Winter 2005

Minnesota’s Charitable Giving Declines for Second Straight Year, New MCF Report Shows

Charitable giving in Minnesota declined for the second year in a row in 2002, reflecting the impact of an economic recession that was exacerbated by the tragic events of Sept. 11, according to the Minnesota Council on Foundations’ latest Giving in Minnesota report. The state’s total charitable giving by individuals, foundations and corporations totaled $4.18 billion in 2002, a drop of less than 1 percent from the previous year, which follows a similar small decline in 2001. Giving increased slightly for individuals but declined for foundations and corporations.

“The weak economy in 2001 and 2002 has clearly taken its toll on Minnesota’s charitable giving, as it has on other sectors in our state and across the country,” said Council president Bill King. “Fortunately, the declines in giving have not been severe, and we expect to see an upturn in the near future.”

First Grantmaking Drop in Nearly 20 Years

Minnesota’s foundations and corporate grantmakers gave more than $893 million to nonprofit organizations in 2002, a decline of 5 percent from 2001 in inflation-adjusted dollars (see sidebar). This is the first drop in Minnesota grantmaking recorded by the Council since 1984, and is higher than the 0.2 percent decrease nationwide in 2002.

The primary explanation for the loss of Minnesota foundation and corporate grants in 2002 is the economic recession that hit the country that year. The nation’s economy began to seriously weaken in early 2001, and was exacerbated by the terrorist attacks of Sept. 11, 2001. The resulting stock market declines caused a significant drop in the value of most foundations’ assets, which are the source for most grant dollars.

The assets of Minnesota’s foundations totaled more than $11.5 billion in 2002, which represents an increase of just 2 percent from 2001 and a slight decline (less than 1 percent) in inflation-adjusted dollars. This is the second year in a row that the state’s total foundation assets have declined in inflation-adjusted dollars, after an 8 percent drop in 2001.

The loss of Minnesota foundation assets in 2001 and 2002 are in stark contrast to the double-digit increases through most of the 1990s, including a 10 percent annual increase in 2000. But Minnesota’s loss in foundation assets was smaller than the nationwide decline of 8 percent.

“Minnesota grantmakers continued to increase their grants in 2001 despite the worsening economic conditions, but in 2002 the fiscal realities forced them to pull back,” says King.

Grantmaker Ranks Grow

In some good news, the number of grantmakers in Minnesota continued to grow in 2002, although at a slower pace than in the late 1990s. In 2002, there were 1,277 active foundations and corporate grantmakers in the state — 50 more than in 2001. This net increase is larger than the increase of 31 new grantmakers between 2000 and 2001, indicating that formation of new foundations continued at a fairly healthy pace in 2002 despite the weak economy.

“The continued growth of new foundations in the state, even in weak economic times, is a hopeful sign for the future,” says King. “Although most of these new foundations are small, over time they can grow to provide valuable philanthropic assets for Minnesota in the years to come.”

Between 2001 and 2002, community/public foundations experienced the largest percentage growth of the three main types of grantmakers, increasing in numbers from 71 to 81 — a 14 percent rise. “This growth is due in part to the continuing interest of many Minnesota communities in establishing permanent philanthropic vehicles to meet the current and future needs of the people and institutions in their hometowns,” says King. “It’s a positive sign of communities around the state wanting to become more involved in ensuring their own health and vitality.”

Private foundations continued to represent the largest number of foundations, with 86 percent of the total, although they had the smallest percentage growth in numbers in 2002, with their ranks increasing just 3 percent. Private foundations gave half of Minnesota’s grant dollars in 2002.

Individuals Post Slight Gain in Giving

In contrast to the drop in foundation and corporate grants, individuals in the state increased their giving — albeit slightly — in 2002. The Council report shows that Minnesotans gave an estimated $3.28 billion to charity in 2002, an increase of 2 percent from 2001 (0.2 percent adjusted for inflation). This follows a decrease of 1 percent in 2001.

More Minnesotans appear to be giving to charity over the past few years and their average annual gifts are holding steady, according to IRS data. A total of 913,172 Minnesotans claimed charitable contributions on their tax forms in 2002, which is up from 900,813 in 2001 and 869,570 in 2000. The average charitable contribution per return was $2,953 in 2002, which is up slightly from $2,929 in 2001.

Minnesotans gave an average of 2.3 percent of their adjusted gross income to charity in 2002, which is identical to the national average and increases by income. Minnesotans with less than $20,000 in adjusted gross income gave an average of 0.8 percent of their income to charity, while those earning more than $200,000 donated an average of 3.5 percent of their income to charity.

Even though Minnesota ranks just 21st in total population out of all 50 states, it ranked 16th in total charitable contributions claimed by its citizens on their tax returns in 2002, and 19th in the average percentage of 2002 adjusted gross income given to charity.

These rankings are similar to ones done in past years by such organizations as The NewTithing Group and the Urban Institute, but are much higher than rankings released recently through a “generosity index” put out by the Catalogue for Philanthropy, which placed Minnesota just 45th in its ranking of individual giving. The difference is due to different research methodologies, according to King. “The rankings by the Catalogue for Philanthropy tend to be more biased against states like Minnesota where a very high percentage of tax filers itemize their deductions,” King says. “The rankings based on giving as a percentage of income on the other hand, provide a bit more direct measure of how much of their income people give to charity.”

Continued Growth in Health Grants

Health grantmaking had the strongest growth of any subject area in 2002, posting a 7 percent rise from 2001, which follows a 24 percent increase between 1999 and 2001. Health was the only one of the eight major subject areas to see an increase in grant dollars in 2002, and this growth was in stark contrast to a 15 percent decline in health grantmaking nationwide. Health organizations received a record-high 8 percent share of all Minnesota grant dollars in 2002, although this is significantly below the national average of 18 percent, continuing a long-term trend.

The growth in Minnesota’s health grantmaking in 2002 was due in large part to an increase in health funding by the Minnesota Partnership for Action Against Tobacco (MPAAT) and by several community foundations, most notably the Catholic Community Foundation, The Minneapolis Foundation and Northwest Minnesota Foundation.

Arts Funding Loses Ground

Arts groups experienced the largest decline in grant dollars of all subject areas in 2002, with a 22 percent drop. The share of Minnesota grants dollars going to the arts declined from 15 percent of the total in 2001 to a 13 percent share in 2002, which is equal to the all-time low set in 1999.

1999 had marked the first time since 1986 that the percentage of Minnesota grant dollars to the arts did not exceed the national average. But in both 2001 and 2002 Minnesota was once again above the national average, although in 2002 the difference was slight: 13 percent in Minnesota versus 12 percent nationwide.

Other key findings from the report:

• More grants stay in the state: Although overall grantmaking declined in 2002, the state's foundations and corporate grantmakers increased their support for organizations that serve the state. Minnesota grantmakers gave 61 percent of their 2002 grants to Minnesota-serving organizations, which is up from a 59 percent share in 2001 and is the highest level since 1990.

• Fewer gen/op grants: General/operating support grants declined in Minnesota between 2001 and 2002, after rising in 2001. The share of Minnesota grant dollars awarded for general/operating support dropped from 32 percent of the total in 2001 to 22 percent in 2002, which is nearly identical to 1999 levels. Despite this decline, the share of 2002 grant dollars going to general/operating support in Minnesota remained higher than the national average of 16 percent.

A Brighter Outlook?

Despite the drops in giving in 2001 and 2002, the Council expects a brighter outlook going forward. According to surveys of the Council’s members in 2003 and 2004, the slowdown in the nation’s economy that had a negative effect on the state’s grantmaking dollars in 2002 is likely to have continued in 2003, resulting in flat or declining grantmaking dollars in 2003. But the state’s grantmaking is expected to increase modestly in 2004 and perhaps in 2005.

In a November 2003 survey of Council members representing about 60 percent of the state’s private grant dollars, 70 percent expected their grants to increase in 2004, although most expected increases of no more than 4 percent. Another positive sign: the 50 largest foundations in Minnesota saw their assets grow 17 percent between 2002 and 2003, which will likely lead to increases in foundation grant dollars in 2004 and perhaps 2005. “We have several indicators pointing to at least modest growth in Minnesota grantmaking in the next few years,” says King. “If these indicators prove true, the downturns in 2001 and 2002 could turn out to be blips in a longer-term upward growth trend.”

Sidebar

Minnesota Giving Facts

• $4.18 billion in total charitable giving from individuals, foundations and corporations (down 0.9%).
     
• $3.28 billion in giving by individuals (up 0.2%).
    
• $893 million in foundation and corporate grants (down 0.1%).
     
• $11.58 billion in foundation assets (down 0.1%).
     
• 61% of grants to Minnesota.
     
• 7% increase in health grants.
   
• 22% decrease in arts grants.

Source: "Giving in Minnesota," 2004 Edition, Minnesota Council on Foundations

© Copyright 2005 Minnesota Council on Foundations
Reproduction in any form without the written permission of the publisher is prohibited.

Top