Government Funding Reduces Philanthropy

An obvious conclusion—I’m already donating through my taxes—which this study seems to support, that nonprofits who are supported largely by government funds receive less in private philanthropy, as reported by the Neiman Journalism Lab.

An excerpt.

“At a time when some Americans are talking about increasing government support for journalism, here’s an interesting new study that adds a useful data point to the discussion: When governments provide financial support to nonprofit organizations, 73 percent of the extra money is counterbalanced by a decline in support from private donors. In other words, the value of government money received is decreased by a reduction in funds from elsewhere.

“The paper is by Jim Andreoni of UC San Diego and A. Abigail Payne of Canada’s McMaster University, and it examines over 8,000 nonprofit organizations. The idea that government funding reduces private giving is not new, but this paper attempts to figure out why — and how — the trade-off occurs. Is it because private donors think that government grants eliminate their own need to give — the idea that they “already gave at the office” through their tax dollars? Or is it because getting government money causes nonprofits to relax, to reduce how aggressively they pursue outside money through fundraising?

“Andreoni and Payne come down squarely on the side of the latter — it’s primarily nonprofits’ own reduction of their own fundraising efforts that lead to less outside support, not any change of heart by donors. When the government gives, nonprofits take that as an opportunity to cut back on fundraising, even though fundraising is highly cost-effective; the paper finds an average $5 return in gifts for every $1 spent on raising money. Reducing fundraising may save some cash in the short term, but it doesn’t appear to be a smart strategy.”