Given what the nonprofit sector has endured these past six months, I suspect few readers will dispute the topline finding of the Center for Effective Philanthropy’s “State of Nonprofits 2025: What Funders Need to Know,” in which respondents reported “difficulty pursuing their missions in a complex environment shaped by the current political climate and future economic uncertainty.”
But a closer read reveals that this isn’t your evergreen narrative of organizations looking to plug funding caps while bracing for an economic downturn, a war or both. The administration’s actions have set off an unprecedented domino effect across the philanthrosphere that has left few organizations and funders unscathed.
In a recent conversation, the report’s co-author, Elisha Smith Arrillaga, asked me to imagine a local food bank that had its federal support cut. (Unfortunately, it wasn’t a difficult exercise — a few weeks ago, Central Florida Foundation President and CEO Mark Brewer told me that Orlando’s Second Harvest Food Bank lost over $10 million in federal funding.)
Now, imagine there are multiple food banks in the area. “After the largest one had its federal funding cut, those other food banks will see an influx of folks who were originally going to another location,” Smith Arrillaga. “Those kinds of shifts can happen really quickly. And so, even if an organization never received or didn’t lose federal funding, they could still see a significant increase in demand for their services, and they may have limited ability to respond.”
We also know that a substantial set of organizations primarily relied on federal support throughout their entire existence. Now that support has dried up, those nonprofit leaders are undergoing a frustrating crash course in institutional philanthropic fundraising. Most foundations have invitation-only grantmaking, and among the funders that do have an open-door policy, “anecdotally, we’re hearing they are getting increases in the number of requests for support, which would make sense, given that organizations are losing federal support,” said Smith Arrillaga, who manages CEP’s Research team.
Fortunately, many funders have stepped up to plug funding gaps in recent months, and in the last two weeks alone, the courts reinstated terminated National Institutes of Health and Environmental Protection Agency grants. But for many organizations, the damage has already been done. Even if suspended funding eventually makes its way back to nonprofits, it will do little to quell the pervasive unease coursing throughout the sector.
“The main finding” of the report, Smith Arrillaga said, is that “organizations are having a difficult time, and that’s really problematic for communities across the country that depend on them.”
Key data points from CEP’s study
In February 2025, CEP invited 897 nonprofit leaders from the Nonprofit Voice Project, a nationally representative panel of U.S. nonprofits that receive foundation funding, to participate in a survey capturing their experiences across the previous year and thoughts on the year ahead.
CEP received 585 responses, constituting an impressive 66% response rate. “It’s the first time in 10 years that we got this high of a response rate,” Smith Arrillaga said. “We also had tons of folks emailing us back when we sent the survey, saying, ‘Thank you for asking what’s happening right now. Thank you for giving us an opportunity to share.’”
Many respondents reported thriving in the 2024 fiscal year, with 42% indicating that their organization had a budget surplus. However, the percentage of respondents who projected a surplus in 2025 dropped to 18%, and the percentage of those who did not anticipate increases in revenues from foundations, individuals and fees for services was 70%, 61% and 79%, respectively.
Respondents’ fears are warranted. Assuming institutional foundations that were created to exist for perpetuity don’t take in new contributions, it stands to reason that they won’t dramatically boost their grantmaking in the aggregate to meet surging demand. “We are actively seeking measures to untangle ourselves from public funding,” one respondent told CEP, but “we simply do not know whether private foundation grants will keep up.”
How nonprofits are responding to political and financial uncertainty
Respondents are pulling from a familiar playbook to generate needed revenues. Their top five tactics are pursuing funding from new funders/donors (93%); engaging existing funders/donors (86%); making “staffing-related adjustments,” which includes reducing staff and pausing pay increases or hiring (56%); using reserve or endowment funds (51%) and reducing programming or services (39%).
Each approach carries its own set of risks. Building a relationship with new funders is a challenging and time-consuming endeavor for nonprofits in the best of circumstances. Now, with foundations navigating a torrent of new requests and unsolicited messages, it’s become infinitely more difficult. Anecdotally speaking, CEP is seeing “an increase in the number of requests that foundations are getting,” Smith Arrillaga said, “which possibly means that some requests are less likely to be seen” by program officers who were struggling with burnout long before Trump took office a second time.
Speaking of burnout, perhaps the most disillusioning strategy has nonprofit leaders reducing staff as the need for services grows exponentially. Leaders know it’s a counterproductive decision, but it’s also the most efficient way to boost revenues.
They also know the decision comes with a not-so-hidden cost, as it requires remaining staff, many of whom are already overworked, to do more with less. Not surprisingly, one of the CEP report’s big takeaways is that nearly 90% of leaders reported “some level of concern” about their own burnout. “A similar percentage note that burnout is affecting their staff,” the report reads. The report also found that leaders “identifying as people of color are slightly more likely to indicate that burnout is significantly impacting their staff and that their own burnout is very much a concern.”
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A forthcoming CEP report will focus on “listening to community”
As CEP’s name suggests, Smith Arrillaga envisions its research as a way to gently nudge funders toward making more, well, effective grantmaking decisions.
“What we’ve heard so far, anecdotally, from this release is that a lot of funders have said this report has been useful as they try and help their staff and boards understand the scope of what’s happening right now,” Smith Arrillaga said.
Better yet, the CEP already has an empirically sound and simple strategy that funders can implement to assist beleaguered nonprofits.
“State of Nonprofits 2025: What Funders Need to Know” comes on the heels of CEP’s trenchant research initiative exploring the impact of MacKenzie Scott’s approach to grantmaking. “The research we’ve done shows that when she gave organizations large, unrestricted funds, they had flexibility in terms of how they use them,” Smith Arrillaga said. “We have three years of that data, including Form 900 data that shows that kind of giving works for organizations.”
Having previously pored over CEP’s research into Scott’s grantmaking, I had a hunch my discussion with Smith Arrillaga would ultimately lead to whether other funders were emulating her approach. “We’ve seen some movement,” she said, citing tech entrepreneur Jeff Atwood, who has publicly stated his admiration for Scott. “I would say the results are really mixed.”
Slightly deflated, I asked Smith Arrillaga if she’s seen more overt flickers of hope across the philanthropsphere. She said she’s been “encouraged” by recent developments involving the Marguerite Casey Foundation, which recently announced a $130 million response to Trump 2.0, the MacArthur Foundation’s decision to boost its payout 6% for the next two years and the Henry Luce’s Foundation’s 25% increase in its grantmaking budget. “Foundations have also set up funds providing organizations with legal counsel, advisory services or emergency funding,” Smith Arrillaga said, which has made her feel “hopeful.”
In the coming weeks, Smith Arrillaga and her team will be putting the finishing touches on a new report titled “Voices That Matter: How Foundations and Nonprofits Engage with the Communities They Support,” which will be published July 9. Based on surveys of hundreds of nonprofit and foundation leaders, the report will offer insights and recommendations for foundations and nonprofits seeking to strengthen their community engagement practices.
In the interim, funders navigating our current and precarious landscape “have to do some soul searching,” Smith Arrillaga said. “As programs get cut, what do they want their role to be? Is it a bystander? Is it a helper? Is it a deep partner? We have a real opportunity to do some things differently, and I hope that as folks make those decisions, they’re thinking about how they can stand side by side with communities they’re seeking to serve.”
