Posted January 1st, 2005

Where the Generous Are

The Catalogue for Philanthropy recently released its annual report on charitable giving in the United States. Unlike studies that focus primarily on the dollar amount donated to America’s nonprofits, the “Generosity Index” evaluates how much people give in relation to how much they have.

Based in Boston, the Catalogue for Philanthropy began its Generosity Index to determine the best way to encourage philanthropy in Massachusetts and greater New England. Although philanthropists in this region donate a large percentage of the nation’s philanthropic dollars, the report indicates that other regions may give more in relation to what they have. The Generosity Index puts giving in perspective by normalizing for wealth and income. The full report with multiple data sheets may be viewed on the Catalogue’s Web site at www.catalogueforphilanthropy.org.

How it works

The Generosity Index uses IRS income tax return data to rank each state’s adjusted gross income (AGI) and average itemized charitable contribution (AICC). The states are then ranked according to their AGI, called the “Having Rank,” and their AICC, or their “Giving Rank.” The difference between the two—the Rank Relation—dictates a state’s position on the “Generosity Index.”

For the eighth straight year, Mississippians gave the largest share of their income. With an average AGI of just over $33,754, Mississippi ranks dead last in the Having Rank at fiftieth place. However, the state’s average charitable contribution of $4,484 is the fifth highest in the country—$1,029 over the national average—arguably making Mississippians the nation’s most generous people. Arkansas, Oklahoma, Louisiana, and Alabama round out the top five most generous states for 2002 in terms of the Generosity Index. Wisconsin, New Jersey, Rhode Island, Massachusetts, and New Hampshire are the nation’s least generous states, according to Catalogue for Philanthropy data.

Crunching the numbers

Much of this data has been widely reported in the press over the last several weeks. But what has received less attention, and what may be of most interest to gift planners, is the wealth of data compiled in the report relating to income and charitable giving distribution in the United States.

The report includes such useful figures as the average AGI and the average charitable deduction both nationally and for each state in both 2001 and 2002, along with the percentage change in each. Gift planners can use this report to quickly gather important information they need to determine how their state ranks compared to the national average and how they are doing in terms of average gifts in proportion to the average amount of total giving for their state and others in which they may raise funds. This may in turn be of help in budgeting fund-raising dollars in the coming year.

In terms of actual dollars given in 2002, California is by far the most philanthropic state, with a total of over $18.3 billion donated to charity. New York comes in second, with gifts totaling just over $12.4 billion. Texas ($8.3 billion), Florida ($7.4 billion), and Illinois ($6.2 billion) are the nation’s top five most generous states in terms of actual dollars donated. These figures coincide nicely with 2000 Census data that reveal that these are the nation’s five most populous states: more people, more money to give.

The Catalogue also presents data on the average size of charitable contributions, known as the Giving Rank. According to its data, the state with the highest average itemized charitable contribution is Wyoming, with an average contribution of $6,356. Rounding out the top five are Utah, Tennessee, Texas, and Mississippi. The states with the lowest AICC are Maine, Rhode Island, New Hampshire, Vermont, and Wisconsin.

Where the money is

The Catalogue report also ranks states based on generosity in various household income categories: $75,000 to $100,000; $100,000 to $200,000; and over $200,000. Interestingly, the results of these rankings are quite similar to the overall Generosity Index. Among the wealthiest—those households earning more than $200,000—South Carolina ranks first, followed by Oregon, Iowa, Mississippi, and Utah. Once again, the northeast trails behind with three of the bottom five (Wisconsin, Illinois, Massachusetts, Connecticut, and New Jersey). It is interesting to note that the $18,866 average charitable deduction among this group is about six times the national average of $3,455 and that the percentage of this group that has itemized charitable deductions is over 91%, compared to 31% for all income groups.

The report also provides information on which states have the highest adjusted gross income, which may be of interest to gift planners who want to know where their marketing efforts might have the greatest impact. California ranks first with a total AGI of over $773 billion. New York ($454 billion), Texas ($401 billion), Florida ($339 billion), and Illinois ($284 billion) round out the top five.

However, the states with the highest average AGI are Connecticut ($64,724), New Jersey ($59,159), Massachusetts ($56,764), Maryland ($54,043), and New York ($52,774). The states with the lowest average AGI are Mississippi ($33,754), Montana ($33,775), West Virginia ($34,941), Arkansas ($35,467), and North Dakota ($35,654). Compare these figures to the nation’s average AGI of $46,160.

These figures are reflected again in another report that monitors the wealth of various communities—Coldwell Banker’s recent annual survey of average home prices for homes bought by “middle management.” The national average for these four-bedroom, two-and-a-half bath homes is $354,372. The survey homes in Greenwich, Connecticut, average $1,192,500, more than five times the price of the survey homes in Jackson, Mississippi ($219,875).

Another way to look at it

The Catalogue for Philanthropy report attempts to determine the most generous states by taking into consideration the fact that a $5,000 gift by a wealthy, high-income individual does not represent the same sacrifice as a $5,000 donation by someone struggling to make ends meet. However, it does not take into account the striking cost of living differences in different parts of the country illustrated by the Coldwell Banker report and others. The Chronicle of Philanthropy last year presented another option: by ranking the nation’s 50 most populous metropolitan areas according to the amount donated by itemizing households with incomes of at least $50,000. The report then also attempted to normalize for cost of living by deducting from disposable income the cost of living in different cities.

As might be expected, the Salt Lake City-Ogden area ranked first, with its residents giving nearly 15% of their income to charity, most notably to the Latter-day Saints. The Salt Lake area was followed by the greater metropolitan areas of Grand Rapids, Minneapolis/St. Paul, Greensboro/Winston-Salem/High Point, and Memphis. The most generous city (as opposed to a metropolitan area) was Detroit, with its residents donating over 12% of their discretionary income to charity. Detroit was followed by New York, Fort Worth, Denver, and Wichita.

Why people give

A number of factors contribute to an individual’s decision to make a charitable gift. As Robert Sharpe has previously pointed out in Give & Take, people usually give for one or a combination of five reasons: religion, social theory, politics, emotion, and tax and economic benefits. Of these, religion seems to inspire the vast majority of gifts. According to the Giving USA report, charitable organizations with religious affiliations received nearly 40% of all charitable gifts in 2002. By comparison, education and health care combined accounted for just 24% of charitable giving.

The Chronicle of Philanthropy report mentioned above revealed that 75% of charitable donations by individuals as reported on 1997 income tax returns were directed to religious organizations. This is largely a result of weekly offerings and tithing to churches and other places of worship and could partially explain the dominance of southern states—states with historically high regular church attendance—at the top of the Generosity Index.

Inherent limitations

It is impossible to accurately measure generosity on a chart or graph, and those responsible for the Generosity Index are the first to admit its limitations. The IRS data on which the Index is based is not released for two years, so the Index is, of necessity, a “trailing indicator.” Also, the Catalogue for Philanthropy consciously decided not to factor in costs of living since accurate cost of living figures are not available at the state-wide level. Additionally, it is impossible to factor in contributions made by individuals who do not itemize deductions or who make gifts of time and other talents.

However, the Index does create a platform for discussion and attempts to provide a forum to acknowledge the contributions of those whose limited assets do not allow them to make the substantial gifts that are more likely to receive widespread press attention.

What the Index means for fundraisers

While understanding its limitations, nonprofit development executives should benefit from the wealth of data included in the report, especially its comparisons of 2001 and 2002 figures. It is interesting to note that the national average AGI dropped by 1.94% in that year as Americans contended with a struggling economy, yet the average charitable deduction fell by just .86%—indicating that the “demand” for charitable giving is relatively “inelastic,” in economic parlance. Of special interest to gift planners is the fact that the average AGI for those households earning more than $200,000 fell 5.94%. The average charitable deduction for that group dropped as well, but not by as large a margin (4.29%), further illustrating that giving by Americans is somewhat buffered from economic fluctuations.

Regardless of economic conditions, Americans will continue to be generous people. But the shape of their generosity may evolve as their personal and financial circumstances change. Wise fundraisers will do their best to stay abreast of the latest data and fund-raising trends while still adhering to proven methods of fund development. Those groups that do a good and consistent job of articulating their mission and providing donors with the information they need to make informed decisions will thus continue to benefit from the generosity for which Americans are known.

The publisher of Give & Take is not engaged in rendering legal or tax advisory service. For advice and assistance in specific cases, the services of your own counsel should be obtained. Articles in Give & Take may generally be reprinted for distribution to board members and staff of nonprofit institutions and other non-donor groups. Proper credit must be given. Call for details.

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