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Donations down:  Charitable donations have seen a decline since a 2017 tax reform known as Tax Cuts and Jobs Act went into effect.

Charitable giving has seen a sharp decline since the 2017 GOP tax reform, called the Tax Cuts and Jobs Act (TCJA), went into effect. The TCJA increased the standard deduction and eliminated personal exemptions, making it less beneficial to itemize deductions like charitable donations. Losing the tax incentive to give charitably, not only from the increased standard deduction but also from a doubled indexed estate tax exemption (people no longer need to write charitable contributions into their will to reduce the estate tax paid), led to fears in 2018 that nonprofits and religious organizations would see fewer charitable contributions. This year, that fear has been realized.

In 2018, according to numbers from a report by the Association of Fundraising Professionals’ Fundraising Effectiveness Project (FEP), the total number of donors dropped 6.3% in the first quarter compared to the same quarter the year before. There was a 12% drop in new donors and a total revenue decline of 2.4%. Those numbers did not improve in 2019-- the total number of donors dropped another 5.7% in the first quarter of 2019 and overall revenue dropped another 2.2%. Numbers have only gotten worse since then with the most recent report from the FEP looking at the first half of 2019 stating that overall revenue from charitable gifts is down 7.3% and donor numbers are down 5.8%.

Fergus Falls, which is home to 232 registered tax exempt organizations, is seeing similar declines in charitable giving. Four nonprofits (A Center for the Arts, the YMCA, the Otter Tail County Historical Society and Kaddatz Galleries) report being down over $200,000 between them in contributions this year compared to last year. “Speaking with the rest of the nonprofits, I think that everyone is a little concerned about it,” says Eric Price, executive director of the YMCA.

Although Price has only been executive director for a little over a year, he says he has noticed that donations this season seem lower than years prior and that they’ll have to adjust their budget to reflect what they expect to receive next year. “We try and make sure that we balance part of our budget with this idea of community giving and helping us do what we do. When you’re noticing a trend that maybe there’s not as many gifts or maybe some of the gifts have been scaled back some, then you have to make that adjustment for next year,” he says, though he didn’t specifically identify any cuts they might have to make.

Chris Schuelke, executive director of the OTCHS, doesn’t think he’ll have to make cuts to programming or staff, but their facility needs upgrades and he’s worried that won’t be possible. He says, “That has me worried because it’s going to be a big campaign, so the constant worry is, can we get this accomplished? And we’re in the process right now of determining what, where and how this is going to work.”

A Center for the Arts will be making significant budget changes next year, including possibly cutting their large summer musical and scaling back Concerts in the Park from 10 in previous years to six, three of which will be held in downtown. “If this trend continues, next summer we are not going to be doing a large community musical. We will do the children’s musical, but this year, it is such a tight margin that we can no longer take the chance,” says executive director Michael Burgraff.

“This is the first drastic year. We have, over the last couple of years, very slowly crept up to our previous giving levels, but we haven’t been down, we haven’t been up at all but we haven’t been down to any significance. This year we are seeing [a loss of] tens of thousands of dollars,” Burgraff says. “And on top of that, we’re here trying to raise money for the roof.” The roof of A Center for the Arts is leaking water, soaking their rafters and dripping down into its offices and soaking into the carpets. They’ve raised the money to help replace it, but not enough to check the rafters and clean up the damage its caused. Furthermore, it means money they’re raising is going to the roof and not to programming.

“We are absolutely making a concerted effort to keep things buttoned up as tight as we can and when we’re not doing shows here, we are turning the theater area down to very cold,” says Burgraff. “I don’t mind the cold that much, but when I came into work this morning I spent the first hour here in my jacket because the heat hadn’t kicked in yet. And water rains in my office. It’s an interesting condition. What can you ask employees to work through?”

This isn’t to say that any of the organizations are at risk of closing, but that the community might be losing access to valuable programs. Burgraff, Price and Schuelke all wonder if maybe it’s an issue of awareness, that they aren’t doing enough to educate the community about what they offer. “We’ve been here for a while and we’ve done our best to continuously help the community and I think that, hopefully that’s something that we’re able to communicate a little bit better,” says Price. “I think the awareness part of it is a part that is the most concerning for us, letting the community know that we have new organizations and long-term organizations that are sitting here providing services for everyone in the community and making sure that we recognize what we have as a community in Fergus Falls.”

Schuelke agrees. “We’re down a little bit in our membership, there’s no question,” he says. “But I don’t want to say that it’s that people aren’t interested, maybe part of the issue is that we’re not getting the word out about it. We have to also take responsibility for ourselves and letting people know our story.”

In addition to the new tax code, members of the FEP worry that a slowing economy and continuing talks of a recession may lead to even greater drops in charitable giving. This is on top of the fact that, according to the National Council of Nonprofits, half of all nonprofit groups don’t have the resources to meet the demand for their services. Bills have been introduced in the House and Senate that seek to allow people to deduct their charitable donations even if they choose the standardized deduction but nothing has come to fruition.

The Association of Fundraising Professionals’ vice president of communication, Michael Nilsen, said in a USA Today article that he believes this serves as a signal that people are less connected to their communities. Price, Schuelke and Burgraff hope to turn that around, as they said, by bringing more awareness and education to the community about the services they provide. How they will accomplish that outreach with an ever decreasing budget, though, remains to be seen.

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