing foundations or established new ones.

The sky didn't fall in 2009-10 -- at least as far as foundation giving is concerned. And there's nothing in the past or on the horizon to suggest that things will be different this time around, even if we are in, or are about to experience, a double-dip recession.

-- Steven Lawrence

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