The Tip of the Iceberg

This is a continuation of a blog that began here.

A friend asked me how much money is in charities’ endowments, and what kind of difference it could make if half of it was used differently.   I did some research and found that the top 286,000 registered charities in the US hold three trillion dollars in assets.   One trillion of that is in the hands of foundations that every year give away $50 billion in grants to other charities.

If philanthropic foundations decided to give away half their trillion dollars in assets through a 20-year generational annuity generating $50 billion a year, and continued to hold the other half in perpetuity and only make grants totaling 5% of that half, then their grantmaking would increase by 50%, to $75 billion, next year. Of course, that would only last for twenty years, unless they went to work asking the next generation to leave some of their wealth to replenish the fund.

Between philanthropic foundations giving away an extra $25 billion a year, and operating foundations making an extra $50 billion a year in investments in their own missions, that’s an increase of $75 billion every year. $75 billion is only 5% of the total $1.6 trillion that charities generate and spend every year … but if you take out the hospitals and universities that bring in most of a trillion dollars of that total revenue in fees and government grants and contracts, and just look at charities that are dependent primarily on donations and the income from bequests (like churches), an additional $25 to $50 billion would be the equivalent of an 8% to 16% increase.8341271744_0199c2ded4_n

But that’s really just the tip of the iceberg. The real crux of this matter is that the total wealth of Americans today is about $58 trillion. Now, half of that is in the hands of 1% of the population, which is fodder for a whole separate conversation. More germane to this discussion, two-thirds of it is in the hands of people aged 55 and older. Last year, Americans who died left behind estates valued at $1.2 trillion dollars, by one conservative estimate. State and federal estate taxes claimed about two percent of that. Another $26 billion — barely two-tenths of one percent — was bequeathed to charities.

That’s where the opportunity lies, I believe. How can charities — and particularly churches, which claim a central role in the lives of many members, see them several times a month, and can be seen as the main conduit through which those members make a difference in the world — start to convince our supporters, and our culture, to start leaving more than .2% of their accumulated wealth to others?

Perhaps more of those kind of gifts would be forthcoming if the impact that they could create was more immediately visible. I don’t have any wild notion that a good communication plan alone could double or triple that number in the next few years; but the capacity is certainly there to do several times that.

Several times more than double or triple $26 billion.  A year.

Perhaps it starts with the vision, and the visible impact, of how that kind of money could change the world.

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About J. Ronald Newlin

Non-profit consultant, museum developer, historian, Episcopalian, blues/punk bassist
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