The provinces should move quickly to enact and implement a “matching fund” model for Canada’s charities this year.
Canadian governments are moving swiftly to provide financial support to businesses and households affected by the coronavirus-induced downturn. These steps are critical and should be lauded. But policy-makers must not neglect Canada’s charities.
Charities have been rightly described as “our society’s shock absorbers when crisis hits.” And this may be even more the case in the current circumstances given the unhealthy mix of economic disruption and social isolation. Canadians will have significant demands for charitable services in the coming weeks and months. Yet, if the 2008-09 experience is emblematic, charities may face a financial crunch at the precise moment when we need them most. Sustaining and strengthening charities’ capacity must therefore be an immediate priority for governments at all levels in Canada.
We recently published a briefing memo for policy-makers, philanthropic foundations and ordinary Canadians on how we can collectively support Canada’s roughly 86,000 registered charities. The memo’s recommendations represent a tripartite call to action in the name of social solidarity.
We have seen some early steps from provincial governments in Ontario and Alberta as well as ordinary Canadians. These are positive signs. But more ambitious actions will be necessary to stabilize Canada’s charitable sector and ensure that it has the capacity to respond to the inevitable spike in demand for their services.
In this vein, we propose that Canadian governments establish “matching funds” to match private donations to Canadian-based charities in the immediate term to protect their operations and support their community-level activities considering the COVID-19 crisis.
Provincial governments could earmark funding to match private donations to registered charities on a one-to-one basis between April 1 and Canada Day. Public funds would match private donations up to a set cap, that would mean a broad distribution of public funds. This would also ensure the focus remains on helping charities during a cash crunch rather than padding budgets.
The provinces could disburse the matching public funds twice during the eligibility period. The first disbursement, for instance, could be as early as May. The second could be in late July following the end of the eligibility period July 1. This would provide charities with an incremental cash infusion in the immediate term.
The reporting mechanism would be straightforward. Charities already provide tax receipts for donations. They would simply submit this documentation to the relevant provincial ministry in order to validate their donations during the eligibility period and then the government would provide a matching grant equal to their private donations from philanthropic foundations and ordinary Canadians. It would effectively utilize pre-existing processes and in so doing minimize the administrative burden on governments or the charities themselves.
The fiscal cost would of course depend on the level of private donations. We know that Canadian charities received roughly $830 million per month in reported donations in 2018. Setting a goal of maintaining similar giving levels would mean that Canada-wide donations would total roughly $2.4 billion between April and July.
Of course, maintaining 2018 giving levels in the current environment is ambitious. Private donations will invariably fall in the coming weeks and months due to rising unemployment and market turmoil. The whole purpose of the “matching funds” model would be to minimize the decline in charitable giving as much as possible.
Government matching on a one-to-one basis might cost as much as $1.25 billion in the current fiscal year. The provinces could collectively target this amount in individual pledges. The relative share could be based on population or economic size.
Canada’s roughly 11,000 philanthropic foundations could be challenged to similarly put up $1.25 billion in charitable donations in the current year. Our briefing memo outlines possible board-level initiatives that these foundations might undertake (such as temporarily increasing disbursement levels) in order to free up these resources in the immediate term.
There are three reasons for provincial governments to adopt this approach for supporting Canadian charities in these extraordinary circumstances.
The first is speed. This model can provide more immediate support to charities than relying on the tax system such as a temporary increase to the Charitable Donations Tax Credit. The potential cash crunch is in the coming weeks and months and cannot afford to wait for the 2020 tax process.
The recently passed federal relief package did not include specific measures for the charitable sector. But that does not preclude the provinces from stepping up in this area. The federal finance minister has also signaled that further federal relief is likely to come. The point is there is plenty of time to move quickly to enact and implement a “matching fund” model for Canada’s charities this year.
The second is that it would permit charities to run campaigns where they can use the equivalent of 50-cent dollars to encourage donors to give despite the poor economic conditions. The availability of matching public funds has been shown to be a strong incentive for giving in other contexts such as humanitarian assistance or medical research. It may help to pull scarce private dollars into the charitable sector that may otherwise been deployed elsewhere.
The third is that a national campaign around charitable giving can contribute to a positive psychology at a time of despair and uncertainty. Not only is there evidence that charitable giving is correlated with individual happiness and satisfaction, we believe that a national effort to support Canadian charities can also have positive effects on our collective psyche. It can contribute to greater social solidarity at a critical moment.
We envision a healthy, three-month competition among provinces to see which one is home to the highest level of charitable giving in the current circumstances. The federal government could consider matching the donations in the province that has the highest total donations (on a population-adjusted basis) over the three months. One might think of it as a national competition to be deemed the country’s most generous province.
Politicians, charities, and other community leaders can in turn use the matching funds to challenge citizens to show their generous spirit and cultivate a national expression of solidarity. They might use social media hashtags or other tactics (such as “friendly bets” among provincial premiers) to build awareness and momentum behind the initiative. The purpose of the competition, in short, is not to create divisions but rather to bring provinces and citizens together in a national effort.
The result would hopefully not just be sustaining donation levels for Canadian charities in the short-term, but also contributing to a positive psychology that is similarly needed right now. One positive outcome may to be to build broad-based habits of giving in tough times that could continue when things get better. During the last economic crisis, for instance, the number of Canadians who reported charitable donations dropped from 5.8 million in 2008 to 5.6 million in 2009. It has never recovered.
Recognizing and supporting the charitable sector now can kickstart a virtuous cycle that ultimately strengthens Canadian civil society, maintains the capacity of the charitable sector to deal with the longer-term fall out of this crisis and perhaps more importantly brings us together as citizens. It is needed now more than ever.
This article is part of the The Coronavirus Pandemic: Canada’s Response special feature.