Giving May Be Up Nationally, But It's Down in This Wealthy Region. Why Is That?

Charitable giving may be up nationally, according to new data released this week, but it's a different story in Southern California.

The ground is shaking beneath 35,000-plus charities based in Los Angeles County, and it’s not because of the San Andreas Fault this time. Angelenos are giving $1 billion less per year—almost all of it locally—which is perplexing because they claim to care about solving the problems in their communities.

The disconnect sets up a new published report, “The Generosity Gap: Donating Less in Post-Recession Los Angeles County,” from UCLA’s Luskin School of Public Affairs. A billion dollars in funding for social services and the arts has vanished, and there is "evidence that historical patterns of local generosity are changing, and not for the better.”

We were pretty surprised by these findings. Just last year, we wrote a piece about the booming philanthropy scene in Los Angeles, which has been boosted by the emergence of various new funders in recent years.

As it turns out, though, what a bunch of rich people are up to is less important than the giving habits of ordinary citizens writ large. Read on.

The study for the California Community Foundation compared tax years 2006 and 2013, using IRS returns filed by county residents. Angelenos had donated more than $7 billion in the year before the Great Recession, much of it to community-based charities and causes. Then, boom!

The region’s housing market got slammed by the tsunami of 2008, wiping away those good vibrations. Many Southern Californians are living in a state of post-traumatic shock, having lost homes, jobs, wealth and their sense of security.

The UCLA researchers expanded on earlier work that identified L.A. giving patterns by zip codes. Among its findings: People in the lower-income South Los Angeles are bigger donors than the dudes living near the beaches. Church and synagogue attendance is higher on the Westside and in South-Central, where the givers are. Those who regularly attend religious services give a larger percentage of their incomes.

Another finding: The big money given by Angelenos often goes to causes outside the region. Most of the major gifts of $1 million-plus flow outside Los Angeles County, while “only giving to higher education largely benefits local organizations.” We're talking about such institutions as USC, UCLA, Pepperdine and Loyola Marymount.

Here is where the disconnect starts between what Angelenos say and do with their contributions. The report states: “Given the opportunity to make a large gift to Los Angeles, donors’ highest priority would be ending homelessness. But of their contributions to basic needs causes and combined-purpose organizations in 2015, only one-third went to locally focused nonprofits.”

Money leaves and the problems remain, creating a wealth-and-services divide that’s widening.

Nonprofits and funders who read this report are going to ask, “Why hasn’t giving recovered if the economy is improving?" Bill Parent who directed the UCLA Luskin study acknowledged that the IRS data doesn't answer the question, so he gave it a try.

“We’re all sitting here looking at the ceiling," Parent said, but then went on to dig into possible explanations, starting with something that candidate Bill Clinton famously said. “It’s the economy, stupid.”

Households have lower incomes than in 2006, and they're giving less. The connection seems plausible. The post-traumatic shock of the 2008 housing crisis is deeper than people think, and Parent sees it reaching into the ranks of the high-earners who make six figures from good-paying jobs. They lack job security, so they pull back on making donations to create a teeter-totter effect—as the funding goes down, community-based need goes up.

There’s another possible explanation—immigration. It takes a generation before newcomers to the United States become givers, maybe 20 years, and Southern California has a huge immigrant population from Mexico, Central America, and Asia. In time, maybe they’ll contribute.

The report isn’t all data, doom and gloom. Fixing the hole in the L.A. County’s charitable and nonprofit safety net is doable, the reports suggests. It’ll take more outside funding, some merger and contraction within the nonprofit community, better marketing to avoid donor fatigue in choosing a local cause to support, and being ready for the largest wealth transfer in U.S. history. Oh, and just a bit more giving by everyone could make a huge difference, according to the report: "If Angelenos gave 2.5% of their annual income—with the extra 0.5% going to Los Angeles—Los Angeles County nonprofits could see an additional $1.5 billion in revenue."

One last thought: A little more religion in this famously hedonistic city would help, too. As the report states, "religious congregations received the highest proportion of locally focused giving.”