Takeaways from AP's report about cuts to government grants for nonprofits

Al Arabiya

5 days ago

President Donald Trump's policies are poised to upend decades of partnerships the federal government has built with nonprofits to help people in their communities. Since the 1960s, presidential administrations from both parties have used taxpayer dollars to fund nonprofits to take on social problems and deliver services. A vast and interconnected set of federal grants fund public safety programs, early childhood education, food assistance, and refugee resettlement services in every state. In January, the Trump administration sought to freeze federal grants and loans. Nonprofit groups immediately challenged the move and won a court-ordered pause. But in the six months since, the administration has cut, frozen, or discontinued many federal grant programs across agencies.
An analysis by the Urban Institute provides a sense of the scale and reach of government support for nonprofits. Published in February, the data comes from the tax forms nonprofits file where they report any government grants they receive. 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.'
How much support does the government give to nonprofits? 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. That figure underestimates the total funding 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. The data includes all tax-exempt organizations that file a full tax return, from local food pantries to universities and nonprofit hospitals. But government funding does not just go to the largest organizations. A majority of nonprofits in the dataset, across every sector from the arts to the environment to human services, report receiving government grants. In most places, the typical nonprofit would run a deficit without government funding.
The Urban Institute cautions that just because a nonprofit would run a budget deficit without government funding, it does not necessarily mean the nonprofit will close. Even in wealthy areas, nonprofits would struggle without government support. In only two Congressional districts – one that includes parts of Orange County, California, and one in the suburbs west of Atlanta – would typical nonprofits not be in the red if they lost all of their public grant funding, the analysis found. However, funders in Orange County warn that nonprofits are not as optimistic about their resiliency. Taryn Palumbo, executive director of Orange County Grantmakers, said local nonprofits are seeing their budgets getting slashed by 50 percent or 40 percent. Last year, a large local foundation, Samueli Foundation, commissioned a study of nonprofit needs because they were significantly increasing their grantmaking 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 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.'
Private donations can't replace government support. The nonprofit Friendship Shelter helps house and support 330 people in Laguna Beach, California, which falls within Orange County. Dawn Price, its executive director, said the organization 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 support different programs and fill in gaps. Private donors already subsidize their government grants, which she said pay for 69 percent 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. Even in a wealthy place like Orange County, Price said she does not believe private donors are prepared to give five, six, or eight times as much as they do currently if new cuts to government grants occur or programs are not renewed.