Dec 1, 2008

From the Archives

Churches Stand to Lose Several Billion Dollars in Lost Donations Due to Economic Downturn

Tens of millions of Americans have already suffered substantial financial losses in the wake of the sub-prime mortgage crisis and subsequent financial challenges. A new survey from The Barna Group shows that more than 150 million adults said they have been affected by the economic turbulence, and most of them expect it to take several years before the nation fully recovers. Americans are now passing on their financial pain to churches and other non-profit organizations by cutting back substantially on their giving during the fourth quarter of 2008. Those reductions – occurring during the most important quarter of the year for donor-driven organizations – will cripple thousands of smaller and less stable donor-supported organizations.

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Many People Hit Hard

Two out of every three families – 68% – have been noticeably affected by the financial setbacks in America. Nearly one out of every four (22%) said they have been impacted in a “major way,” almost four out of ten have been affected “only somewhat” and about one out of every twelve (8%) say they have not been affected too much.

Interestingly, the people least affected have been those under 30 years of age – perhaps because relatively few of them have substantial retirement funds – as well as Asian households and those who describe themselves as mostly conservative on social and political issues.

Overall, more than one-quarter of adults (28%) said they had lost at least 20% of the value of their retirement and 401K accounts. The same share of the public (28%) said they had lost 20% or more of the value of the stocks and bonds that they owned.

Born again adults were slightly less likely than were others to have sustained such substantial financial losses in recent months. While 30% of the born again public has lost 20% or more of its retirement portfolio value, the same was true for 37% of non-born again adults. Similarly, just 31% of the born again segment had lost 20% or more of the value of their stocks and bonds compared to 36% among the non-born again Christians.

No Quick Fix Expected

On average, Americans believe it will take about three years before the economy fully recovers. Only one out of four adults (24%) said the economy would completely recover within a year; 30% said it would take two or three years; and 32% said it would take more than three years. A small proportion (2%) said they do not believe the economy will ever completely recover.

The most pessimistic people are Asians, upscale adults, and sociopolitical liberals. The study also showed that people who voted for Barack Obama are significantly more likely to expect a prolonged period of recovery than are people who voted for John McCain.

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Cutbacks in Church Giving

During the past three months, one of the ways that adults have adjusted to their financial hardships has been by reducing their charitable giving. In total, one out of every five households (20%) has decreased its giving to churches or other religious centers.

Church cutbacks have been most common among downscale households (30%) and those families which are struggling with “serious financial debt” (43%). Not surprisingly, 31% of those who have lost 20% or more of their retirement fund value have sliced their church donations, as have 29% of the people who have lost 20% or more of the value in their stock portfolio.

The degree of reduction in giving is significant for churches. Among people who have decreased giving to churches and religious centers, 19% dropped their giving by as much as 20%, 5% decreased their generosity by 21% to 49%, 17% reduced their giving by half, and 11% sliced their provision by more than half. In addition, 22% said they had stopped their giving altogether.

The most widespread reduction in amount of money given to religious centers was detected among people under 25 (47% who had been affected by the downturn reduced their gifts by more than half of what they usually gave); upscale households (48%); Hispanics (43%); non-born again Christians (40%); and sociopolitical moderates (39%).

How Churches Are Responding

The Barna study revealed that many churches have attempted to help their congregants understand and responsibly address the current financial challenges. Among those who attend a Christian church, the survey found that one-third (35%) said their church had offered a special talk about the financial situation and ways to respond to it. Such a presentation was more commonly cited by those who attend a Protestant church (38%) than by those who attend a Catholic church (27%).

A similar proportion (37%) said their church had offered specific opportunities for personal financial counseling. This response was more frequently cited by those who attend a Protestant church (39%) than by those who attend a Catholic church (28%).

Providing special prayer support for those who were struggling financially was noted by 73% of church-goers. Once again, this response was more likely to be identified by Protestants (78%) than by Catholics (64%).

About half of Christian church attenders (52%) said that their church had increased the amount of material assistance made available to congregants during the past three months, such as food, clothing and other basic needs. In this case, there was no difference in the responses of those attending a Catholic church and those going to a Protestant congregation.

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Reductions in Giving to Non-Profits

The million-plus organizations recognized by the government as non-profit agencies have reason to worry about the economic climate, too. Nearly one-third of all adults (31%) said they have already reduced the amount of money they are donating to non-profit entities.

Cutbacks in gifts to non-profits are especially common among the one-quarter of the population who are immersed in “serious financial debt” (49%). It is also a common response among adults who are feeling “stressed out” (39%), African Americans (36%), downscale households (36%), and registered Democrats (36%)

Among those who are decreasing their giving to non-profits, 53% are simultaneously decreasing their generosity to churches or other religious centers, as well.

Other Responses to Financial Suffering

Americans have responded to the nation’s economic woes in other ways besides reducing their generosity. So far, 5% have moved to less expensive housing. This has been especially common among people with “serious financial debt” (14%), people under age 25 (13%), and downscale adults (11%).

Potentially Devastating Impacts

George Barna, whose company conducted the survey, commented that the economic woes hitting families will be felt in a major way by churches and non-profits by the end of the year. “Most non-profits and churches count on the fourth quarter of the year to produce at least one-third of their annual income. Deficit spending is common during the first three quarters, with the expectation that holiday giving will enable the organization to meet its budget projections. This year is likely to be very different. The giving patterns we’re witnessing suggest that churches, alone, will receive some $3 billion to $5 billion dollars less than expected during this fourth quarter. The average church can expect to see its revenues dip about 4% to 6% lower than would have been expected without the economic turmoil. We anticipate that other non-profit organizations will be hit even harder.”

Barna encouraged church leaders to embrace a new mindset for their financial projections. “With a large share of congregants expecting the nation’s economic woes to drag on for several years, it would be wise for churches and non-profits to reconfigure their financial models and plan to spend more cautiously over the coming two or three quarters,” he explained. “Even if a congregation continues to grow numerically, this is not a good time to use dated financial projections and models. People’s attitudes about generosity have been altered, as shown by their immediate donation behavior. We anticipate that a greater percentage of church-goers will decrease both their giving levels and frequency over the next year or so. This is a time for church leaders to demonstrate restraint and wisdom in their financial decisions.”

About the Research

This report is based upon telephone interviews conducted by The Barna Group with a random sample of 1,203 adults selected from across the continental United States, age 18 and older, November 1-5, 2008. The maximum margin of sampling error associated with the aggregate sample is ±2.9 percentage points at the 95% confidence level. Minimal statistical weighting was used to calibrate the aggregate sample to known population percentages in relation to several key demographic variables.

“Born again Christians” are defined as people who said they have made a personal commitment to Jesus Christ that is still important in their life today and who also indicated they believe that when they die they will go to Heaven because they had confessed their sins and had accepted Jesus Christ as their savior. Respondents are not asked to describe themselves as “born again.”

“Downscale” individuals are those whose annual household income is less than $20,000 and who have not attended college. “Upscale” people are those whose annual household income is $75,000 or more and they have graduated from a four-year college.

About Barna

Since 1984, Barna Group has conducted more than two million interviews over the course of thousands of studies and has become a go-to source for insights about faith, culture, leadership, vocation and generations. Barna is a private, non-partisan, for-profit organization.

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