Impact of a recession on giving hard to predict

What impact would a serious recession have on alumni contributions to Skidmore?
 
No one can say for sure, but a close look at the last recession, which lasted from 1999 through 2002 and took down many "dot-com" startups, may be instructive. Aggregate household wealth declined by 15 to 20 percent—the largest and deepest downturn in wealth since the 1930s—but household donations decreased only by about ten percent, according to a recent study by John J. Havens, a wealth researcher at Boston College.

After a small initial dip in 1999, Skidmore actually saw an increase in contributions to the Annual Fund in 2000 and 2001. Participation increased from 40 percent in 1999 to 42 percent in 2000 and 44 percent in 2001.

"That was a reflection both of the increased attention we devoted to the Annual Fund and to the remarkable manner in which our alumni responded to our calls," said Michael Casey, vice president for advancement. "We need that same kind of response now."

According to Havens' study, signs of the current recession began to appear in the fourth quarter of 2007 with a decline in the net wealth of households. Based on the previous recession, he predicts a lag of up to a year before donations decline, in part because most high-net-worth donors plan their charitable contributions a year in advance.
 
One provision of the recent "bailout" bill actually makes one form of giving significantly more attractive by reinstating the popular "IRA charitable rollover" provision through the end of 2009, said Donald Blunk, director of gift planning. "Donors who are at least 70½ years of age may give up to $100,000 per year directly from their IRA to a charitable organization without paying income tax on that IRA withdrawal. Moreover, their IRA mandatory distributions may be used for the charitable rollover." [Details]
 
In a highly unpredictable investment market, charitable gift annuity rates also look very attractive, Blunk added. "They provide the sort of fixed, secure lifetime income that many mature individuals are looking for right now." An alumna in the Class of '43, he noted, is in the process of transferring low-yield bonds to a Skidmore annuity that will pay her 9.5 percent income for life. [Details]

Contributions to the Annual Fund go directly to the college's operating budget. "They're particularly important in a recessionary period because most of these gifts go directly to supporting key elements of our budget, including financial aid and compensation, both of which could come under considerable pressure."

Last year, the Annual Fund contributed more than $6.4 million to the college's annual operating budget. This year's goal is $6.7 million.