Expert tells Funding Review Advisory Committee philanthropy remains resilient; urges streamlined public grants and capacity building

Laura McDonald, founder and principal of Benefactor Group, told the Funding Review Advisory Committee at a meeting that charitable giving in the United States has been “remarkably resilient” but that local nonprofits will feel pressure from recent tax law changes and shifts in corporate giving.

McDonald, who has worked in fundraising and philanthropy for four decades and served as board chair of the Giving USA Foundation, outlined ways public dollars and private philanthropy can be coordinated to increase impact. "The process of accessing and deploying resources can be made more efficient," she said, recommending simpler grant processes, faster disbursement and fewer strings for frontline human-service providers.

Why it matters: Committee members said the region is growing quickly and that nonprofit capacity, funder coordination and donor behavior will shape whether philanthropic resources keep pace with demand. McDonald warned philanthropy alone cannot bridge cuts in federal funding and recommended local steps that could multiply private giving when paired with public incentives.

Key points from McDonald’s presentation

- Scale and sources: McDonald cited national figures, saying individuals accounted for roughly two-thirds of the $590 billion given to nonprofit organizations in the most recent year and that individuals drive about 85% of philanthropic decisions when including bequests and closely held foundations. She said philanthropic giving has declined in real terms only five times since 1967 and that most sectors have grown over time.

- Donor-advised funds (DAFs): McDonald described DAFs as a fast-growing platform but noted recent research showing, for 2023, more money flowed out of DAFs into charities than into them. "Within five years, 92¢ of every dollar has been distributed back out to the nonprofit community," she said, adding that data do not support the idea of persistent “zombie” hoarding of DAF assets.

- Tax-law effects: McDonald summarized changes from recent federal legislation and the 2017 Tax Cuts and Jobs Act. She said the earlier law reduced the share of taxpayers who itemize and that studies estimated charitable giving fell by roughly $40 billion after that change. Under the new law she discussed, corporations face limits on deducting charitable giving until it exceeds 1% of pre-tax profits, a dynamic that consulting firms project could reduce some corporate giving (Ernst & Young estimates were cited in the discussion).

- Public incentives and policy tools: McDonald offered examples from other places where state or local tax incentives were used to encourage giving (for example, enterprise-zone credits for certain projects and state credits for specific charitable purposes). She cited a literature review reported by the Philanthropy Roundtable estimating that every $1 in tax credit can yield about $1.30 in giving, while noting local examples are limited.

- Grant design and nonprofit capacity: McDonald recommended several programmatic changes to public grantmaking: adopt common or simpler applications across funders where feasible, provide rapid-response and fewer-restriction grants for organizations serving basic needs, fund capacity-building (for development, technology and earned-revenue pilots), offer matching and multi-year grants to help organizations stabilize funding and grow individual-donor pipelines.

Questions from committee members and McDonald’s responses

- Donor-advised funds and net flows: Committee member Doug asked whether DAFs are diverting dollars from charities. McDonald said recent research indicates net flows from DAFs into the nonprofit sector were positive in 2023 and that DAFs function primarily as a transaction platform rather than a permanent holding place.

- Convening and coordinated private-public funds: A committee member asked who typically convenes large pooled private-public efforts. McDonald said models vary; some communities have voluntary collaboratives, others rely on philanthropic leaders and a few employ collaborative grantmaking. She emphasized that donors retain autonomy and that public incentives may persuade but cannot compel private participation.

- Practical local moves: Several committee members pressed for examples the commission could pursue. McDonald reiterated: streamline public grant applications and timelines where possible; offer matching or stepped multiyear grants to leverage private gifts; create or expand local capacity-building funds so nonprofits can invest in development and digital giving infrastructure; and consider local tax incentives or publicity campaigns to nudge everyday donors (for example, publicizing the restored limited deduction for non-itemizers).

Scope and limitations

The presentation and Q&A were discussion-focused; the committee did not take formal action or vote on policy at the meeting. McDonald framed many points as evidence or recommendations drawn from national studies, examples elsewhere, and her consultancy work; when she cited studies she used phrases such as "studies showed" or referenced organizations (Giving USA Foundation, Philanthropy Roundtable) rather than asserting new local data that were not presented in the meeting.

Next steps and ending

Committee members thanked McDonald and said they may follow up with additional questions. No formal motions, referrals or funding decisions were made during the meeting.