2016’s Most Charitable States

What are the biggest challenges facing US-based charities in the current economic environment?

Charities are in a period of deep uncertainty because it is impossible to know whether and how the Trump administration will act on his campaign promises. Several of his proposals and practices may be very disruptive in areas such as health care and reproductive rights, immigration, civil rights, government accountability, freedom of the press, and the environment. The new Congress may also embrace budget priorities that decrease funding while increasing need for the types of programs and services charities provide. The current environment proves how essential it is for us to have a robust and thriving nonprofit sector, but organizations and donors may be stretched more than ever as they are forced to grapple with competing urgent demands.

What percentage of income should households donate to charity?

I will not set a percentage because there is so much variability between households' financial circumstances in the U.S. A two or three percent target could be inconsequential for some families and completely out of reach for others. Instead, I'd prefer that people become more mindful of the role that giving can play in their overall toolkit for making a difference, along with how they shop, vote, volunteer, manage their homes and businesses, use energy, process waste, use their social networks, etc. How much you give should become a function of how you choose to live your priorities, not some arbitrary number.

What advice do you have for choosing the right charity?

Most of the problems that charities address are complex, so don't reduce your choice to some simplistic formula based on overhead rate and quantifiable social return on investment. Learn enough about the one or two issues you are most passionate about to understand what levers need to be pushed to make a difference, then find the organizations that are pushing them well. They should be deeply connected to and knowledgeable about their target communities and issues, able to articulate the specific needs their work address, explain how they hold themselves accountable for results, and demonstrate responsible stewardship of the money entrusted to them.

Keep in mind that many of the most important things nonprofits do, including policy advocacy, community organizing, social movement building, and consciousness raising, are best done collaboratively, can take a long time to yield results, and may be difficult to quantify.

Do you believe charities should face increased regulations and scrutiny in order to reduce fraud?

I deeply believe that charities have an obligation to steward the resources entrusted to them responsibly, with accountability and transparency, because of the public trust their tax status grants them. However, I also wish the general public had a greater appreciation of how accessible charities' financials are online. While even that degree of sunlight can't prevent fraud, there are many ways in which the nonprofit sector is doing a better job holding itself accountable to the common good than the private and public sectors are.

What are the biggest challenges facing US-based charities in the current economic environment?

I believe there are a number of significant challenges facing US - and global-based charities alike: First is authenticity. How do charitable donors know if the organization is credible with respect to so many fraudulent or fictional organizations in existence? Is the website credible, or is it a ghost website? Are the individuals behind this particular charity credible, or do they have ulterior motives for the proceeds? Are there checks and balances for the finances, or is it yet another situation akin to the Haitian earthquake where accurate accounting is almost nonexistent?

Second, the large percentage of donors are typically in a demographic that is skeptical about providing personal information and committing monies online. This technostress is warranted given the ease with which fraud occurs online, and these same individuals are often the targets. With nearly every organization promoting and encouraging "text donations" and online-based giving, this technology movement renders many individuals and corporate donors insecure with respect to sending money online.

Finally, the polarization of the country today appears to have furthered the rift between those who have resources to donate and those who do not. There is a growing schism between these groups and this has led to fracturing of so many individuals. Translation: perhaps it's better if I donate my limited resources to causes that are near and dear to me, be it political, environmental, women's rights, education, etc. Thus, organized charities as they exist today may also become more fractured and issue-based leading to many of these charities to fold, unfortunately.

What percentage of income should households donate to charity?

I do not believe there should be a set formula for donation, because each household has its' own challenges. On the surface, a household that is considered upper-middle class often feels the same insecurities as a household that is not as well off financially. Whether this is rational or not is not up to external individuals. Example: small business owner making six figures but has private health insurance with exorbitant deductibles and perhaps family members who have existing health challenges. Thus, maybe they do not feel they have any additional resources to donate, because they have to remain financially liquid as a "just in case" mindset.

To be honest, can anyone really say what the magic number is with regards to being financially sound? That is both the beauty and the horror of a consumer-driven mindset: financially rich today and potentially financially devastated tomorrow. It's scary and exciting at the same time, those unknown quantities.

What advice do you have for choosing the right charity?

When I advise my students and those I consult for with respect to donating, I recommend first and foremost they choose causes and issues that they are passionate about from a long-term lens. Hot button and acute issues are great, but if there is a risk of your monies not going to those who directly need it, then you will quickly lose interest in ever returning to donate to that specific cause.

Organizations that have a long-term track record are great and often have multiple means of donation including time, in-person financial donations, online donations, and snail-mail donations. Infrastructures within The Red Cross, United Way, OXFAM, and Greenpeace are just a handful of organizations that do a solid job of allocating resources where it's needed most.

Do you believe charities should face increased regulations and scrutiny in order to reduce fraud?

That is a slippery slope, because who should be in charge of these regulations and scrutiny? I worry about political agendas coming into play with respect to regulatory oversight. Having said that, there must be some oversight to prevent fraud. But the amount of fraud that occurred right after 9-11 with respect to fraudulent charities demonstrated that no matter how much regulation exists, enforcement is challenging and nefarious players will always find a way.

Should contributions to charity be fully tax deductible or should there be limits?

Again, this is a slippery slope because there are always ways around limitations and regulations: I believe there should be a limit though, because at the end of the day, just because someone has the means to contribute significant amounts does not mean they are not using other public resources that requires tax contributions (e.g., roads, schools). Thus, for me to be able to write off large amounts of donations to organizations that I feel are important in order to reduce my tax responsibilities, in essence means other people are vicariously contributing to the causes I feel are important.

Should all non-profits be able to receive tax-deductible contributions regardless of their mission?

Absolutely not, if we are basing our regulations and "rules of law" on general constitutional considerations. What comes to mind here are fly-by-night religious groups who open to take advantage of tax laws only to close up when they've exploited those laws to their benefit. Another example of this relates to my previous answer: why should an organization that promotes something that not every person can ethically or morally get behind at least somewhat, be allowed to benefit financially off the backs of others? This is the egalitarian argument again. For example, anti-abortion or pro-abortion groups: why should those on one side of the aisle have to essentially pay for the other side of the aisle to reap public benefit when they are vehemently opposed to the mission of that group? I realize this is a dogmatic thought, but it is something our country is currently grappling with. The answer to me is to continue having dialogue on all sides of all issues. Though, that is why I am in academe I suppose, to keep the dialogue flowing.

What are the biggest challenges facing US-based charities in the current economic environment?

Despite the improvement in the overall economy, nonprofits, particularly in the health and human service sectors are tremendous pressured. First, their organizations were financial weak entering the recession. Then, the recession resulted in reduced revenues and increased program service demand. This put increased financial pressure on already weak organizations. The program service demands remain high, but the revenues have not yet rebounded.

What percentage of income should households donate to charity?

I do not believe there is a fixed percentage that they should give. It is really a matter of one's personal finances and charitable desires.

What advice do you have for choosing the right charity?

There is no right charity for any one person. Many people give out of loyalty to an organization (hospital, college, religious organization). Others give to particular causes. Many also give in response to a humanitarian crisis. I personally aim to give a portion to my local nonprofits, a portion to overlooked/underserved humanitarian needs, and a portion to support causes that I care about. I then look for organizations that are having an impact, have well-run programs, and good managements.

Do you believe charities should face increased regulations and scrutiny in order to reduce fraud?

The regulation and oversight has been quite uneven. The IRS is understaffed in this area, so does not scrutinize many nonprofits that should be. The state regulations and oversight levels vary considerably state-to-state. If there were to be more investment in this area, I would like to see more staffing for oversight at the IRS and at the state level.

Should all non-profits be able to receive tax-deductible contributions regardless of their mission?

The tax system as a whole could benefit from an overhaul. I believe that tax deductions should have some limits in terms of amount and nature of the contribution such as we have today.

What are the biggest challenges facing US-based charities in the current economic environment?

I will answer this question in two parts. First, I think it is important to discuss some of the challenges that have arisen because of the recent presidential election. Then, I will discuss two important challenges that are unrelated to the election.

1. Because the election painted both the Clinton Foundation and the Trump Foundation in a negative light (and because these negative stories were basically the only mentions of charity during the campaign), a lot of US-based charities (and nonprofits more generally) are worried that we will see a decline in trust from the public for all kinds of charitable organizations. The fear is that we will see a contamination problem: these two very mediatized bad apples will lead people to stop trusting all charities.

2. US-based charities are also concerned about what a Trump presidency (accompanied by a Republican-controlled Congress) will mean for them. Reduced government spending would mean fewer grants and contracts. President-Elect Trump’s tax plan also caps the charitable deduction amount, which could possibly result in lower donations from high-income households. Finally, a lot of nonprofits serving vulnerable populations (women, immigrants, Muslims, people with disabilities, etc.) are worried that demand for their services will rise while they are under fire from the administration. Environmental charities have similar concerns based on the President-Elect’s statements about climate change and his recent appointment of Myron Ebell, a climate change skeptic, as the head of the EPA (Environmental Protection Agency).

3. One challenge that charities face consistently is fundraising. It is very difficult and time-consuming to find funding, and even more so to find reliable, long-term funding. Foundation and government grants are usually for one year or for a few years, and they tend to be very competitive. Donations by individuals like you and me are often one-time donations. So many charities have no choice but to be constantly looking for funding.

4. The final challenge is not something that we hear about a lot, but it is very important. Many charities (and nonprofits more generally) struggle with employee turnover. They just cannot keep their employees for very long. The 2016 Nonprofit Employment Practices Survey puts employee turnover at 19% among nonprofits. More than half of nonprofits (54%) do not have a formal recruitment strategy and more than 80% (84%) do not have a retention strategy (2016 Survey). The problem also extends beyond employees. Many nonprofits struggle with finding and retaining good board members.

What percentage of income should households donate to charity?

If your readers would like to have an idea of what other people give, I can certainly answer that question. According to the 2016 Giving USA report, average US household giving in 2015 reached $2,124. What I want people to realize though, is that giving money is not your only option. Charities need volunteers. Giving your time is just as valuable as giving your money, especially if you have some specialized skills that you can contribute to the charity. But do remember that charities invest in you when you come in as a volunteer – they show you around, they train you, and so on – so you don’t want to waste their time either. If you can, try to volunteer regularly or semi-regularly in the same organizations instead of volunteering once and never going back.

What advice do you have for choosing the right charity?

First, I think it is important for people to determine what values/issues/topics are important to them. Then, they have to ask themselves if they want to give to a local, national, or internationally-focused charity.

Once a person has a better idea of the type of charity to which they want to give, there are a lot of tools available on the web to help them choose the right charity for them. The Better Business Bureau allows you to search for charities and see if they meet the BBB’s standards for accountability. Charity Navigator also gives you a lot of information about a charity’s financial performance and accountability. Guidestar is another good charity watchdog. These websites can help people narrow down their choices to a smaller set of charities. If the charities receive good ratings from these organizations, they manage their resources well and are transparent.

Once a person has created a shortlist of charities based on information from the watchdog websites, I would advise looking at the charity’s website and its annual report. Are they expressing their mission clearly? Are you inspired by them? Are they getting closer to achieving their goals? How do they measure that? As a college professor, I use online research a lot. But if it is possible, go visit the charity in person before making a donation. Go volunteer for them. If you cannot find certain important information online, don’t hesitate to call and ask them questions.

Do you believe charities should face increased regulations and scrutiny in order to reduce fraud?

I don’t believe the problem is that we do not have sufficient regulations. One problem is that the IRS (Internal Revenue Service) does not have enough capacity to enforce these regulations and investigate charities consistently. Another problem is a lack of education, both on the part of charity staff/volunteers and on the part of the public. Many people create charities because they want to make the world a better place, but they do not necessarily have the legal and taxation knowledge to run a charity. Similarly, the public makes donations hoping to make a positive difference, but they do not always research charities and end up donating to fake charities, scams, or very inefficient charities that do not really make a difference. We all need to be more vigilant.

One area where I think more regulation would be beneficial, however, is with donor-advised funds. A donor-advised fund is a fund that is maintained by a charity in which an individual can deposit money. The individual receives the full deduction for their charitable contribution immediately, but the money is invested and the individual can decide over time to which charities the money will be sent. One issue with donor-advised funds is that the money for which you received a tax deduction right away is not helping the public good right away. Theoretically, it could stay in the account for an unlimited amount of time. Also, we have a situation where the organization managing the money has an incentive for you to keep the money in the account (because they receive fees), instead of distributing it to charities. Simply adding a fixed time limit to spend the money could help with these issues.

To be fair, some scholars and practitioners have argued that allowing the money to be invested for some period of time, actually means that more money will go to charities in the end than if it was required to be spent right away. And almost every scholar I know argues that donor-advised funds are better than for high-income donors to each create small private foundations.

Should all non-profits be able to receive tax-deductible contributions regardless of their mission?

My personal opinion is that nonprofits should not all be able to receive tax-deductible contributions. A charity’s main purpose must be one of the following: “charitable, religious, educational, scientific, literary, testing for public safety, fostering national or international amateur sports competition, and preventing cruelty to children or animals” (IRS). Charities must also act in the public interest. As such, it makes sense for them to receive tax-deductible deductions. The assumption is that, even if the government loses some revenue in taxes, the money will still be spent on goods and services that benefit the general public (and that the government may be required to provide otherwise).

If we were to allow all nonprofits to receive tax-deductible contributions, then it would mean that the government would forego tax revenue, but the organizations receiving the money would not necessarily have to benefit the public interest. Nonprofits that benefit only the interests of their members (like AAA or country clubs for instance), unions, chambers of commerce, and political groups could all receive tax-deductible contributions even if their activities were not in the public interest. The government could not use this tax revenue to provide the public with goods and services, and the nonprofits would not have to do so either.

Some scholars and practitioners have argued that we all receive other income tax deductions, and that we do not feel obligated to spend that money for public purposes. So why do we feel this way about the charitable deduction? Why must this money absolutely be spent in the public interest? The government loses tax revenue any time we claim a tax deduction, whether it is the charitable deduction or not.

What are the biggest challenges facing US-based charities in the current economic environment?

Uncertainty about the economic climate including tax policies, budget changes, and oversight which will all affect their ability to serve their beneficiaries and members.

What percentage of income should households donate to charity?

There is no one correct giving percentage for all households - it depends on income, wealth, commitments and concerns. Two percent of income is the giving average, but many people (with low or high income) give more. Also, those with massive wealth, and those with few obligations are likely able to afford more. Committed givers may tithe (give 10% of income) to their religious institutions, or give more to causes that they are passionate about.

In the 1980s Independent Sector, a national association of nonprofits and foundations had a campaign to encourage everyone to give 5% of income and to volunteer 5 hours a week. Those are worthy goals.

What advice do you have for choosing the right charity?

Donors should choose charities that pursue a mission they feel is important. They should check out the charities on their websites, and look at reports available on GuideStar, Charity Navigator, and Global Giving websites to see what information the charities provide about who they serve, their finances, and their achievements. Donors can also look at the Forms 990 that charities annually provide to the IRS, available through the IRS, GuideStar and other sites. Organizations should provide information that allows donors to make informed choices.

Do you believe charities should face increased regulations and scrutiny in order to reduce fraud?

I don't believe that there needs to be more regulations, but I do believe that the oversight of charities is not adequate to cover the growth in the number of organizations over the last 20 years. There are currently only 355 full time state employees who oversee charities and the IRS has had its staff and resources cut year after year. To keep the sector strong, there needs to be adequate oversight to answer questions, educate and correct mistakes in addition to eliminating fraud.

Should contributions to charity be fully tax deductible or should there be limits?

There should continue to be tax incentives for charitable giving. Research shows that they are important for encouraging giving, especially for those that itemize their taxes and the wealthy. Research also suggests that there could be floors and/or ceilings that make the incentives efficient in terms of obtaining the most dollars for charity at the least cost to the treasury. In the interest of fairness, there could also be a non-itemizer tax incentive.

Should all non-profits be able to receive tax-deductible contributions regardless of their mission?

As is currently the case, all "charities" with a mission to benefit the public (education, poverty alleviation, arts and culture, youth development, job training, housing, food, health, religion, research, etc.) should be able to receive tax-deductible contributions. Political nonprofits, membership and professional associations, and other non-public serving nonprofits should not be eligible for tax-deductible contributions.

What are the biggest challenges facing US-based charities in the current economic environment?

There are a lot of factors that determine how much Americans give to charity at any given time, but the health of the economy dwarfs all others in its influence. Simply put, the level of giving directly mirrors the health of the economy, and has for as long as we’ve measured giving. So the biggest challenge charities face today is uncertainty over what will happen with our economy in the next few years. But not all Americans are created equal when it comes to how much they can give, of course. Even if those with lower levels of income and wealth give as high a percentage of their money to charity as those at the top, the fact is that those at the top have so much more to give in real dollars – and this gap in income and wealth is growing. So the primary challenge facing charities is not just how the overall American economy is doing, but how the wealthiest Americans are faring in this economy. That is the biggest question for the next few years.

Also, charities need to pay close attention to the philanthropic patterns and preferences of certain types of wealthy individuals, those who are most ascendant in our current economic system. Charities need to look at how hedge funders and tech billionaires and others in boom industries are giving. We’ve seen some recent examples of these newer wealthy donors approaching their giving in new ways, and philanthropic organizations have to respond to these preferences if the economic system will continue to favor these types of potential major donors.

What advice do you have for choosing the right charity?

For everyone considering a donation, I think the first and foremost question they should ask is, “Does the mission of this organization fit my values and my vision for how to make the world better?” At their core, all philanthropic organizations are defined by their mission. This is why they exist. So they should be judged primarily by mission. And donors who are driven by mission first also tend to be bigger and better donors. Once you are sure of this mission fit, though, you can turn to other questions like, “Do I think their strategy for achieving mission is smart and feasible?” or “Do they have good evidence of their effectiveness?” I think the question donors ask too much is “How much of my donation will go to overhead and/or fundraising costs?” It is important to avoid the rare scams that exist out there in the charitable universe, yes. But in nearly every case, overhead or fundraising ratio isn’t a good way to decide which organizations to support. Effective organizations need good staff, adequate resources, and other “overhead” to achieve their missions. In fact, smart donors know it is best to give unrestricted, general operating support, rather than earmarking their contribution for a certain program or budget item.

What are the biggest challenges facing US-based charities in the current economic environment?

The biggest challenges are ongoing challenges, namely that there is always more good work to do, so there is always a need for more financial resources. People are, of course, more skittish when economic times are lean, and the great challenge is that for many organizations, that’s when the need is deepest already. But like a lot of other spaces in our society, economic volatility can make conditions unpredictable. Sometimes that’s because donations can be unpredictable, and sometimes that’s because nonprofit organizations draw heavily from endowment, which is subject to market conditions.

What advice do you have for choosing the right charity? What percentage of income should households donate to charity?

I’m going to combine these questions and answer them together. The first thing I’ll say is that charitable giving is very personal. I advocate, with my students and in my writing, an approach called “mindful, strategic generosity.” Mindfulness comes from a traditional Christian prayer to be made “ever mindful of the needs of others.” This means, to me, a focus on the “why” and the “what” questions: Why do we give? What needs compel us? What do we know about those needs? What do we prioritize? These are deeply personal questions. “Strategy” involves the “how” questions: How do we best achieve the change we want to see? How effective are organizations at fulfilling the missions that compel us to give?

“Generosity” is a virtue, a marker of character that runs much deeper than dollars and cents — and is thus much harder to cultivate. It’s a way of life that is others-oriented and is perhaps what gives us clarity on the very personal “how much?” question.

Do you believe charities should face increased regulations and scrutiny in order to reduce fraud?

The current regulatory structures are sufficient. The reason our voluntary or charitable sector is so vibrant and strong is that it is borne of an American belief in pluralism. We all have different visions of “the good”, and this is the space in our society where we are voluntarily able to pursue it. Over-regulation can seriously diminish innovation and entrepreneurial approaches to achieving good.

Should contributions to charity be fully tax deductible or should there be limits?

As a general statement, there should not be limits on tax deductions. However, I wouldn’t be opposed to a reform of the tax code that established more classifications of charitable organizations, with certain types of those classifications becoming subject to limits on deductions. But under the current code, I am glad there are no limits.

Should all non-profits be able to receive tax-deductible contributions regardless of their mission?

Like a lot of things, there are certainly going to be abuses or major variations from what we traditionally understand to be “charity.” But unless we re-classify, so that certain types of organizations are subject to different rules, I think we ought to continue to maintain a wide latitude in the space in our society that we have designated for voluntary action toward the public good.

What are the biggest challenges facing US-based charities in the current economic environment?

Nonprofit organizations exist in part because there is not a commercially viable alternative. As such, the vast majority of nonprofit business models in the US require an effective subsidy or fundraising arm to ensure the enterprise is financially sustainable over time. While challenges facing US-based charities will vary according to sub sector, I would expect the biggest across the board challenge for leaders of US based charities is maintaining access to consistent sources of unrestricted revenues that will be used to help further the mission of the organization.

What percentage of income should households donate to charity?

Charitable giving at any level is welcomed, so anything better than 0% is good. Many households involve the entire family, including children, in the process of deciding which charity to support. Cultivating the spirit of charitable giving in American households is, in my estimation, equally if not more important than the amount we give.

What advice do you have for choosing the right charity?

People will give to the issues they care about, and should be encouraged to research these areas of interest - peruse the website of organizations you like, review their annual report, go onto Guidestar and have a look at their financial information. Then, I would recommend taking the time to meet the leadership of one or two organizations. Maybe seek out volunteer opportunities with the organization. Bottom line: if you believe in the cause and trust the leadership, the decision to give will be easy. Finally, consider making a multi-year unrestricted commitment to the organization you want to support.

Do you believe charities should face increased regulations and scrutiny in order to reduce fraud?

Nonprofits have an obligation to be transparent and accountable for the resource allocation decisions they make. I would like to see the financial and accounting requirements for nonprofits updated so it is easier for the public to access timely and accurate financial information. Specifically, the way in which nonprofits are currently required to account for restricted funding is counterintuitive and complex, resulting in financial statements that are challenging for the average consumer to easily comprehend.