Despite a severe recession, new study finds that fraternal benefit societies still generate an average $3.8 billion in annual value to America's communities

OAK BROOK, Ill., Sept. 11, 2014 /PRNewswire/ -- A new study released by the Center for Financial Policy at the University of Maryland demonstrates that fraternal benefit societies contributed an average of $3.8 billion per year to the United States economy from 2007 to 2011. Even in the face of a deep recession, fraternal benefit societies produce $76 in value to society for each dollar the federal government invests, through the fraternal tax exemption, to help support their operations. This is according to the study authored by Phillip Swagel, a Professor at the University of Maryland, School of Public Policy, who also served as a senior economist in both the Bush and Clinton Administrations.

Building on his September 2010 analysis of fraternals' economic contributions, Swagel confirms and expands on the earlier paper's finding that the nation's two largest fraternals (Thrivent Financial and the Knights of Columbus) provided $3.4 billion in a single year through direct support and valuable social capital.  Over the five year period studied in Swagel's new report, fraternals were found to have contributed a total of $19 billion to the U.S. economy, filling growing needs that might otherwise go unmet in communities nationwide.

Working through their grassroots network of member groups called lodges, fraternal members are engaged in their communities and uniquely positioned to identify and help meet pressing needs large and small, at both the local and national levels. The study finds that fraternals, including societies such as Modern Woodmen of America, Thrivent Financial, Polish National Alliance, Knights of Columbus, Woodmen of the World/Omaha Woodmen Life Insurance Society and more, provide not only direct charitable contributions and volunteerism, but also much-needed "social capital." This capital is built through the efforts of fraternal members bringing people together for the common good and results in stronger communities nationwide. 

America's fraternal benefit societies are not-for-profit mutual aid organizations created more than a century ago to serve the financial and social needs of communities.  Swagel notes, "as member-owned, mission-based organizations, fraternal benefit societies are motivated by the opportunity to help others."  While fraternal benefit societies provide some $1.6 billion a year in direct contributions to communities, their impact throughout the United States —from assisting families struggling with medical bills to providing financial literacy initiatives to acting as a first-response network in the face of natural disasters— generates another $1.7 billion in social capital, according to Swagel's comprehensive analysis. 

"Fraternal benefit societies continue to play a quiet but vital role in helping build and maintain the economic and social infrastructure of this country. This is especially important during an economic downturn when federal, state and local resources to serve communities in need are scarce," said Joseph Annotti, president and CEO of the American Fraternal Alliance.  "The fraternal model enables these organizations to help their members achieve financial security and have the opportunity to give back to their communities.  By bringing people together to serve their neighbors in need, the fraternal model builds valuable social capital that strengthens communities from the inside out."

Swagel's latest analysis expanded on his previous effort by assessing fraternal activities over a longer period of time and through a broader range of fraternal benefit societies.  He demonstrates how such activities build social capital through the networks fraternals create that bring people together for the common good, build community trust, widen awareness of local needs, educate and inspire younger generations of service, as well as provide a consistent first response in times of crisis – and a consistent presence after the crisis as well.

For example, the Modern Woodmen of America members nationwide provide community educational programs ranging from financial literacy to exercise and nutrition; Thrivent Financial and its members serve as the largest source of non-governmental support to Habitat for Humanity International with fundraising and  thousands of volunteers; the Knights of Columbus sponsor the Special Olympics nationwide and Woodmen of the World/Omaha Woodmen Life Insurance Society created the Red Basket program in 2012 as a way to bring their current model of community giving through lodges into the digital age. Woodmen of the World is also funding for Red Basket's administrative fees. That way, 100% of donations received go to the individual or project that the user has selected.

"Fraternal chapter members benefit from their organization's collective experience to magnify their local charitable and volunteer efforts many times over to make a consistent positive impact nationwide – including in difficult economic times when their efforts are especially valuable to their communities," said Swagel. "With social capital having an important positive impact on the U.S. economy, the policy question is whether and how the social structures such as fraternal benefit societies that generate beneficial social capital can be further encouraged and supported.  Government policy is part of that, including the tax policy that has long worked to support fraternal societies." 

At a time of shrinking government budgets and rising demands from communities struggling through a weak economy, this updated study again confirms that fraternal benefit societies represent a tax policy solution with an enormously positive ratio of benefits to costs for society. The beneficial activities performed by government or corporations are important, but cannot replace the level of commitment of dedicated fraternal member-volunteers who are active in their communities and come together through their lodges to help others in a more targeted, efficient and consistent way.  As Swagel suggests, "the fraternal is the community."

To learn more, go to: http://blogs.rhsmith.umd.edu/financialpolicy/newsandevents/swagel-economic-contributions-of-fraternal-benefit-societies-a-five-year-perspective/

To download key findings from the report go to: http://fraternalalliance.org/wp-content/uploads/2014/09/Swagel-Report-Key-Findings-9-8-15-REVISED.pdf

About the American Fraternal Alliance

The American Fraternal Alliance promotes the relevance and furthers the missions of its approximately 70 not-for-profit fraternal benefit society members operating in 50 states, the District of Columbia and Canada. Alliance member societies represent 9 million individuals, making it one of America's largest member-volunteer networks. Through advocacy, policy and providing opportunities for a broader understanding of fraternal benefit societies as financial providers and community service activists, the Alliance serves as a vital and valued resource.

Please visit the website at www.fraternalalliance.org to learn more.

SOURCE American Fraternal Alliance