January 24, 2013
Firm Issues Gloomy 2013 Forecast for Religious Giving
Four takeaways for churches in the midst of projected declines.
A company specializing in computer-based reports and forecasts for charitable giving in the United States says giving to religion rose steadily in 2012 compared to 2011. The religious sector, though, has seen its share of the overall charitable giving market shrink, and a dismal outlook for 2013 likely will erode that share further, the firm says.
The Dallas, Texas-based Atlas of Giving on Tuesday said overall donations to nonprofits across eight sectors climbed 6.7 percent in 2012, fueled by notable gains in educational and environmental causes. The religious sector, which includes churches, synagogues, and faith-based organizations, climbed 4.1 percent.
But early signs point to a decrease in collections for the religious sector in 2013, the only one the company predicts will decline. "It's not good," said Rob Mitchell, chief executive of Atlas of Giving. "We're projecting giving to religion to be down 0.8 percent, or essentially flat-to-trending-slightly-down-from-flat."
Overall charitable giving in 2013 is also expected to weaken, with a modest 1.6-percent increase predicted.
As a percentage of all charitable giving, the religious sector remained tops in 2012, collecting 35.7 percent of the total, Atlas of Giving said. That's down slightly from 36.6 percent in 2011, and down dramatically from 10 years ago, when various data sources showed it captured more than 50 percent. In 2013, the sector's share likely will dip again to 34.9 percent of all charitable giving.
The economy is one reason, Mitchell said. Changing attitudes toward worship attendance and religious affiliation, especially among younger people, is another, he added.
Atlas of Giving defines the religious sector to include all types of faith communities and faith-based organizations, but Mitchell said the report is still instructive for niches, such as evangelical churches. While Atlas of Giving doesn't tabulate specific giving data or survey any representative organizations from the eight sectors, it instead creates proprietary computer algorithms for each of the sectors using a wide range of economic factors and demographics that it deems most relevant.
The company says its one-month projections have been 99.99 percent accurate, while six-month projections have been 98.9 percent accurate and twelve-month projections have been 97.5 percent accurate.
Mitchell won't disclose all of the metrics that Atlas of Giving uses for the religious sector, but unemployment rates and gross domestic product (GDP) are among the economic indicators included, he said. All churches and faith-based groups should note what the computer models suggest for the year ahead, he said.
"Unemployment has had a huge impact the last three years, specifically on gifts to religion," Mitchell said, mainly because most congregations depend on a large number of donors who make numerous gifts of small amounts throughout the year. Those who have lost their jobs aren't able to give as much, and those who find new employment require time to pay off debts they accumulated during their search for work, he added.
Other reports, studies, and surveys in recent years have shown steady signs of improvement for giving to churches and religious organizations, even in the midst of high unemployment and tepid economic growth. The 2012 State of the Plate, a constituency survey of 1,360 Protestant pastors and church leaders co-sponsored by ManagingYourChurch.com's publisher, Christianity Today, showed 51 percent experienced giving increases in 2011, up from 43 percent the prior year. Among those who indicated gains, 20 percent said giving grew from 1 percent to 4 percent, 20 percent said it increased from 5 percent to 10 percent, and 12 percent said it jumped 10 percent or more.
The Evangelical Council for Financial Accountability, also a co-sponsor of the State of the Plate survey, released a separate report in December 2012 that showed giving in 2011 increased 1.7 percent for its accredited members, which include a small segment of large-sized churches.
Mitchell said he expects a much different story in 2013 as economic uncertainty in the United States and abroad weighs down the stock market and GDP sputters. The Kiplinger Letter, one respected financial publication, expects minimal GDP growth in early 2013, with a slight surge in the second half helping it finish up 2 percent for the year.
Consumer confidence is also showing signs of weakness, Mitchell said, and discretionary income has tightened for millions of Americans after the December 31, 2012, expiration of the "payroll tax holiday" that gave workers an extra 2 percent per paycheck the past two years.
What should churches make of Atlas of Giving's report? Here are four immediate takeaways:
1. Prepare again for rainy days. Whether Atlas of Giving's report proves accurate or not for 2013, the lessons of the Great Recession, and the possibility of more economic choppy waters ahead, are simple reminders of what churches should do to prepare for decreased giving. In a recent guest piece for Church Executive magazine, Dan Mikes, the national manager of Bank of the West's religious institution banking division, urged churches thinking of potential future expansion to first "stabilize their net cash flow and re-establish their operating reserves."
"Many churches were slow to make tough expenditure reduction decisions during the downturn," Mikes continued, "allowing cash reserves to dwindle to uncomfortably low levels."
Each church must decide for itself what amount of cash reserves is enough. Our Essential Guide to Church Finances provides a cash reserve ratio that divides the amount of cash a church has by twelve to "show the number of months of cash on hand as related to expenses." Usually, the goal is to possess at least three months' worth.
The Evangelical Christian Credit Union also provides a white paper on cash reserves, with a three-pronged review of cash flow fluctuation, unplanned events, and potential opportunities.
Now is a smart time for churches to review the state of their reserves.
2. Be conscientious about your budget forecasting, especially during these next six months. With GDP potentially slowing to a crawl until mid-year, and the payroll tax holiday gone, general economic stagnation is possible. People will run their household budgets differently, and it's possible some will scale back what they give. Think through your church's expenses and scrutinize the figures you projected for the next six months. You may want to take a more conservative position—and you may want to prepare your pastor and leadership team for that possibility in case the actual numbers begin to bear this out.
Longer term, our Essential Guide to Church Finances recommends churches adopt a program budgeting method. If your church continues to use an incremental budgeting method, which simply takes the current budget and makes it the basis for the next one, tweaking items here and there for anticipated cost or activity changes, then take some time now to begin thinking about using a program budgeting method. Program budgeting requires much more time, energy, and investigation. But it "operates on the premise that programs are run to achieve certain purposes, and by clearly establishing these purposes the church can improve both the use of its resources and the effectiveness of its programs." When tough times hit, this homework can make a significant difference in terms of demonstrating why funds are needed in specific places.
3. How you spend reflects who you are. The program budgeting method mentioned above provides another benefit: It forces your church to more specifically define who you are by how you spend. What has God called you to do in your congregation? In your community? And does your budget faithfully reflect those callings?
These are significant questions. And if the religion sector's share of overall charitable giving continues to shrink, it shows the continued competitive nature for donor dollars. If your church isn't demonstrating compelling reasons for why people should give, other organizations will. A number of smart, qualified people throughout the church world have written extensively about the power of storytelling and how it affects the ways that people give, so I won't go into great detail here. But remember, how you spend reflects who you think God has called you to be. The more you can share the stories of life change and community change directly affected by your church's program and budget priorities, the better.
One final thought: The continued surge in discussion and interest about "missional" churches matters here. As our colleagues at ChristianityToday.com pointed out, ECFA's State of Giving report released in December 2012 showed significant gains in giving to paraministry organizations involved with short-term missions, adoption agencies, pregnancy resource centers, and orphan care. People want to give to causes they care about. What cause (or causes) does your church care about—and do your people know?
4. Generosity is taught and lived. The final thought is the most important of all. How does God invite each of us to give to His work? Our resources of time, talent, and money are all His. So how do we generously give of them as an act of faith and worship? Churches have an opportunity to tell, to teach, and to show what generosity looks like inside and outside the building. Is the pastor teaching on the subject? Is the church providing resources and classes on personal finance and biblical perspectives on money management? Does the pastor and key staff and lay leaders actively give? Is the church finding ways to help people of all means to give sacrificially?
“Our national State of the Plate church giving research the past four years shows half the churches we have surveyed have seen giving flat line or decline," said Brian Kluth, founder of Maximum Generosity and the State of the Plate survey. "Churches that are seeing giving go up in a down economy are the ones that are finding helpful ways to teach people Biblical financial and generosity principles. For people of faith, giving is not just a matter of having some loose money in their hands, but about having a firm conviction in their heart.”
For more help on this subject, Church Finance Today offers Increase Giving at Church, a downloadable training resource for church leaders.