What donors need to know before they make a gift
We can unknowingly reduce the value of our gifts when inflation occurs, because our dollars are worth less.
Inflation has returned to the U.S. economy, and according to the Chronicle of Philanthropy, (March 14, 2022) this means trouble for America’s nonprofits. Inflation amounted to 7.9 percent over the past year — the fastest year-over-year pace since 1982 — according to a report released in March by the Bureau of Labor Statistics (BLS). The report found that price increases have continued to accelerate and projects costs will not be going down any time soon.
Now consider how Russia’s invasion of Ukraine continues to drive up energy costs. Perhaps even more important, though, is that housing costs are rising, according to the BLS data. Energy prices are often volatile, but increases in housing costs tend to last.
According to Gregory R. Witkowski, a senior lecturer in the nonprofit management program at Columbia University and an affiliate faculty member of the National Center on Disaster Preparedness, inflation reduces the value of money. But some economists argue that most people don’t see it that way. According to the economic theory of the “money illusion,” people think about prices rising when in fact the purchasing power of each dollar is declining.
Consider the impact on philanthropy. We can unknowingly reduce the value of our gifts when inflation occurs, because our dollars are worth less.
The danger of the money illusion is not that donors want to give less; it is that they are inadvertently giving less because they don’t recognize the decreasing purchasing power of their donations. If donors are used to giving a set amount — say, $100 or $1,000 — they will continue to give at the same level even though that decision means nonprofits are not benefiting as much as they did from the same size gift before inflation began its rise. Donors will effectively be giving less without making a conscious decision to reduce their gifts’ size.
Even before today’s record inflation numbers and the conflict in Ukraine, COVID-19 had devastated mental health in our communities. Given the dramatic increase in the need for support, ITA has been challenged with generating the resources we need in order to continue to serve everyone who needs our help. The mental healthcare staffing crisis has encouraged ITA to reimagine staff retention plans to maximize capacity. Yet, the past year has represented a time of growth and transformation. Since 2019, ITA’s therapist staff roster has grown by 58%–from 12 to 19 therapists. ITA strives to meet growing needs by adapting operations with optimism and resilience—hiring more therapists and dramatically increasing the funds allocated to our financial aid program.
We are dramatically expanding the financial aid that is available to clients this year, and we are projected to allocate more than $155,000 toward or sliding fee scale. This is an increase from the $120,000 spent last year, and more than ever before.
We would not assume that our donors are used to adjusting for inflation because many have not experienced such a significant rise in inflation in their adulthood. As a friend to ITA, be assured that our financial health is strong. We work under the fiscal and governance oversight of a tremendous board of directors, and we make every dollar coming into the organization count. But we would be remiss if we did not share with you exactly how inflation is challenging us, along with non-profits everywhere.
If you’re wondering how you can help, the answer is simple. If you’re connected to ITA as a donor, stay connected. Give what you can by renewing your support, and if you can, consider giving even a little bit more to help us succeed in our mission even throughout this tumultuous time. If you’re not yet connected as a donor, we ask for you to please consider starting now with a gift at any level by clicking on www.itachicago.org/give.