Insights from the Great Recession and what they mean for fundraising during COVID-19

Expert Insight

Insights from the Great Recession and what they mean for fundraising during COVID-19

The recent announcement that over 3.3 million people in the U.S. filed jobless claims in just one week confirms a fear that fundraisers have harbored since the coronavirus crisis hit: we may be entering an extended period of economic decline.

If that’s the case, the fundraising landscape will look radically different than it has for the past decade. Advancement teams have enjoyed unprecedented success across the 2010s on the back of what the Washington Post called a “bull market for the ages.” Since the bull market began, the median institution’s fundraising production has increased by 55%.

Now that we’re likely facing a deep and painful recession, that growth is poised to reverse itself.

In the past few weeks, one of the most frequent questions my team and I have gotten from our partners is, “How big of a hit to our production should we be preparing for?”

The question is, in many ways, unanswerable. We just don’t know how deep this economic hole goes. But to shed a glimmer of light on it, we decided to turn to recent history. We analyzed data from nearly 1,100 institutions about their fundraising performance during the Great Recession. Here are some of the things we learned from our analysis.

33.1%

Drop in the three largest individual gifts, FY08-FY09
Drop in the three largest individual gifts, FY08-FY09

Giving at the top of the pyramid took a disproportionately big hit

For most colleges and universities, their most sizable losses came from their biggest donors. The three largest individual gifts at the median institution added up to 33.1% less in FY2009 than in FY2008. Overall declines in FY2008 were just 12.2%.

When I speak with our advancement partners, they say that what causes them the most anxiety today is the realization that we’re a lot more dependent on those top gifts today than we were in FY2009. In this current crisis, a big dip at the top could prove even more destabilizing than it did a decade ago.

Alumni participation declined, yes—but not much faster than normal

Nearly every year for the past 25 years has brought an alumni participation drop.

Alumni participation, as everyone knows, has been in freefall for decades Those trends accelerated briefly during the Great Recession, with median undergraduate alumni participation falling 1 percentage point in FY2008 and 1.5 percentage points in FY2009.

Undergraduate Alumni Participation Rate

However, those drops were merely a slight exacerbation of trends that had persisted for years. Every other year around the recession—before the crash as well as afterwards, when we were well into the recovery—saw an average 0.7 percentage point drop in undergraduate alumni participation. In fact, FY2011 saw the biggest drop of all, at 1.8 percentage points.

The next few years are likely to elicit further participation drops—and perhaps a broader push to move away from alumni participation as a key advancement metric.

Unrestricted giving fared especially poorly

We’ve long known that unrestricted giving is a fragile source of revenue. That fragility played out to the extreme during the Great Recession.

Average unrestricted current operations dollars declined in FY2008, even before the broader fundraising downturn went into full effect. They declined again in FY2009, and again in FY2010. And while unrestricted giving bounced back in FY2011, its growth rate plateaued quickly after that, consistently underperforming restricted giving across the next few years.

In many ways, the economic downturn acted as a catalyst speeding unrestricted giving’s decline—with donors’ finances in peril, unrestricted appeals fell short of the bar needed to inspire action.

Restricted giving, on the other hand, consistently grew

Unrestricted giving’s loss was restricted giving’s gain. During the Great Recession, donors turned out in droves to support restricted purposes that aligned with their passions. Indeed, average restricted current operations dollars grew every single year through the crisis.

Annual % Change in Unrestricted and Restricted Current Operations Dollars

*2008-2010: Recession decline

The takeaway is that, in times of financial peril, institutions that connect with their donors in ways that have an immediate, tangible, clear impact can survive and, indeed, thrive.

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