How Are Foundations Responding to Federal Cuts?

In February, the MacArthur Foundation announced its Set it at Six campaign, committing to increase its charitable payout to 6 percent for at least the next two years and using a flexible trust-based model for its charitable gifts. In April, the Marguerite Casey Foundation announced that it was accessing its endowment to grant over $130 million to help nonprofit organizations combat the challenges of the Donald Trump administration. The Freedom Together Foundation is also spending 10 percent more of its endowment to respond to the White House’s policies.

In a letter to the public, Deepak Bhargava, president of the Freedom Together Foundation, likened the current moment to the AIDS crisis of the 1980s and 1990s when activists pushed the government to find a cure. “The movement made a way out of no way. That can happen again, as it has so many times throughout American history,” he said. In his letter, Bhargava expressed disappointment at how few leaders and institutions are stepping up in his moment, but he also highlighted that “courage is contagious.”

Indeed, the above examples show that some philanthropic organizations have responded with urgency in recent months to support nonprofits navigate the new reality of unreliable federal funding. Still, organizations on the ground continue to call for more resources to meet the moment and for philanthropy to not abandon them when they need them the most.

Mixed Response

Recent executive actions have frozen and rescinded federal grants and contracts, stifling the ability of the nonprofit sector to function effectively. While those closest to the philanthropic sector agree that more support is needed, they also understand that it will be hard for the philanthropic sector to completely make up for the lack of federal resources.

In an interview with NPQ, Natalie Ross, the vice president of membership and development at the Council on Foundations, said she is not surprised that nonprofits are saying they need more philanthropic support. She noted that in 2023, federal support to nonprofits was three times the amount of philanthropic support. “We saw $103 billion from foundations, according to Giving USA, and $303 billion from the federal government, according to Candid,” she said.

Ross, who has spent much of her career in the nonprofit sector, asserted that philanthropy can’t fully fill this funding gap. “Foundations have always worked in partnership with the federal government. This moment has fundamentally shifted that dynamic—not just in terms of dollars, but in the types of things that used to be consistently funded by the government,” she said.

The consequences are already being felt across the sector. In recent months, nonprofit organizations have had to lay off staff and reconfigure programs. As an Urban Institute analysis finds, nonprofits in states including Alaska, Arkansas, and West Virgina “have the highest share of nonprofits at risk of not covering their expenses if they lost their government grants” and are among several states anticipating severe budget shortfalls.

While nonprofit organizations are naturally looking to philanthropic organizations to help fill these gaps, some funders are leery of offering support, fearing that it will cause them to come under attack as well. The Council on Foundations conducted a pulse survey of 138 philanthropic groups to learn more about how they are currently responding. The findings of the survey, shared by email with NPQ, included:

• 27 percent of foundations have or are considering increasing their overall grantmaking budget
• 39 percent of foundations have or are considering flexibility in grantmaking processes
• 44 percent of foundations have or are considering grantmaking priorities to address new or worsening funding gaps
• 54 percent of grantmakers are seeking new opportunities to collaborate with other funders
• 64 percent of foundations said they are not retreating from a focus on equity despite political pressure

Growing Understanding

According to Ross, philanthropy is increasingly heeding the call for more support from nonprofits. In the weeks since the survey was conducted, she noted that more philanthropic groups are understanding the urgency of the moment in a way that recalls the height of the COVID-19 pandemic. “Think about the COVID pledge—foundations committed not just to more funding but to doing philanthropy differently. Those same principles—flexibility, general operating support, trust—are what nonprofits are still asking for today,” she said.

Ross noted that what she is hearing the most from member organizations is that more foundations are collaborating and trying to figure out how they can work together to be as impactful as possible. From her vantage point, many foundations have a “very place-based strategy” and are thinking about how to work with others in their community to help those most impacted by what’s happening. She further noted that a lot of communication is happening directly with grantees and communities with long-standing relationships, as opposed to broad public communications and that some foundations are trying to be more flexible to make it easier for nonprofits to work with them.

“It’s a very hard time for everyone,” Ross said. “We hope foundations continue to really lean in and do what they do best, which is directly support nonprofits so that nonprofits can help communities thrive.”