Is Everything Really So Underfunded? Or Are We Relying on Bad Data?

jokerpro/shutterstock

It’s a theme that comes up time and again in our coverage of philanthropic giving. Across a wide range of issues, funders are devoting a vanishingly small percentage of their yearly outlay to some pretty important categories of work and categories of recipient. Underfunding is rampant — say, for climate justice, estimated to receive under 5% of total philanthropic funding for climate change mitigation, or for organizations led by and serving women of color, which a 2020 Ms. Foundation report found were getting a paltry 0.5% of annual foundation funding.

Similarly measly percentages apply when it comes to LGBTQ funding, AAPI funding, funding for Black liberation, funding for reproductive rights, funding for rural areas — the list goes on. This isn’t news. In fact, a good portion of our coverage here at Inside Philanthropy tends to include one or more quantitative references to how little funding is coming down the line on specific issues or for specific groups. And elsewhere, statistics on underfunding — and measly sounding percentages — are a staple of commentary on where philanthropy is dropping the ball.

I’m of two minds when it comes to the ubiquity of the “underfunding” theme in nonprofit discourse. On one hand, there’s undeniable truth to the fact that philanthropy is shortchanging a lot of causes. After years of unfettered wealth accumulation at the top, there’s plenty of potential philanthropic money sloshing around out there. At the same time, some high-impact grantees, like climate justice groups and organizations by and for women of color, are too often overlooked in favor of larger NGOs that tend to be run by and often serve more privileged segments of society.

Top-level tallies like Giving USA’s annual report lay that out in no uncertain terms. Last year, for instance, contributions for “religion” made up a massive 27% of total charitable gifts in the U.S., followed by gifts for education (14%), human services (13%) and foundations (13%). “Public-society benefit,” a catch-all category that includes but isn’t limited to giving for policy advocacy, got 11%, while categories like “arts, culture and humanities” and “environment and animals” hovered in the single digits. So part of the problem here is that a large portion of charitable giving routinely goes to some pretty, um, vanilla causes. 

At the same time, while white-male-led “eds and meds” (maybe churches should be in there as well) certainly get the large majority of philanthropic funding, the idea that organizations outside that domain are going nearly un-resourced may also be a bit misleading. Though they’re compiled in good faith, stats on underfunding tend to suffer from the nonprofit sector’s overall lackluster status quo on data and transparency. Any numbers we do have on philanthropic priorities are inherently incomplete, cobbled together from surveys and, where possible, 990s. That makes it easy for advocates with a variety of agendas to cherry-pick the percentages that best bolster their case. And again, philanthropy media are absolutely guilty of this too, as shaky or partial data is usually the only data we have to go on.

Is that a problem? If the goal is simply to convince grantmakers to devote more resources to causes that need more backing, then maybe not. But if we’re looking for a more complete picture of how philanthropy is impacting American society, perhaps all these “underfunding” statistics could do with more interrogation. At the very least, they point to a need for more thorough transparency requirements in a sector where traditional grantmaking now coexists with a growing universe of murky advocacy spending and untraceable streams of charitable giving. 

Part of the difficulty with quantifying the amount by which grantmakers are underfunding a particular cause, if at all, comes from the fallible — though formidable — source for many of these statistics: Candid. As pretty much the only game in town when it comes to determining how much money funders are devoting to specific causes, Candid plays a vital role in the sector’s information landscape. The people at Candid have a difficult job and take their mission seriously. But their data isn’t perfect. For example, in our recent coverage of how so-called “crisis pregnancy centers” can mislead patients looking for abortion care, my colleague Dawn Wolfe discussed how Candid’s Foundation Directory Online had difficulty parsing funding for the centers, which are frequently backed by anti-abortion grantmakers.

That’s just one example. And even as new streams of funding from MacKenzie Scott and elsewhere bode well for Candid’s capabilities, that’ll do little to counteract the vast array of nonprofit funding data that is simply inaccessible to Candid or anyone else, especially in real time. Through no fault of Candid’s, the data provider’s records are often several years out of date. In this era of digital-age immediacy, the lackadaisical timeframe of 990 reporting is frustrating. So is the fact that pass-through funding, including via DAFs, as well as non-501(c)(3) nonprofit funding, is subject to so few transparency requirements and thereby doesn’t make it into many of Candid’s tallies. As we pointed out in a recent post on what scares us most about philanthropy, it is increasingly concerning that what we know about the sector is merely the tip of an iceberg floating in very dark waters.

Add to that a growing embrace of general support and the tendency of nonprofits’ programs and constituencies to overlap, and we’re left to wonder how accurate all these “underfunding” statistics can ever be.

Maybe it doesn’t matter. If mentioning a vanishingly low percentage in connection with a cause that needs more support is what convinces a donor to give, perhaps that’s all to the good. But to those of us who come across those stats almost every day, it can all start feeling a bit foggy and artificial. And more importantly, it starts to feel as though we truly do not know how funding is being prioritized and divvied up among many pressing causes. That is especially concerning in a country that has outsourced so much of the public good to the whims of private donors. If, say, these issues were better funded by a more robust public sector, we’d have a much clearer picture of what resources are going to which needs, and whether those amounts are sufficient. For all of the pluralism that philanthropy enables, it also creates a patchwork quilt of funding that’s difficult to fully grasp. 

Not long ago, I wrote about philanthropy’s misleading scarcity mindset — this idea, promulgated and endorsed by many funders and sector organizations, that nonprofit funding is a zero-sum game. Although it’s understandable that grantseekers would feel that way, given the constraints they’re often obliged to work under, the reality is that philanthropy isn’t actually a zero-sum game. Compared to a half-century ago, the number of super-wealthy entities in the U.S. — living donors or otherwise — has skyrocketed. The money is there. I just worry that philanthropy watchers are ill-equipped to monitor the new ways it’s flowing.

We’re in an era in which murky conservative mega-gifts like Barre Seid’s $1.6 billion commitment to a high-powered new right-wing 501(c)(4) can coexist with ongoing conservative complaints about their lack of resources next to left-leaning nonprofits — even as those same progressive nonprofits claim underfunding while opaque progressive pass-throughs and DAF war chests continue to swell.

While I don’t doubt that causes like climate justice or grassroots democracy activism aren’t getting what they deserve, it would be nice to see a regulatory and transparency regime that actually allowed us to get a handle on the real numbers, rather than having to rely on what are often cherry-picked statistics from interested parties.