Green Giving: Factors Influencing Donations to U.S. Environmental Groups

Jerrell Richer

Does the election of a Democratic president result in reduced giving to environmental organizations? Do people donate more to organizations that purchase threatened habitat than they do to groups that lobby for new legislation? If government funding for environmental organizations is cut back, will private giving increase to make up the difference?

People typically seek answers to questions like these by examining the only evidence we have, past experience. Too often we limit our search to the study of a few isolated events. Unfortunately, answers that rest on anecdotal evidence cannot be applied with much confidence in other situations. For example, total donations for environmental and wildlife causes declined somewhat in 1993 after rising for each of the previous three years—coinciding with the inauguration of President Clinton. Perhaps donors perceived less need to contribute money to advocacy groups after the election of a candidate who promised greater efforts to protect the environment. But how do we know that the drop in donations was not due instead to some other factor, such as uncertain economic conditions or changes in the fundraising efforts of the environmental organizations themselves? Sorting out these questions requires a systematic study of giving to many organizations across a span of years.

I spent much of the past year collecting and analyzing data from twenty-nine major environmental organizations for the period 1980 to 1994. I collected information on donations and on the factors thought to influence them, and I used statistical techniques to analyze how each factor influenced giving to a typical environmental organization in a typical year, holding other factors constant. The results are informative and, in some ways, surprising.

For example, I find that government funding for activities of an environmental organization does not appear to "crowd out" individual contributions to the group. In fact, environmental groups that received greater government funding tended to attract more, not less, private support. To illustrate: each dollar of government grants to a typical environmental group was associated with roughly an additional two dollars in voluntary contributions, on average, assuming that nothing else changed. This suggests that any cut in public funding to these organizations may not be replaced by private giving, as one might expect.

Groups that receive greater federal funding tend to attract more, not less, private support. This suggests that any cut in such public funding may not be replaced by private giving.

Further, current economic conditions and the political climate also play a significant role in determining how much people give to environmental groups. For the average organization in the sample, an increase of a single percentage point in the unemployment rate brought about a reduction in annual contributions of nearly a million dollars. On the other hand, having a Republican president in office in a particular year was associated with a million-and-a-half dollar increase in contributions to the average organization.

These and other results are presented in the final section of this article. First, though, I describe the sources of the data as well as the methods I used in my analysis.

The roots of green giving: Designing the study

The purpose of the study was to examine how contributions to a typical environmental group were affected by the characteristics of the group. The data for the study came from the tax records of twenty-nine of the largest environmental organizations in the United States (see sidebar on page 4). I asked the groups to supply copies of their annual tax returns, beginning with the most recently available fiscal year and extending back as many years as possible. Their cooperation was both cheerful and essential to my project.

The completed tax returns list the organizations' revenues by source. For the purposes of the study, total donations were defined as the sum of direct and indirect public support, membership dues, and special-events revenue. Direct public support consists of contributions, gifts, grants, and bequests received directly from individuals, trusts, corporations, estates, and foundations. Indirect public support refers to contributions generated through solicitation campaigns conducted by federated fundraising agencies or similar organizations, such as the Combined Federal Campaign or the United Way. Membership dues and special-events revenue include the payment for certain services provided by the groups, such as magazine subscriptions and fundraising banquets.

I also estimated the influence on donations of various economic and political conditions, factors that are beyond the groups' control. I considered how each factor affects donations to the typical group using multivariate (regression) analysis. This statistical technique provides an estimate of the dollar change in donations caused by a change in each one of the factors.

First, I tested whether donors seem responsive to the "price" of making a contribution by considering the net cost, to the donor, of "purchasing" one dollar's worth of program services. This effective price depends on how much each organization spends on nonprogrammatic activities—such as the proportion of total expenditures devoted to fundraising and management. Also, if donations to the organization are tax deductible, the effective price depends (negatively) on the marginal tax rate for personal income. So, for instance, if an organization spends fifty cents on administration and fundraising for each dollar it spends on programs, the effective price of a contribution to it would be $1.50.

Though fundraising may reduce contributions from some donors, it may also increase contributions by publicizing the organization and its specific programs.

Next, I examined the influence of government grants on donations to the individual organizations. Information on this source of revenue, as well the proportion of spending used for fundraising and management, typically is made available to donors in the following year when annual reports and financial statements are released. Therefore, I used the lagged (last year's) value for this variable when estimating its effect on donations.

Though fundraising activities may reduce contributions from some donors by diverting money away from programmatic activities, they may also increase contributions by publicizing the organization and its specific programs. Total fundraising expenditures for the current year were included in the study to estimate the effectiveness of these marketing activities. Similarly, older organizations may receive more contributions due to greater name recognition or credibility, so I also examined the effect of an organization's age on the amount of donations it receives.

In my background research, I observed that environmental organizations tend to differentiate themselves considerably with respect to the activities they pursue to achieve their goals. I examined whether engaging in any one of these activities seemed to have a systematic effect on donations to those particular groups. The activities I considered included lobbying, litigation, land/habitat acquisition, and such direct actions as boycotts and demonstrations. Lobbying expenditures, as reported in the tax forms, were used to determine whether groups engage in this particular activity, while information on the other activities came from the 1992–93 edition of Public Interest Profiles, published by Congressional Quarterly.

Last, I used the widely publicized U.S. unemployment rate to represent economic conditions in a particular year and the party affiliation of the U.S. president to help account for the political climate.

Identifying the influences on donations: Analytical results

The results of my statistical analysis are summarized in the table (see page 5). It shows the effects of each organizational characteristic on contributions to the average group in the sample.

An increase in the effective price—the total amount a donor must give in order to get one dollar's worth of program services—has a negative though minor effect on contributions. For the average organization in the average year, a one-cent increase in price is associated with a $50,000 drop in contributions, assuming nothing else changes. (All figures are measured in 1994 dollars.) This suggests that donors do give less to organizations that devote a high proportion of their funding to nonprogrammatic activities, such as administrative expenses.

The influence of organizational, economic, and political variables on voluntary donations to the average environmental organization (1980-1994)

On the other hand, organizations that receive more support from government agencies have tended to receive greater private support as well. Each $1.00 increase in government grants is associated with $2.31 in additional private contributions for the average organization in the average year. Perhaps donors consider government grants an indicator of an organization's quality and give more to groups that have been "certified" in this sense. The positive impact of government grants on contributions, however, tends to diminish as the level of public-sector support increases. This implies an eventual limit to the effectiveness of government grants in attracting additional voluntary contributions.

Fundraising efforts seem to pay off substantially for the organizations in the sample. Each $1.00 increase in fundraising expenditures is associated with more than $4.00 in additional contributions for the average organization. Again, however, this large and positive effect tends to diminish as fundraising efforts increase. Beyond some point, additional fundraising actually can reduce contributions. Similarly, an increase in an organization's age is associated with greater contributions. Since age is not controllable by an organization, however, this factor must be considered as an item of interest that is of little practical importance.

Only one of the activities by the organizations was associated with a statistically significant change in contributions. During the time period of the study, organizations that pursued land and habitat acquisition tended to receive about $3 million more in contributions than groups that did not, other things being equal.

Far from proving a given theory, these results merely lend support to particular hypotheses about charitable giving, such as the idea that donors are more motivated to contribute to environmental groups when a Republican is in the White House.

Last, I find clear evidence that contributions in a given year depend on economic and political conditions in addition to the actions of the organizations themselves. Specifically, an increase of 1 percent in the unemployment rate was associated with a drop in annual donations to the average organization of more than $800,000, or about 6 percent. On the other hand, holding other things constant, contributions were higher during years when the president was Republican. The increase in annual donations during those years was $1.5 million for the typical organization, an 11 percent change.

Care should taken when drawing implications from these results. First, the results do not prove that presidential party affiliation, or any of the other factors examined here, has a particular impact on contributions to environmental organizations. Rather, the results presented here merely lend support to particular hypotheses regarding charitable giving, such as the idea that donors are more highly motivated to contribute to environmental groups when a Republican is in the White House. Further research to illuminate these issues will offer new evidence to refute or further support these hypotheses.

Second, my findings are based on donor behavior over the past decade and a half. Engaging in land and habitat acquisition appeared to increase donations substantially for environmental organizations during this period, but there is no guarantee that this pattern will continue. Similarly, the sensitivity of future donors to economic and political conditions may differ from that of the recent past.

Experience is, however, probably the best guide we have to tomorrow, and this line of research offers insights that can help inform better decisions and policies in the years to come. Environmental organizations are likely to continue to find that higher administrative costs tend to reduce donations, while additional fundraising efforts encourage them. Groups that specialize in the acquisition of habitat may inspire greater support than organizations that only lobby or litigate. Threats to environmental quality will almost certainly continue to motivate greater contributions, though the threats that donors perceive as imminent may change. Finally, past experience indicates that future cuts made to government funding of the organizations' programs may not be made up in private gifts.

Jerrell Richer, a 1994–95 Gilbert White fellow at RFF while he conducted the research summarized in this article, teaches economics at California State University–San Bernardino. His research is described in detail in RFF discussion paper 95–39, "Green Giving: An Analysis of Contributions to Major U.S. Environmental Groups."

A version of this article appeared in print in the October 1995 issue of Resources magazine.

A version of this article appeared in print in the October 1995 issue of Resources magazine.

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