Reading the tea leaves is a fun exercise and important to prepare for 2018. Many norms and laws changed in 2017 that will surely affect how advancement officers do business in the coming year. Here are a few things I think we can count on for 2018.
Tax Changes
The big headline for 2018 is, of course, the recently passed tax reform bill. As a result of this bill we can count on:
- Fewer tax payers will itemize their tax deductions to take advantage of charitable contributions. Only 20% of tax filers itemize their deductions now, so this small base of itemizers will be eroded further by the 30 million additional tax payers who are anticipated to opt for the new standard deduction. The good news is that most people are not motivated to contribute because of the tax savings they will reap.
- Wealthy donors will find the value of their charitable tax deduction — the amount Uncle Sam picks up — is lower, because they will be enjoying a lower tax bracket. If tax deduction is a justification for the wealthy donor, they may be a bit less inclined to give, or give as much. The good news is these wealthy donors should have even more disposable income and, perhaps, a guilty conscience that may lead them to be more generous.
- Those who pay all or part of their health insurance premium will see their payments rise much more than normal. This increase will eat greatly into and, perhaps, exceed the tax cut benefit most taxpayers will see in their paycheck. Higher premiums will also put a strain on your organization’s budget and put more pressure on you to raise more money. The net effect could be LESS disposable income for the vast majority of contributors. No good news here.
Staffing Shortages
The challenge to find strong advancement staff, who you can afford, will continue. This will be exacerbated by the ramp up of hiring by healthcare and higher education fundraising shops. They are well established and can pay more for talented staff. The good news is there are many talented people in hospitality and sales positions who can be trained to be good fundraisers. Think out-of-the-box for your next hires, and invest in advancement and management training to develop the skills your organization needs.
Social Media Justification
The nonprofit sector will continue to struggle to justify building or maintaining a fundraising social media presence. Most nonprofits that think social media is an important fundraising channel will continue to be challenged to justify their return on investment. This will become even more challenging as traditional channels begin to decline in actual usage (rather than millions of fake and dormant accounts) and new channels emerge that further dilute and distract donors. There are currently 60+ social media sites you can use in 2017. The good news is that traditional fundraising “blocking and tackling” methods still work, including direct mail, if you are willing to dig in and get to know your donors.
Noise Gets Louder
The current political and #metoo climate virtually ensures there will be constant controversy, cringeworthy Twitter-torment and uproar, special counsel revelations and focus on the 2018 mid-term elections. There will be a lot of “noise” in your inbox, social media, news media and mail box. The good news is you can provide your donors and stakeholders a safe-haven from the noise by sharing the great work you are doing and how giving supports your mission and donor’s philanthropic objectives.
Institutional Winners and Losers
I hate to say this, but it will be hard to find nonprofit winners in the coming year. 2018 will be the beginning of The Big Squeeze for organizations.
Healthcare: The elimination of the individual mandate in the tax bill will create serious financial challenges to rural and urban hospitals alike. They are already scrambling to understand the implications.
Higher Education: Challenges abound including a new tax on large endowments amounting to $4,000 per effected student, ever-rising tuition, the challenge for families to justify the return-on-investment of college, restrictions on immigration that reduces the number of paying foreign students, and the uprising of adjunct professors in their quest for pay fairness.
Human Services: Federal and state funds for human services will increasingly be under assault as federal lawmakers try to find ways to pay for their $1.5 trillion gift to their constituents. The tax bill will also hurt state tax income because most state calculations are based on federal adjusted gross income, which will decline under the new bill.
Arts and Culture: I predict a beleaguered public will increase their desire for the arts as an escape from the world around them. Hopefully, this will be accompanied by philanthropic support.
Generosity
All this being said, I believe we can still count on the inherent generosity of our nation and its citizens to be ignited by the tumult that 2017 brought and that 2018 will likely bring. Americans will continue to understand that nonprofit organizations, as well as the people who support and work for them, are central to a civil society and exemplify our nation at its very best. Their missions touch every facet of our lives, inspire the success of our citizens and country, and deserve our admiration and generous support.
Larry,
Very timely and thought-provoking blog.
Let’s hope things get better in 2018.
Cheers,
Chris
Larry
As always, an informative and interesting article.
The key is your last paragraph about Generosity. I agree. When the donor knows the need, and the value, they will donate. With the right development staff it can be done.
Happy New Year
Russell
Middle income and wealthy will have more money to give, but less in tax incentives. It will be important for nonprofits to step-up their game to improve and communicate program results, and to engage donors and prospects more meaningfully and more often. Do this, and 2018 should be an improvement.