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Trump's cuts to grant funding are upending decades of cooperation with nonprofits | AP News
By THALIA BEATY
Dawn Price signs rent checks worth about $160,000 every month for 79
people that her nonprofit helps house in Laguna Beach, California.
Usually, she logs into an online portal to withdraw enough from an account funded by a grant from the federal housing agency. But in February, she couldn't. Access had been temporarily cut off for many housing
organizations as part of the Trump administration's cuts and funding
freezes.
"That was just a sea change for us for those dollars to be so immediately
at risk," said Price, the executive director of Friendship Shelter, which started in 1987 as a community organization. Access was eventually
restored but the episode took a toll.
"Government moves slowly usually, and I think what was so disorienting
early on was government was moving really fast," she said.
In the early days of his second term, President Donald Trump froze, cut or threatened to cut a huge range of social services programs from public
safety to early childhood education to food assistance and services for
refugee resettlement. Staffing cuts to federal agencies have also
contributed to delays and uncertainty around future grant funds.
Altogether, his policies are poised to upend decades of partnerships the federal government has built with nonprofits to help people in their communities.
This vast and interconnected set of programs funded by taxpayers has been significantly dismantled in just months, nonprofit leaders, researchers
and funders say. And even deeper, permanent cuts are still possible. That uncertainty is also taking a toll on their staff and communities, the
leaders said.
In response to questions about the cuts to grant funding, White House spokesperson Kush Desai said, "Instead of government largesse that's often riddled with corruption, waste, fraud, and abuse, the Trump administration
is focused on unleashing America's economic resurgence to fuel Americans' individual generosity."
He pointed to a new deduction for charitable giving included in the
recently passed tax and spending law that he said encourages Americans'
"innate altruism."
But experts say private donations will not be enough to meet the needs.
In 2021, $267 billion was granted to nonprofits from all levels of
government, according to an analysis by the Urban Institute published in February. While the data includes tax-exempt organizations like local food pantries as well as universities and nonprofit hospitals, it
underestimates the total funding that nonprofits receive from the
government. It includes grants, but not contracts for services nor reimbursements from programs like Medicare. It also excludes the smallest nonprofits, which file a different, abbreviated tax form.
However, the figure does give a sense of the scale of the historic - and,
until now, solid - relationship between the public sector and nonprofits
over the last 50 years. Now, this system is at risk and leaders like Price
say the cost of undoing it will be "catastrophic."
Government funding to nonprofits reaches far and wide
The Urban Institute's analysis shows more than half of nonprofits in every state received government grants in 2021.
In the vast majority of the country, the typical nonprofit would run a
deficit without government funding. Only in two Congressional districts -
one including parts of Orange County, California, and another in the
suburbs west of Atlanta - would a typical nonprofit not be in the red if
they lost all of their public grant funding, the analysis found.
But in Orange County, famous for its stunning beaches, mansions and extraordinary wealth, funders, nonprofits and researchers said that
finding surprised them. In part, that's because of major economic
inequalities in the county and its high cost of living.
About our special report on public funding
For decades, nonprofits and public funding have been married, with the
federal government basically paying charities to help individuals in their communities. However, President Donald Trump's policies are threatening to separate the two with a series of cuts to grant funding in the name of
letting individual Americans tap into their "innate altruism" and make
their own donations.
How does that affect nonprofits that depend on federal funding?
The Associated Press teamed up with The Chronicle of Philanthropy to find
out. In this special report:
- ‘SEA CHANGE': Nonprofits say losing the federal government as a
long-trusted partner could put even their strongest support systems at
risk, with potentially "catastrophic" results.
- A DISAPPEARING SAFETY NET: In McDowell County, West Virginia, the
birthplace of the Food Stamps Program, nonprofits are already laying off
staff or dipping into cash reserves.
- HITTING THE BRONX HARDER: The Bronx, where federal funding has proved indispensable for revitalizing green spaces, protecting survivors of
domestic violence, and preventing youth violence, faces a reckoning. Over
84% of the 342 nonprofits based in the Bronx rely on federal grants now at risk.
- TAKEAWAYS: The Urban Institute found $267 billion was granted to
nonprofits from all levels of government - federal, state and local - in
2021, the most recent year a comprehensive set of nonprofit tax forms are available.
Taryn Palumbo, executive director of Orange County Grantmakers, said
nonprofits are not as optimistic about their resiliency.
"They are seeing their budgets getting slashed by 50% or 40%," she said.
"Or they're having to look to restructure programs that they are running
or how they're serving or the number of people that they're serving."
Last year, the local Samueli Foundation commissioned a study of nonprofit
needs in part because they were significantly increasing their grant
making from $18.8 million in 2022 to an estimated $125 million in 2025.
They found local nonprofits reported problems maintaining staff, a deep
lack of investment in their operations and a dearth of flexible reserve
funds.
The foundation responded by opening applications for both unrestricted
grants and to support investments in buildings or land. Against this $10 million in potential awards, they received 1,242 applications for more
than $250 million, said Lindsey Spindle, the foundation's president.
"It tells a really stark picture of how unbelievably deep and broad the
need is," Spindle said. "There is not a single part of the nonprofit
sector that has not responded to these funds. Every topic you can think
of: poverty, animal welfare, arts and culture, civil rights, domestic
abuse... They're telling us loud and clear that they are struggling to
stay alive."
Charitable organizations have held a special role in the U.S.
One of the founding stories of the United States is the importance of the voluntary sector, of neighbors helping neighbors and of individuals
solving social problems. While other liberal democracies built strong
welfare states, the U.S. has preferred to look to the charitable sector to provide a substantial part of social services.
Since the 1960s, the federal government has largely funded those social services by giving money to nonprofits, universities, hospitals and
companies. Several new policies converged at that time to create this
system, including the expansion of the federal income tax during World War
II and the codification of tax-exempt charitable organizations in 1954.
Then, the Kennedy and Johnson administrations started to fund nonprofits directly with federal money as part of urban renewal and Great Society programs.
"It was a key approach of midcentury liberalism of addressing issues of poverty, sort of making a reference to civil rights and racial inequality,
but not growing the size of government," said Claire Dunning, an assistant professor of public policy at the University of Maryland, College Park. Conservatives also tended to support working through local, private,
nonprofit organizations, though for different reasons than liberals, she
said.
With various expansions and cuts during different presidencies, the
federal government has continued to fund nonprofits at significant levels, essentially hiding the government in plain sight, Dunning said. The size
and importance of the nonprofit apparatus became suddenly visible in
January when the Trump administration sought to freeze federal grants and loans.
Dunning said the speed, hostility and scale of the proposed cuts broke
with the long legacy of bipartisan support for nonprofits.
"People had no idea that the public health information or services they
are receiving, their Meals on Wheels program, their after school tutoring program, the local park cleanup were actually enabled by public government dollars," she said.
A coalition of nonprofits challenged the freeze in court in a case that is ongoing, but in the six months since, the administration has cut, paused
or discontinued a vast array of programs and grants. The impacts of some
of those policy changes have been felt immediately, but many will not hit
the ground until current grant funding runs out, which could be in months
or years depending on the programs.
Private donations can't replace scale of government support
Friendship Shelter in Laguna Beach has an annual budget of about $15
million, $11.5 million of which comes from government sources. Price said
the government funding is "braided" in complex ways to house and support
330 people. They've already lost a rental reimbursement grant from the
U.S. Department of Housing and Urban Development. But the Samueli
Foundation stepped in to backfill those lost funds for three years.
That kind of support is extremely unusual, she said.
"We don't know of any large-scale private philanthropy response to keeping people housed because it's a forever commitment," Price said. "That person
is in housing and is going to need the subsidy for the rest of their
lives. These are seriously disabled people with multiple issues that
they're facing that they need help with."
She also believes that even in a wealthy place like Orange County, private donors are not prepared to give five, six or eight times as much as they
do currently. Donors already subsidize their government grants, which she
said pay for 69% of the actual program costs.
"We are providing this service to our government at a loss, at a business
loss, and then making up that loss with these Medicaid dollars and also
the private fundraising," she said.
She said her organization has discussed having to put people out of
housing back on to the streets if the government funding is cut further.
"That would be, I think, a signal to me that something is deeply, deeply
wrong with how we're looking at these issues," said Price, adding, "If I
was placing a bet, I would bet that we have enough good still in
government to prevent that."
___
Associated Press coverage of philanthropy and nonprofits receives support through the AP's collaboration with The Conversation US, with funding from Lilly Endowment Inc. The AP is solely responsible for this content. For
all of AP's philanthropy coverage, visit
https://apnews.com/hub/philanthropy.
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