Here’s how Sacramento’s philanthropic donors are stepping up during coronavirus crisis

As the COVID crisis unfolds, nonprofits are stepping up to meet unprecedented needs and philanthropy is responding with an outpouring of generosity. One of our most powerful tools? Donor-advised funds, or DAFs.

In a recent piece Kat Taylor and Drummond Pike present DAFs as if they are the cause of the nonprofit sector’s challenges rather than one of the best solutions in our philanthropic toolbox.

DAFs are growing in popularity and for good reason. They offer a streamlined, tax-smart approach to giving that is accessible to donors of modest means.

Taylor and Pike claim there is “no requirement that charitable giving actually occurs” from DAFs and “many funds lay dormant” while “Big Philanthropy is becoming another Wall Street.” This is a far cry from the reality of community philanthropy I see every day.

The Sacramento Region Community Foundation was founded in 1983 and since then has distributed nearly $200M in grants and scholarships, mostly from DAFs. In 2019, we provided $15 million. We enforce our active funds policy, which prohibits dormant accounts and contact fundholders multiple times annually to promote grantmaking. The payout rate from our non-endowed DAFs exceeds 50 percent. This is in stark contrast to private foundations with a mandated payout rate of only 5 percent. Our average DAF has a balance of less than $200,000 and a fund can be opened with as little as $10,000.

Support fees go straight into community programs like the Big Day of Giving, and our work on the 2020 Census.

But where is the outpouring of DAF support for the COVID crisis, Taylor and Pike ask?

Research shows DAFs are among the most resilient funding sources in financial crises – the donation is already made and can be deployed quickly, and they can serve as “rainy day” funds in tough times. It’s clear our donors understand that it’s not just raining – it’s snowing.

Even as markets tanked, community foundations across the U.S. saw DAF grants jump by 58 percent this March and April. At the Foundation they spiked 62 percent. Ninety percent of members of the League of California Community Foundations saw spikes in DAF giving, with some increases as high as 300 percent. On May 7 our DAFs generated another $1 million for the Big Day of Giving, which raised $12 million for local nonprofits, 40 percent more than last year’s record-breaking total.

No amount of evidence will convince some critics that DAFs work well. Until every fund has a zero balance, they’ll claim donors aren’t giving enough.

This is misguided. Most donors are not billionaires – their DAF balances represent multiple years of thoughtful, sustained giving. They cannot “drain their DAF” in every crisis then simply refill it. Emptying DAFs on demand is also not strategic or sustainable for communities. The Sacramento Region Community Foundation exists to build community wealth and to support the Sacramento region over generations. These ready-to-deploy dollars are needed now, they will be needed for the next wildfire season and for decades to come.

Our nonprofits are suffering and Sacramento donors are stepping up as they always have and will continue to do because they are engaged, generous members of our community – and because DAFs make it easy for them to translate local generosity into local impact. In a moment when good news is sparse, this is something to celebrate, not disparage.

This story was originally published June 12, 2020 at 9:00 AM.