Markets & Finance

Americans Dig Deeper for Charity


American contribution to philanthropies increased by 6.1% in 2005, according to the 2006 Giving USA report, released June 19. Nearly half of the additional funds were earmarked for relief for a host of natural disasters, most notably Gulf Coast hurricanes, as well as tsunami devastation in Southeast Asia and an earthquake in Pakistan.

In total, Americans gave $260.28 billion to scores of religious, environmental, and health organizations—$15 billion more than in 2004. Of that figure, $7.37 billion was for disaster contributions here and abroad, with nearly half of that money ($3.31 billion) going to human service organizations such as the Red Cross, Habitat for Humanity, and America's Second Harvest. Organizations and foundations, divided into subsectors such as health, environment and animals, religious, and education, also benefited from this year's increase in charitable giving.

Giving to organizations increased uniformly throughout every subsector except for arts, culture and humanities organizations, which saw an overall loss of 3.4%. The report attributes this decline to this subsectors ties to the fluctuation of the economy, capital campaigns and supportive causes. The highest growth can be seen in the human service and the international affairs sectors, both of which benefited from generous donation to disaster relief aid.

LESS MEDIA, LESS MONEY. "Americans dug quite deep to meet a need that was created by these disasters," says Greg Simoncini, senior vice-president at The Alford Group, a consulting agency that serves not-for-profit organizations. "We would have seen a rise in normal annual giving closer to what we got [in 2004] had the disasters not occurred."

The September hurricane melee garnered the most funding, with $5.3 billion of the estimated disaster aid serving Gulf Coast needs. Aid in response to the Dec. 26, 2004, tsunami in the Indian Ocean totaled $1.92 billion, according to the report. The Oct. 8, 2005, earthquake in Pakistan received far less media attention and funding, with $150 million donated from individuals, corporations, and foundations.

"The earthquake was in a more remote part of the world, almost unidentifiable to a lot of people," Simoncini explains. "People could relate to being tourists where the tsunami hit, and certainly could relate to New Orleans." Indeed, contributions to the Gulf Coast surpassed prior disaster-donation records, the report says. Simoncini points out that in cases of natural disaster, people tend to respond emotionally, sometimes without regard to whether they can afford it.

"The average American said `I have to do more,'" he says. "Whether they just took more of their disposable income, took money they would have spent otherwise, bought a few less groceries, or one less tank of gas, they just knew they had to respond."

The data from Giving USA suggest that individual donors did not overlook their customary charity choices in favor of those providing disaster relief. Individual donations represent 76.5% of giving, followed by foundations (11.5%), bequests of those who were deceased (6.7%), and corporations (5.3%). Though always the largest source of donations, individual giving increased by 6.4%. Foundation giving increased by 5.6%, with bequests dropping 5.5%. The report says this is "largely because of fewer deaths" in 2005.

HURRICANES STILL STRONG. Though last in the totem pole of giving, corporations showed the greatest increase in giving in 2005, with their total estimated donation of $13.77 billion representing an "unprecedented" growth of 22.5% from their 2004 contribution of $11.24 billion. Simoncini attributes this landmark growth to the willingness of corporations to find extra money for disaster aid. In 2005, corporations are estimated to have spent $1.38 billion toward such relief efforts. For this or other amounts, Giving USA presents no connection between matching funds provided by corporations in response to employee donations.

The report also provides figures for the beginning of 2006. These numbers show that hurricane-based human service organizations have received more support than other groups so far this year, with gifts amounting to $2.7 billion. Within the international subsection, donations received for the tsunami reached $1 billion while those for Katrina were reported at more than $140 million.

Giving USA is an annual report about charitable giving published by The Giving USA Foundation. It is researched and written by the Center on Philanthropy at Indiana University, using surveys of organizations and econometric studies involving tax data, government estimates for economic indicators, and research from other institutions.

Soller is an intern at BusinessWeek.com.

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