Have the Stimulus Payments enacted by Congress been a windfall for nonprofits?

We were recently reading this article on MarketWatch about the number of people who gave away their Stimulus checks and thought we’d put together our own analysis with a little bit of a different spin.

In this post, we’ll give you a brief overview of the individual giving historical trends, look at trends in attitudes towards spending vs. saving these funds, and put some context around how much cash could hit your organization’s bottom line. Hopefully this will aid your nonprofit in deciding whether or not to put together a marketing effort focused on asking for Stimulus Payments from your donors.

Nonprofit Giving by Individuals from 2014-2019
Figure 1 (Source: Giving USA)

Before we get to the questions at hand, let’s lay some foundation. Based on the upward sloping line in Figure 1, you can see the past few years have been good for nonprofits. In terms of real dollars and cents, nonprofits have seen an increase in individual giving to the tune of $50 billion (yes, with a ‘B’) from 2014-2019. This equates to an average annual year-over-year growth rate of 9.8% in the same period. Many nonprofits (hopefully like yours) have been able to capitalize on this trend to great success.

The question before us, however, is about the effect of Stimulus Payments for nonprofits. Luckily for us (and you!), the US Census Bureau started surveying households about the Stimulus Payments earlier this year. This means we are able to see some interesting trends emerging so far in 2021. Since the data is only available for the first 3 months of 2021, there are some limitations but we still believe it’s valuable information.

People mostly paid off debt with Stimulus Payments

About 50% of all Stimulus Payment recipients, according to the data sets examined, indicated they have or will be using the funds “Mostly to pay off debt.” We’re going to assume that if a person’s primary use of the funds is to pay down debts, donating to a local nonprofit is probably not a top priority. We’ve mostly excluded this group from the rest of our analysis.

The remainder of recipients were segmented into two categories: those who “mostly spent” and those who “mostly saved” their Stimulus Payments (Figure 2).

Percentage of responses indicating Stimulus Payment was either 'Mostly Spent' or 'Mostly Saved'
Figure 2

One of the most interesting thing about this graph is that the percentage of “savers” seemed to only be higher than the percentage of “spenders” shortly after stimulus payments were received. As time elapsed, the percentage of people who continued to “mostly save” decreased gradually. Although the data trend is fairly limited, it doesn’t seem too far off to suggest that Americans who received Stimulus Payments initially intend to “mostly save” but slowly shift to “mostly spend” as time continues.

This probably indicates that if your organization decides to make a play for donor Stimulus Payments, a marketing campaign that persists over many months and centers on individual donor outreach is probably the key. You’ll see the next graph also supports this approach.

How much will individual giving truly be impacted?

The Household Survey then asks respondents to break down where they’ll spend their money. Figure 3 displays the percentage of Stimulus Payment recipients who said they either have used or planned to use funds for “Charitable donations or Giving to family members.”

Percentage of responses indicating at least part of Stimulus Payments will be used for 'Charitable donations or Giving to family members'
Figure 3

While it being able to see data throughout 2020 would have been helpful, you can see that the data does seem to suggest that more people have made or plan to make donations to nonprofits as time elapses. That’s not to say that they actually will all donate, just that Americans said they have or intend on donating. It’s also not to say that they’ll donate their entire stimulus payment — in fact, the data indicates that most will not spend all of their funds in one place.

However, just for fun, let’s look at the world of individual giving from rosiest of rose colored glasses. This will be our best case scenario. If all people who say they are going to give or have already given the entire sum of both of their Stimulus Payments to organizations, the magnitude of this contribution would be relatively small. We’ve created a simple chart below to show you the reality of the best case Stimulus Payment scenario relative to a projected 2021 Individual Giving Revenue (Figure 4) and projected 2021 Total Revenue (Figure 5) for the entire Nonprofit sector.

Stimulus Payments as a percentage of Total Individual Giving
Figure 4
Stimulus Payments as a percentage of Total Nonprofit Industry revenue
Figure 5

While there may be anecdotal evidence that Stimulus Payments donations are going to have a significant impact, as you can see even in the best case scenario (which is beyond idealistic in our opinion), your organization will most likely not feel the impact of the Stimulus Payment directly. This probably means it does not make sense to dedicate many resources or much time to specifically solicit these donations. You’re probably better off sticking to your conventional marketing plan and spending your capacity in different areas of your organization.

What about nonprofits who rely on earned revenue?

Many nonprofits have sought to diversify revenue by creating mission-aligned earned revenue streams. Many of these revenue streams are tied directly to consumer spending. We’re talking about thrift shops, coffee shops, second hand furniture stores, and the like.

While the US Census Bureau’s Household Survey does give us an idea of the percentage of people who intend on using at least part of their Stimulus Payment on food, clothing, and household items, there are a couple of obstacles to analyzing this data. The first is that the survey allows respondents to select multiple areas in which they intend on spending funds. This obviously makes sense, but it makes it impossible to understand how much of each person’s Stimulus Payment will be going to each area. The second is that these consumer industries (food, clothing, household) are broad and competitive, meaning nonprofits typically have a small share of the industry as a whole. We’ll discuss this second point and apply our “rosiest of rose colored glasses approach” (yes, that’s the technical term for it) after we discuss the contents of the Household Survey.

Without further ado, let’s get into our analysis by looking at Figure 6. More so than the timing of the Stimulus Payments, the data seems to suggest time and the improving economic outlook might be a bigger factor in attitudes towards spending. The drop in late March in Food spend is very likely tied to the increase in percentage of people who shifted from “mostly spent” to “mostly saved” in Figure 2.

Percentage of responses indicating at least part of Stimulus Payments will be used for Food, Clothing, and Household items
Figure 6

How should nonprofit organizations look at this data? Honestly, we struggled with the answer to this question. Probably the best answer is that nonprofits should ignore this information altogether. There’s not really a good way to get enough detail and correlate it to Stimulus Payment spend. But, perhaps the bigger reason, is that the magnitude of probable revenue impact is relatively minimal.

In Figure 7, we put together some theoretical estimates based on our highly technical “rosiest of rose colored glasses” model. We generously assumed that in each of the three spend categories: (1) people would spend their entire Stimulus Payment in that category and (2) nonprofit-run businesses would be able to capture 0.25% (a quarter of 1%) of all possible revenue per category.

Potential impact of Stimulus Payments as a percentage of Total Nonprofit Industry revenue
Figure 7

You’ll notice that the impact in the nonprofit industry in this best case scenario is still pretty limited. Unless your restaurant/coffee shop operation has a significant market share in your community, your earned income revenue will not be much impacted by the Stimulus Payments authorized by Congress in a meaningful way. Your organization is probably better served looking at macroeconomic data in consumer spending patterns (check out these interactive data tables on the U.S. Bureau of Economic Analysis’ website) to create your budget and monitor performance.

About Azul Analysis

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