Causes Favored by U.S. Elites See Good Holiday Tithings: Economy

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This is your alma mater calling. Just a friendly reminder not to forget us on your holiday gift list. This year, try to be more like Fred Eshelman.

The pharmaceuticals mogul and 1972 alumnus of the University of North Carolina-Chapel Hill pledged $100 million to the Tar Heels this month, the largest individual gift in the school’s 225-year history.

That’s the spirit of generosity that’s rebuilding endowments at U.S. philanthropies closer to pre-recession levels. Donations climbed 3 percent last year to $335.2 billion after adjusting for inflation, just short of a record, with almost all of the increase coming from individuals, couples and estates, according to the latest figures from the Chicago-based Giving USA Foundation.

Just one cause for concern: The gains have been uneven, skewed toward groups favored by the upper-income households that benefited most from the rebound in stocks and housing. Groups connected to higher education, medical research, and cultural institutions are flush, while growth for those such as the Salvation Army and United Way that rely on smaller individual gifts is lagging behind.

“The favored charities of the wealthy are gaining in share in the philanthropic economy,” a trend that is symptomatic of wealth inequality, said Rob Reich, associate professor of political science at Stanford University in California. “The total amount of money given away by the very wealthy is going up, not because they’re giving away a greater share of their income,” he said, but because “their total income and wealth itself has grown.”

Bigger Gifts

Donations as a percentage of GDP have held near 2 percent since the 1990s, with the annual record reaching $349.5 billion in 2007, according to data from Giving USA, a public-service initiative that monitors charitable activity.

The boost in individual giving last year came from gifts of $80 million or more, indicating that the wealthy’s total share of the philanthropic pie has expanded.

“The gains and losses in giving are increasingly driven by a smaller percentage of the population,” said Patrick Rooney, associate dean for academic affairs and research at the Indiana University Lilly Family School of Philanthropy in Indianapolis, which wrote the report.

The value of itemized contributions reported to the Internal Revenue Service rose 25 percent among households earning $200,000 or more in 2012 from a year earlier, the latest data from the National Center for Charitable Statistics showed. Those making less than $100,000 all saw little change or declines of as much as 6.1 percent among sub-$25,000 households.

Pharmacy School

Eshelman, founder of Eshelman Ventures LLC in Wilmington, North Carolina, and the founding chairman of Furiex Pharmaceuticals, has sat on UNC’s Board of Visitors for more than a decade and had already donated about $38 million, funding the Eshelman School of Pharmacy. The $100 million gift will create a center within the school named the Eshelman Institute for Innovation, the university said.

“I am inspired by the work being done by students, faculty and staff in the School of Pharmacy,” Eshelman said in a Dec. 6 press release. “In the past 10 years, the school has generated more than 130 patents and created 15 spin-off companies.”

When contacted by Bloomberg, Eshelman’s office said he was traveling overseas and couldn’t be reached for comment.

A concentration of donations like Eshelman’s disproportionately tends to serve the personal interests and values of an elite set of benefactors, making the philanthropy “less democratic,” Rooney said.

Giving Preferences

Giving preferences vary among income classes. Households with adjusted gross income less than $100,000 give two-thirds of their charity to religious organizations, while those with more than $1 million give the bulk to higher education, health organizations, and to a lesser extent, cultural institutions, Giving USA found.

Reich, who is a faculty co-director of the Center on Philanthropy and Civil Society at Stanford, found that across income classes, very little charitable giving goes directly to supporting the basic needs of strangers.

“Philanthropy appears to be more about the pursuit of one’s own projects, a mechanism for the expression of one’s values or preferences rather than a mechanism for the redistribution or relief for the poor,” Reich wrote in a 2013 paper published by Johns Hopkins University Press.

America’s largest charities, such as the United Way, Salvation Army, and American Red Cross, are losing ground to another form of giving preferred by the wealthy. Donor-advised-funds are vehicles that allow people to deposit capital in an account for an immediate tax deduction, and decide how they’ll donate later.

DAF Advantage

“From an individual donor’s point of view, they’re great,” said Ray Madoff, a professor of trusts and estates at Boston College Law School in Massachusetts. DAFs give well-off donors the control and autonomy of a private foundation, allowing them to choose where and when the money goes, while also providing the larger tax benefits of a public charity.

Four of the top 10 charities are DAFs, according to the Chronicle of Philanthropy’s ranking of the top 400. Fidelity Charitable, an affiliate of Boston-based Fidelity Investments, took stewardship of $3.7 billion in 2013, and contributions grew 57 percent in the first nine months of 2014, positioning it to oust United Way as the country’s wealthiest charity.

Basic-needs aid organizations are feeling a lack of generosity in their ground campaigns, even as the occasional Christmas miracle keeps spirits lifted.

Holiday Giving

People tend to give most between Thanksgiving and New Year’s. In 2013, 33.6 percent of the year’s total donations were made in the last three months, according to Charleston-based non-profit software and services provider Blackbaud Inc.

In Bloomington, Minnesota, $10,000 in cash was anonymously stuffed into a red kettle at a Lunds grocery store the Saturday after Thanksgiving. The gesture didn’t catch the attention of the volunteer manning the Salvation Army station. As he swung his bell at passersby, one of them -- or maybe a few working in concert -- deposited 10 folded packets of as many $100 bills.

It was probably the same mystery benefactor from years past, Julie Borgen, a Salvation Army spokeswoman, said. The donor, dubbed “Saint Grand” for a series of $1,000 donations, has dropped an estimated $60,000 into kettles in the Twin Cities area since 2011.

‘Saint Grand’

Saint Grand’s generosity did little to make up for the decline in kettle donations, Borgen said. With $1.44 million raised from Nov. 8 through last week, the Twin Cities branch has a ways to go to meet its $3.4 million Christmas Eve target, and is about $185,000 behind where it was at the same time last year.

“The speculation is that people are carrying less cash,” Borgen said. A rise in online donations wasn’t enough to offset the drop in walk-up revenue, she said.

Meanwhile, eight of the 10 largest donations in the world in 2014 came from American philanthropists, according to a Dec. 10 report from Wealth-X, a Singapore-based research and prospecting firm focused on individuals with net worth of $30 million or more. Warren Buffett gave the most, $2.1 billion of Berkshire Hathaway Inc. stock, to the Bill and Melinda Gates Foundation. Nicholas Woodman, chief executive officer of GoPro Inc., came in second, with a $498 million gift to the Silicon Valley Community Foundation, a DAF favored by Facebook Inc. Chief Executive Officer Mark Zuckerberg.

And all those holiday house-calls and e-mail blasts from alma maters may have paid off. Eight of the top 10 donations went to U.S. universities.

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