The recently released Giving USA 2023 report delivered sobering news: charitable giving declined by 10.5% in 2022 after adjusting for inflation, marking one of the worst years in more than six decades of tracking.
While a few bright spots emerged—giving to social justice and global impact causes grew, and healthcare organizations raised more overall—most nonprofits faced diminished resources at a time of surging demand. To navigate this landscape, nonprofits must take bold action to avoid further instability and ensure sustainable impact.
Declines in funding sources
A significant 13.4% drop in individual giving—which typically accounts for two-thirds of nonprofit revenue—was the primary culprit behind the decline. Corporate grantmaking also fell by up to 19%, further cutting a small (6%) source. Although donor-advised fund giving held steady, new investments in some major DAFs dropped by 29%, indicating donor uncertainty.
Inflation’s reduction of buying power also hit nonprofits hard, with service providers that offer essentials such as food and shelter grappling with higher costs and diminished funding. High inflation affected all nonprofits, leading to a loss of purchasing power, shifting priorities, and unstable funding.
Higher education: Giving to education declined nearly 11% in 2022, keeping with a broader trend of generational and demographic changes. Colleges and universities faced slower giving and struggled to meet fundraising goals due to inflation and market losses. Education may continue to decline in popularity, especially with Millennial and Gen Z donors less interested in supporting higher education.
Independent/Private schools: While education as a whole decreased in support, K-12 schools with strong community connections and messaging around affordability/access may gain more support. However, costs are also rising significantly for schools at all levels. Communicate your impact on students and make the value of donations clear, while controlling costs as much as possible.
Healthcare: Healthcare organizations raised 5.2% more in 2022 but lost 2.6% to high medical inflation. Healthcare costs are top of mind and support may increase with a compelling case, but groups must work to avoid diminished funding in real dollars. Explain how donations translate to care and build a sense of urgency around rising costs and community health needs. Unrestricted gifts offer flexibility to direct funds where they’re most needed.
Social & Global Impact: International groups and those tackling urgent social/environmental issues saw strong growth as donors sought to make a difference. However, government funding and corporate grants are never guaranteed sources of income, and general support still lags for basic operations. Capitalize quickly on interest in high-profile causes and focus on sustaining general operating funds. Project-based restricted gifts are attractive, but build an understanding of how unrestricted money enables the mission. Relying only on designated giving risks future funding gaps.
Addressing these challenges
As nonprofits face these daunting challenges, it is crucial to adopt a proactive approach to ensure financial stability and continued impact. The following strategies can help organizations navigate these challenges:
Diversify revenue streams and make a compelling case for unrestricted support. Relying on a few large donors or restricted project funding alone risks budgetary whiplash and disrupted programs. Build an understanding of how general operating dollars enable the mission. Unrestricted gifts offer flexibility to direct funds where they’re needed most.
Control costs aggressively and communicate the value of each dollar. Inflation hits nonprofits hard, and diminished funding means budget trimming is essential. Clearly show how donations translate to impact. Those that can avoid major cuts while keeping overhead low will inspire confidence.
Focus on grassroots support. While major donors remain crucial, broad community backing provides stability. To rally grassroots support, nonprofits should engage people at all giving levels and make a strong case for why their work matters.
Have a long-term vision. Quick fixes won’t sustain organizations through prolonged uncertainty. Nonprofits need a strategic plan to chart a course to stability and impact. To navigate change, build scenarios for various funding environments and programmatic priorities.
By taking these steps to diversify and strengthen funding, control costs, and rally community support around a long-term vision, nonprofits can stay resilient in the face of economic storms. While 2022 brought troubled waters, a steady hand at the helm can help navigate to clearer skies. By coming together around shared missions, the philanthropic sector can weather this crisis and emerge stronger.