Brexit & Job Growth: Strong Forecast for Year-End Giving Season

While Brexit has generated anxiety among economists and world governments (which has already abated somewhat), there are some signs that the short-term consequences could actually be a boon for the United States, and in turn may have a positive impact on 2016 year-end giving for nonprofits and fundraisers.

As has already been well-documented (and discussed in detail here on The Tap), Brexit has amounted to a self-inflicted wound for Great Britain, which is reeling in the EU referendum’s aftermath. Britain’s departure from the EU has sent the pound plumetting to a 30-year low. Various industries, including car manufacturing, face an uphill battle as companies’ dollar and euro-denominated debt worsens due to Britain’s monetary collapse. The nation’s trade deficit is also set to expand, as the already high-consumption Britain is set to lose ready access to the EU market for its own goods and services. Various European financial institutions are also planning on relocating London offices to other European cities, such as Amsterdam.

Additionally, the United Kingdom itself could very well dissolve, leaving a diminished and economically anemic England. Scotland – which overwhelmingly voted to stay within the EU – may make another bid for independence. There are also stirrings in Northern Ireland for unification with Ireland, an EU member state. If both of these divisive political developments occurred, Britain would consist only of England and Wales – a mere shadow of Britain’s former self.

While the United States is in some ways affected by the general financial fallout of Brexit, the nation may actually stand to benefit. Economists are predicting that the U.S. real estate market may receive a boost as investors weary of the British economy flock to the United States. With this unexpected stimulus, there is also speculation that the Federal Reserve could forgo raising interest rates for a while longer to take advantage of this unplanned advantage (as well as to quell investor concerns over the general economic impact of Brexit).

As the United States’ trade deficit swings in its favor, with more money flowing into the comparably safer US markets, inflation rates may also shrink, increasing the buying power of US citizens.

This could have two positive implications for nonprofits: with larger financial institutions receiving an influx of investment, companies may be poised for more generous corporate giving; additionally, increased buying power for US citizens could encourage greater philanthropy, especially as low income individuals are already more predisposed to giving than other income brackets.

While increased expenditures on loans and mortgages may result in more savings for average consumers, there is yet one more factor that could lead to a successful year-end giving season: a consistently improving job market. Despite pessimistic outlooks, it appears that employment in the United States is likely to continue improving throughout 2016, according to McVean Trading & Investments LLC.

With a diminished unemployment rate, consumers emboldened by a more competitive dollar, and greater financial investment, nonprofits could see a particularly profitable year-end giving season. Even if the US populace looks toward saving during this momentary economic reprieve, that could still result in stronger giving in FY2017.

The Tap will continue to provide economic insight through the lens of today’s hottest issues for the benefit of fundraisers and nonprofit professionals.

Philanthropy Supports Struggling Greece

As Greece scrambles to produce a list of economic reforms to satisfy its creditors, it is still unclear whether or not the Mediterranean nation and its primary negotiating partners will reach an agreement that keeps the Hellenic Republic in the Eurozone.

The country’s debt crisis has proved intractable. Following the onset of the 2008 recession, Greece has struggled tremendously. A list of austerity measures – including privatizations and pension reforms – has left much of the population reeling financially.

Economists initially projected only a few tough years before the economy rebounded. Instead, unemployment rates are currently higher than those of the United States during the Great Depression of the 1920s and 1930s. Some fear that an exit from the Eurozone will leave a collapsed economy, and an exacerbated humanitarian crisis that could threaten the population’s access to basic needs items.

Strict credit controls have limited the amount of cash available to Greek citizens. As the nation quickly depletes the remaining bank reserves, the future – no matter which way it goes – promises to be difficult.

Outside of the economic effects that a “Grexit” would have on the philanthropic sector, there is another charitable angle to the crisis: foundation and nonprofit support for struggling Greek citizens.

A number of philanthropic entities have sought to mitigate the social effects of the great recession. The Stavros Niarchos Foundation (SNF), for example, initiated an ambitious three-year program in 2012 aimed at alleviating the worst effects of Greece’s economic crisis. After spending $130,000 million on 200 grants – primarily on social welfare, but on arts and education as well – the program benefited nearly 500,000 individuals, or 4.5 percent of the nation’s population. The grants also sustained 3,000 jobs, and is believed to have doubled the economic impact of the grant monies issued.

But the SNF initiative and the work of other smaller philanthropic groups in the extensive Greek diaspora still fall way short of the support needed by a population without opportunity and a diminishing social safety net.

The country’s path over the seven years following the global recession has been rocky, painful, and socially devastating. Greece’s economy has retracted by 25 percent since 2009, and its unemployment rate hovers around 25.6 percent. Its youth unemployment fares even worse, sitting just shy of 50 percent. Those without work are increasingly less likely to find it – 75.3 percent of the country’s unemployed were without work the preceding year. Greece has seen a 35 percent suicide rate increase since the initiation of harsh austerity measures in 2011.

The problems that Greece faces are variegated and require comprehensive relief efforts from government institutions, foundations, and nonprofits. While many media reports choose to focus on the mere economics, the real human impact is jarring. Some generous individuals, however, are beginning to take notice, and are making charitable gestures that could compel others to act.

A tragic photo that emerged this week depicted an elderly Greek pensioner crying outside of a bank. James Koufos, an Australian business man, recognized the gentleman as an old school friend of his father’s. Moved by the photo, Koufos requested that anyone in the Greek public with the man’s contact information step forward, offering to pay his pension. He stated that he “will never allow to see a fellow Greek proud hardworking man starve.”

As the human toll becomes more apparent, other philanthropists and donors may come out of the woodwork to help citizens bogged by depression, betrayed by the nefarious and disingenuous dealings of their country’s political and economic elites, and deprived of the resources they spent their working lives to secure.

Philanthropy and the Greek Debt Crisis

Following the break-down in talks between Greece’s political leadership and the country’s creditors – also known as the “troika,” including the International Monetary Fund, the European Commission, and the European Central Bank – Greece’s financial crisis has entered its eleventh hour.

While the drama is still playing out, it is all but guaranteed to have an impact on the global economy – including the philanthropic sector. 

Last minute attempts on Tuesday from Greek Prime Minister Alexis Tsipras to secure a third bailout faltered, as German Chancellor Angela Merkel indicated that there would be no further negotiations until the results of Greece’s July 5 referendum on the current bailout package become known. Leaders across Europe argue that the referendum is a de facto vote for Greece to either remain in the Eurozone or leave.

On Tuesday evening, Greece has become the first developed nation to default to the IMF, missing a €1.6 billion loan repayment, entering insolvency and quickly approaching bankruptcy. The country also has the distinction of being the first European Union member to default on its creditors.

The global effects of the crisis are already taking shape. In Asia, stock markets fell 3 percent on Monday, while Europe dipped 4 percent in anticipation of the Greek default.

International turmoil this year has had little effect on U.S. markets. In fact, the U.S. exchange has gone through the longest post-recession stretch of time without a 5 percent sell-off. Additionally, the United States has little direct economic interest in Greece; the nation amounts to less than 1 percent of U.S. trade.

The real threat is the spillover that would occur from European markets, which would take a serious hit following a Greek default and a “Grexit” from the European Union. The biggest fears rest on the potential backlash, which could involve investors pulling money out of struggling Eurozone countries including Italy, Spain, and Portugal, as well as potential bank runs in those nations.

If the more pessimistic projections prove correct and the default and “Grexit” rattle global markets, the result could be a huge blow for the philanthropic sector, which is just now enjoying a return to pre-recession levels. Indeed, the sector broke a new record last year, raising $358.4 billion. This extraordinary feat – which defied predictions that it would take ten years for philanthropy to recover – was aided significantly by increased giving from corporations and foundations, which outpaced the rate of growth for individual giving.

As a Stanford report details, foundation and corporate giving are heavily influenced by stock market trends, and dip accordingly when markets take big hits. This means that, should the United States fall victim to the financial fallout of “Grexit,” the fastest recovering segment of philanthropic giving would face a hurdle to its robust rebound.

Nothing is certain yet. The referendum on creditors’ bailout demands is this Sunday, and a yes vote may pave the way for further talks that will mitigate Greece’s technical default and generate a plan to continue pumping Greek banks with funding in order to return the nation to solvency. But pending these compromises and deals, the philanthropy of corporations and foundations could face the detrimental effects of a sliding market. 

An Interview with Women on 20s Founder Barbara Ortiz Howard

An innovative nonprofit has attracted a great deal of press lately, broadcasting its message of gender equality through a clever campaign to put an influential woman from US history on the $20 bill.

Women on 20s aims to replace Andrew Jackson – the controversial president who presided over the Indian Removal Act. Who exactly should go on in his place, however, is up to the US populace. The organization rolled out a primary round voting this spring, consisting of 15 women that included key figures from the suffragette, abolitionist, labor, and environmental movements. Counting more than 250,000 votes, the final list features Eleanor Roosevelt, Harriet Tubman, and Rosa Parks. And – in a nod to Jackson’s infamous legacy – the nonprofit has included Cherokee Nation Chief Wilma Mankiller in the final round of voting.

Barbara Ortiz Howard – the founder of Women on 20s – sat down with Key Elements Group to discuss the inspiration behind the campaign, her experience starting and running a 501(c)3 nonprofit, and how her organization’s campaign fits into a larger context.

KEG: What was your inspiration for founding Women on 20s?

BOH: A desire to honor our Centennial of suffrage with an iconic woman on our currency that heretofore had not seen a woman on it. For me, having role models of great women in our daily lives is important to helping us all conquer stereotypes that limit our perspectives. Seeing women who exemplify the best of who we can be is at once uplifting and inspiring for everyone. Imagine if we were all inspired to be our best selves.

KEG: The campaign’s goal is so precise, and has garnered so much positive attention and press. How did you and your team arrive at such a specific, effective objective? 

BOH: It was a precise mission – the lack of a woman on our currency despite the significance of women in our culture, economy, and everyday life seemed to be a glaring omission, and not a difficult one to formulate. On the other hand, it has been tempting to veer off and consider other missions, so it has been important to stay on point.  In addition, we had some other defining parameters. Us wanting the process to proceed in a timely way meant limiting the scope to replacing one portrait with a woman who fit the few guidelines in the code. Not trying to change too many things at once.

KEG: What larger mission or goal – outside the scope of Women on 20s –  does the campaign fit into?

BOH: This campaign is about helping create cultural shifts that will better align the intentions we inscribe in our laws in our everyday lives. This mission is to value women as full and equal beings, which can be best done in our everyday lives and activities rather than in thick laws most of us don’t have access to and rarely refer to as we interact with one another.

KEG: After registering as a 501(c)3 nonprofit, what were some of your biggest hurdles getting the organization running, and how did you overcome them?

BOH: Spending time setting up your 501(c)3 is very important in minimizing the hurdles you may face down the road. Understanding what you can and cannot do and your purpose is critical. Getting this done correctly and efficiently will allow you to get donations more quickly.  Get professional help in doing this if at all possible, this will be a huge ROI. We were fortunate to get this right, although I wish it had been earlier in our evolution.

BOH: After that, getting the timing, critical support from similar groups and influencers, and having a “product” with integrity were essential ingredients. As a startup organization we faced huge staffing issues that never got quite resolved. I work at this as I can, as I have another business to take care of, while my colleague Susan Ades Stone rarely was able to leave her desk caring for the infinite pieces of the campaign.  We do not have a physical office and we have become so busy and specialized and time sensitive, we cannot bring on staff. If you can set up the right people in advance and have funding for this, it will not be so challenging! It is unlikely that you will ever have enough people or support to do exactly all you need to do, but try to get a strong team together as soon as possible.

KEG: What were your most effective fundraising strategies? Which strategies were least effective? 

BOH: So far we have not had effective fundraising strategies.  We are working on that so we can sustain the enthusiasm and maintain our movement. We’d really also like to take advantage of many exciting options that we can develop, such as the educational component, and funding will allow that. While people have been donating lately, we are far from being self-sustaining.  However, we believe that inspiration will carry us through most of what we have in the days ahead, and then new options will pave the way. We are fortunate that we have such a compelling cause. A well developed and compelling cause is a main goal you must achieve.

KEG: When do you estimate the final vote will take place? 

BOH: We are planning to keep the voting going through the month, as our funds allow and as the voting remains strong.

KEG: How would you characterize the response from voters?

BOH: Overwhelmingly positive, with many expressions of gratitude for the effort and offers of help.

KEG: Is there any advice you would offer to young women who want to make a difference, and who may pursue their goals through forming a nonprofit organization?

BOH: I think most of my answers here are also formed in part as advice. Surround yourself with good people and ask for help. You cannot do it alone. You must be willing to do what you may never have thought you’d do and /or sacrifice. You can do it if your heart is really in it, and people will respond to that!

KEG: What do you think the chances are that your campaign will succeed?

BOH: We seem to have the law, timing and hopes of so many on the side of this overdue change, so we are very hopeful it will all happen to celebrate the Centennial in a grand way.

Philanthropy Saves Monuments, How About Infrastructure?

There’s one thing everyone can agree on: the United States’ infrastructure needs an overhaul.

While a contentious debate over funding rages on, there is a demonstrable consensus that cracking roads, neglected bridges, and outdated technology not only pose a threat to the country’s economic viability, but also to the physical wellbeing of its people.

Another country is facing similar issues involving rote maintenance and the elusive funding necessary to pursue it. To account for the difference between the two cases, just trade a power grids for aqueducts.

Italy has had difficulty paying for the conservation and refurbishment of its extensive catalog of amphitheaters, churches, and various artifacts from its long and storied history. Along with many of its southern European peers, Italy has been slow to emerge from the recession. The country has sizable public debts, and Rome officials oscillate back and forth between filing the city for bankruptcy. In this cash-strapped climate, channeling public resources to highly expensive historical conservation is exceedingly difficult.

Tourism is an essential component of Italy’s economy, and state officials needed a solution. They turned to one area of the Italian economy that has weathered the last decade’s downturn – the fashion and luxury industry.

A variety of high-grossing corporations have stepped in to ensure the maintenance of Italy’s national patrimony. Tod’s, an Italian fashion company, is paying to refurbish the iconic colosseum. The company Fendi has shelled out $4 million to restore the Trevi Fountain. Bulgari has donated $2 million for revitalization efforts for the Spanish Steps.

Dario Franceschini, Italy’s culture minister, discussed the public-private partnerships that are currently shaking up the country’s funding system:

Our doors are wide open for all the philanthropists and donors who want to tie their name to an Italian monument. We have a long list, as our heritage offers endless options, from small countryside churches to the Colosseum. Just pick.

Many Italians find Franceschini’s words troubling. While finding the necessary funding for such a trove of priceless artifacts and buildings is important, there are nonetheless a host of ethical questions for the Mediterranean nation. Will these partnerships usher in the commercialization of publicly held assets? Will good intention give way to future privatizations? Are these practices here to stay?

Italy is new to the corporate philanthropy scene. Public-private relationships of this nature are more common in the United States, which has an entrenched tradition of business philanthropy. Indeed, the United States has seen its share of philanthropists propping up national landmarks.

In 2012, David Rubenstein – the billionaire head of the Carlyle Group – donated $7.5 million to restore the Washington Monument in the country’s capital. After the famous obelisk sustained damages from an earthquake, the National Parks Service struggled to secure the funding necessary to repair the structure and to reenforce it against similar calamities in the future. Rubinstein – who has also contributed to the Smithsonian and the U.S. panda reproduction program – stepped in to front the cost.

As unfortunate as it may be that national symbols such as the Washington Monument in the United States and the Colosseum in Italy require private support, they may nonetheless carry a lesson for how the philanthropy sector can fill some of the gaps in infrastructure funding created by government inaction. By marrying art and infrastructure, private-public relationships can formulate and execute fundable projects. A provincial bridge does not carry the same import as the Lincoln memorial, but in recognizing the value of public art and its fundamental relationship with public infrastructure, creative philanthropic thinking can find solutions to these pressing issues.

Proposed Legislation Would Apply Business Tax to New Hampshire Nonprofits

State Rep. David Hess has proposed legislation that would treat large New Hampshire nonprofits as private businesses, subjecting them to the state’s Business Enterprise Tax (BET). If successful, the bill would exact a heavy toll on the state’s nonprofit sector. New Hampshire Catholic Charities, for example, would have to pay out around $200,000 annually in BET taxes if the bill passes.

The BET is among the most profitable taxes in New Hampshire, responsible for $219.6 million in state revenue during 2014. It is currently a fixed rate of .75 percent on interest, dividends, and wages at large private businesses. Currently, 501(c)3 organizations are exempt from the tax.

An estimated 88 nonprofits would feel the effects of the legislation, among them the New Hampshire Alliance of YMCAs, institutions of high learning, and nonprofit hospitals.

The effort appears to be part of a larger, party-line battle on taxation and the future of state budgeting. Republicans have proposed two bills which would deprive the state government of a combined $42 million in revenue. One bill would reduce the state’s profits tax from 8.5 to 8 percent, and the other would address the BET, with an aim of lowering the rate from .75 percent to .675 percent.

Discussing the proposed legislation, Rep. Hess remarked that the legislation was not to raise additional revenue for the state, but rather to pave the way for a general lowering of the BET by spreading the burden of taxation. As for putting nonprofits on the hook to pay the difference, Hess commented that, “If it acts like a business, has a business plan, walks like a business … maybe it should be taxed under the Business Enterprise Tax like its competitors.”

Criteria for what “acts” and “walks” like a private business, however, differ among leading nonprofit voices in New Hampshire.

As Mary Ellen Jackson of the New Hampshire Center for Nonprofits states in an op-ed appearing in the Concord Monitor, “nonprofits are able to conduct their work in highly economical ways is because they operate on business models that leverage volunteers, donations and private grants and because they pour all profit back into mission, not shareholders pockets.”

Jackson points out that a number of institutions providing essential services to New Hampshirites would be affected, including mental health centers, disability services programs, nonprofit nursing homes, and affordable housing groups, and that their work would be undermined by the addition of an onerous tax that was not designed for application to nonprofits.

Outside of the financial pinch on nonprofits, the tax cuts would also result in an overall loss in state revenue that would nearly amount to the entire annual budget of the state’s community college system, thereby threatening such vital services.

Considering that the Tax Foundation ranked New Hampshire seventh in the nation for ideal business tax environment, the proposed legislation is misguided and unnecessary. By sequestering a sizable portion of nonprofits’ resources, the legislation would force organizations to cut their services, having a direct negative impact on the nonprofits’ beneficiaries while simultaneously dampening the appeal of vital jobs in the nonprofit sector.

What Low Oil Prices Mean for Nonprofits

The new year has kicked off with even more good news for U.S. consumers. The price of oil has continued its dramatic plummet, presenting unique fundraising opportunities – as well as challenges – for development professionals.

On January 6, the barrel price of gasoline fell below $50 for the first time in six years. The latest decrease follows industry projections that the United States is stockpiling reserves at an astonishing rate, potentially by as much as 700,000 surplus barrels a week.

In a November meeting of OPEC (the Organization of Petroleum Exporting Countries), member nations discussed the possibility of slashing production to limit the glut in international supplies, thereby curbing the spiraling price of crude oil. The cartel, however, opted not to. The decision stemmed largely from the interests of production leader Saudi Arabia, whose desire to maintain a massive market share won out over the appeal of short-term benefits offered by production cuts.

The reasons for the decline in oil prices are manifold, but chief among them is the increase in U.S. energy production. Since 2008, the United States has contributed 4 million barrels of crude oil a day to the global market, which amounts to 5 percent of the daily global production of crude oil. Combined with dismal growth projects for Asia and Europe, this uptick in U.S. oil production has spurred some of the lowest gas prices that the United States has seen in years.

All of these developments benefit the average U.S. consumer tremendously. If nonprofits calibrate their fundraising focus and acknowledge the new spending power of average U.S. consumers, they could increase revenue significantly, and continue to do so for a while; specialists expect no abatement in declining oil prices anytime soon.

Due to falling prices, motorists could save $75 billion on gasoline in 2015. The financial benefit from these savings to U.S. families could reach $1,100 in extra cash, allowing for greater spending and a growth of .3 – .4 percent for the U.S. economy.

General economic growth could in turn lead to more financial security for many U.S. families, emboldening them to give more to charity. And if giving trends during the recession were any indicator, this could bode very well for the nonprofit sector. Poorer and middle-class U.S. citizens increased their yearly giving by 4.5 percent over the course of the recession, whereas wealthier donors scaled back their donations by 4.6 percent.

The resilience of the average American’s giving spirit – in conjunction with an improving economy, greater disposable income, a resurgent dollar, and a growing interest in online giving – could mean that 2015 will be the year of small donors, giving more to make a difference on the issues they care most strongly about.

Declining oil prices, however, have not been a boon to everyone, and will reduce the giving power among certain demographics.

The stock market has taken a shellacking, as news of falling oil prices have led to energy stock selloffs and bearish market projections. On January 5, the Dow Jones Industrial Average fell 331.34 points, or by 1.8 percent. The Nasdaq fell by 72.24 points – amounting to a 1.6 decrease. As Kathy Jones from Charles Schwab notes, declining energy prices are a mixed blessing, as it benefits consumer spending while simultaneously harming investment, which makes up much of the capital wealth propping up petroleum businesses.

Outside of institutional pains felt on Wall Street, certain regions of the country are suffering due to the declining prices. Indeed, U.S. Steel just announced on January 6 that it will idle a plant in Lorain Ohio, putting 614 employees out of work. Energy production has occupied a larger share of the economy than ever before, and the glut of cheap oil spells trouble for certain regional economies. Eight states in particular are projected to suffer as a consequence of falling oil prices. Due to economic dependency on energy production, Louisiana, Alaska, New Mexico, Oklahoma, North Dakota, Texas, West Virginia and Wyoming comprise this group.

The overall impact on the spending (and giving) power of average U.S. consumers will be positive, as disposable income grows across much of the United States – specifically among demographics that have giving more to charity throughout the past five years. Giving levels rarely deviate from around 2 percent of GDP, meaning that, at the very least, charitable giving should grow proportionately along with the economy.

Investors and energy sector workers will take a hit, however, as the stock market retracts and energy companies lay off employees. Nonprofits and development professionals should be mindful of which side of the issue their target demographics fall. By doing so, nonprofits can hone their segmentation and craft better messaging the connects with prospective donors in a manner appropriate to their economic situation.

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