In a tough year, donors came through for Minnesota's charities

Donors to Minnesota nonprofits were surprisingly generous last year.

The total from Give to the Max Day in November blew through the previous donation record, and with more than $30 million it wasn't even close.

Giving to donor-advised funds was up strongly in 2020, too. And grants made out of those funds increased 22% to more than $100 million at the St. Paul & Minnesota Foundation, said Jeremy Wells, the organization's senior vice president of philanthropic services.

If donors had been regulars in giving to arts organizations, he explained, that likely continued in 2020. But they also increasingly made gifts to social service organizations, housing nonprofits and for what the nonprofit community calls capacity building, meaning money to make nonprofit services more effective.

The foundation staff also got flooded with calls from donors after the death of George Floyd in Minneapolis, Wells said, seeking ideas on how the money they donated could be put into social justice efforts.

St. Paul's Amherst H. Wilder Foundation had more individual donors last year and more donors giving at least $500, while the percentage who increased their donation from last year grew as well, said Armando Camacho, CEO of this nonprofit that goes back to 1906.

"Those are three checked boxes of increases that we've seen, because people really are trying to meet the needs of the community," he said. "Not only at Wilder, but really across the nonprofit sector, especially the social service sector."

Yet in almost the next sentence he mentioned the worries over budget challenges that may lie ahead. Most of Wilder's spending is paid for with government grants, and how those hold up is anyone's guess.

And are donors going to increase their giving again? The needs of the people served by organizations like Wilder won't likely won't have gotten any smaller.

Nonprofits are called public charities under the tax code, but that takes a little explanation. Maybe only religious communities rely exclusively on charitable donations, as it's not that practical to make a business out of selling eternal salvation services for cash, although of course that's been tried.

Most nonprofits are some sort of service business, maybe collecting ticket revenue for a performance or some rent for an apartment in a new affordable-housing project.

The mix of revenue varies among the most familiar nonprofit business models, yet donations matter a lot to pretty much all of them.

The core business of Hamline University in St. Paul is education and in its fiscal year that ended last June it recognized about $55.5 million in tuition and fee revenue. Its donation revenue came to about $12.5 million, though much of that was restricted, meaning that's money to be set aside for a particular purpose as agreed to with the donor.

For a social service agency like Wilder Foundation, nearly 60% of its last fiscal year's operating spending of $46.6 million was paid by government grants. That's typical for the sector, which could be thought of as the outsourced service delivery arm of many government programs.

Donations and private grants, along with distributions from Wilder's endowment, paid for about one-third of its spending.

The most business-y of the not-for-profits are the healthcare systems that take care of a lot of Minnesota patients, like Allina Health and the Mayo Clinic.

Mayo is a globally renowned powerhouse that generates the vast majority of its revenue in the highly competitive market for healthcare services, about $11.6 billion in its 2019 financial statements.

Yet even Mayo still collected hundreds of millions of dollars from benefactors. This is not just something that happens for Mayo, either, as donors give money to other big healthcare services nonprofits, too.

One of the reasons why many nonprofits really appreciate their individual donors is that their gifts often help pay the cost-of-doing business bills. That might not emotionally grab a prospective donor but it's really critical, particularly since government grants tend to carry restrictions on how they are used.

Armando Camacho, who took over as Wilder's CEO last summer, pointed out that donors really were responding in a crisis year to news of all the unmet needs, but he added that in a really challenging year a lot of people also saw their finances hold up really well.

There was no way of knowing that would be the case in the spring, as the pandemic overwhelmed the country. But with unprecedented government support, plus the fact that the brutal blow that fell on sectors like travel and restaurants largely missed the rest of the economy, personal income shot up in the spring.

Personal income has since slipped a bit, yet by fall it was common to see stories of well-paid, work-from-home consumers who literally had more money than they knew how to spend. They'd been going months without buying sports tickets, leisurely restaurant meals and other things that used to be a big part of their spending.

Meanwhile, their favorite nonprofits needed more help.

With so much uncertainty created by the pandemic, it's hard to know how boards of directors could feel secure about the 2021 budget at a lot of nonprofits, and one of the things no one knows is if those donors they attracted in 2020 will come back in 2021.

In nonprofit circles this is sometimes called the donor retention problem. About one-fourth of first-time donors decide not to donate again, based on the most recent report from the Blackbaud Institute.

There are lots of good ideas for about what to do about this. One is making sure new donors hear a lot about how that donation helped people and supported the mission before getting asked for another one.

"If they did [increase donations] and it didn't hurt too much, they might find a way to continue giving," said Jeremy Wells, of the St. Paul & Minnesota Foundation, explaining why the foundation is hopeful. "I would love to see this level of giving become the new normal."