In addition to the everyday challenges of achieving its mission, nonprofits are facing an inundation of new hurdles in the 2025 political environment. Numerous philanthropic organizations across the U.S. are expressing concern over policy uncertainty and reductions in funding as it relates to their sector.
So far this year, the new government administration has implemented momentous executive orders regarding several key areas of the philanthropic vertical. Within only a few weeks in January, these actions have included laws and policies that: suspended all Federal funding, rescinded said order shortly after it was announced, and judicial actions that affected the standing of several contentious causes. The Federal funding freeze repeal has upheld; however, miscellaneous circumstances have caused much of the intended funding to be paused or delayed — leading to significant operational concern for the nonprofits who depend on this support.
These uncertainties were echoed in a recent report by the Center for Effective Philanthropy, a national nonprofit research institute focused on comparative data that enables the advancement of nonprofit funders and the causes they support. Earlier this year, the CEP released another in its series of Research Snapshots, and the takeaways were sobering; the survey of nearly 600 nonprofit leaders found that:
- Nearly 90% anticipate that the current political climate will have either a negative impact on its nonprofit’s ability to carry out its work (70% of respondents) or are unsure of the impact (another 19%)
- 40% report that shifts in State and Local nonprofit funding are negatively affecting them…and more than 60% anticipate these shifts will affect them in the future
- Less than 40% of funded nonprofits have reported any meaningful communication from their funding sources about the current political atmosphere
- 2/3rds cite decreases in or uncertainty about funding as their current most pressing concern….with 54% noting changing priorities of funders, and 40% saying the well-being of their staff or the populations they serve
REDUCED GOVERNMENT SUPPORT
Many nonprofit organizations rely — some more heavily than others — on government grants, contracts and other types of civic funding.
Nearly 1/3rd of nonprofits count Federal, State and Local funding as its most significant source of support. According to Candid, a nonprofit that provides comprehensive data and insights about the social sector, roughly 30% of nonprofits filing an IRS Form 990 report receiving grants or related funding from the government, equating to more than $303B spread among more than 100,000 501(c)3 organizations. Approximately 35,000 nonprofits — about a third of all government grantees — rely on these grants for over half of their total funding. And another evidenced-based nonprofit research organization, the Urban Institute, recently reported that 90% of nonprofits with $10M+ budgets receive some kind of government funding.
Significant cuts or shifts in this type of financial support can severely affect an organization’s ability to operate and achieve positive outcomes. In order to even remain net neutral, nonprofits must compensate for the loss of any government dollars through other funding sources: Individual Giving (either one-time/donate now or recurring/subscription), fundraising Events, Workplace Giving campaigns, Peer-to-Peer & Crowdfunding initiatives, Memberships & Sustaining Giving, and more. (By the way, DonorPoint specializes in these disciplines. 😏) For organizations that receive sizeable shares of government dollars, this can be a difficult undertaking.
UNCERTAINTY ABOUT OTHER FUNDING STREAMS
Concerns about civic funding aren’t the only things keeping nonprofit leaders up at night. The stability of non-government contribution sources such as private One-Time and Recurring Donations, Corporate Gifts, Foundation Grants, and Special Events have seen their share of volatility as well. The Center for Effective Philanthropy’s survey found that 62% of respondents think that changes in non-government funding is currently impacting their nonprofit’s work. Furthermore, when asked about future effect on their nonprofit, that number soars to 73%. What does that tell us? As much as it’s a current concern, changes in funding from all sources is a more critical worry down the road.
As history has shown, an uncertain political landscape often leads to an uncertain economic landscape — potentially affecting how many of your current donors continue to donate, how much they’ll continue to donate, and how many of your prospect audience (those who have never donated to your cause before) will turn into donors. Another thing to look at: how are your subscription/pledged donations trending? Are your promised donors making good on their monthly/quarterly/annual contributions? Much has been made of how prevalent subscription-based goods and services have become in our society today. For a consumer, it’s largely an ‘out of sight, out of mind’ expense — automatically (and many times subconsciously) rolled into a budget without much consideration once the initial pain of investment at enrollment is forgotten. Moreover, though, for nonprofits subscription/pledged gifts is a gateway to a steady stream of income, not only providing financial stability but also making it easier to forecast and budget. Not to mention it’s decidedly easier to retain repeat business from one-time donors than it is to acquire new donors.
Careful planning and evidence-based projecting is imperative to ensure that you’re able to supplant any loss from one ‘basket’ with gains from another.
ABRUPT DELAYS IN FUNDING TIMELINES
Late payments from Federal/State/Local government, Corporate and Foundation sources of support due to administrative processes, policy changes or increased regulations and ‘red tape’ could result in a greater financial burden for nonprofits, making it more difficult to successfully cashflow in the short or long term — especially for smaller nonprofits that might not have endowments or cash reserves. If delays in funding persist, philanthropic organizations may be forced to cut its own services to the community, delay payments to its vendors, and possibly consider laying off valuable staff members.
TARGETED POLICIES AND ORDERS
Respondents to CEP’s Research Snapshot survey voiced anxiety regarding legislation changes that could hamper their missions. Nearly 1/3rd of those who answered said that outcomes of Federal, State & Local Elections are currently impacting their organization’s work — with another 31% believing that recent U.S. judicial rulings or legislative actions are having an effect. Ask those respondents if those things are likely to impact their nonprofits in the future, and the numbers rise — to 40% and 39%, respectively. These policy decisions, made predominantly at the Federal and State levels, have cast increased scrutiny on the causes of many nonprofits.
Those organizations focused on the most controversial causes of the day (DEI/Diversity Equity and Inclusion, gender equity, immigration, etc.) are — and will be — facing attacks on their funding sources due to executive orders and policy changes. And the legislative audit doesn’t end there. “The current legislative shutdowns on DEI programs impact additional issues — such as financial literacy, health equity and food justice — that are inherent in those communities,” said one nonprofit leader. “This affects how we work with our constituents, and takes time away from our services, fundraising, and other day-to-day work as we update policies and procedures, forms, SOPs, grant deliverables, and more.”
Other causes,, such as child welfare, for example, stand to be immensely affected by the rising cost of living for necessities such as housing, food, clothing, healthcare, utilities, and more……with a greater chance that available services will decrease as the result of a downturn in funding.
POLARIZATION WITH POLITICS, SENSITIVE MISSIONS
Nonprofits focused on hot-button issues are at risk for experiencing reputational damage, threats to safety due to involvement in controversial issues such as DEI, LGBTQ+ rights, Palestinian and Israeli rights, and more. Many organizations are facing pressure to either stay silent on key policy issues for fear of government scrutiny or alienating donor populations. Their messaging, therefore, may be affected as nonprofits adjust what they say and do avoid controversy and backlash — impacting their ability to fully pursue their mission.
Similarly, polarization could lead to decreased monetary and volunteer support from multiple audiences. Some are even sharing how this political climate is leading to divisions within their Board of Directors, where one leader said that a “board member’s personal political leanings is starting to have an effect on our organization (by) trying to change our policies as a result of the current climate.”
WHOLESALE CHANGES TO REPORTING, COMPLIANCE
One of the overlooked consequences of the current political and judicial situation is increased reporting and compliance demands, which may potentially require a slew of additional staff-hours, and perhaps even more personnel — much of it without additional support/reimbursement. A more stringent regulatory environment can increase the administrative and programming burden for nonprofits, requiring more resources to ensure a deeper level of reporting, security, and compliance.
In some cases, compliance or policy changes may render a nonprofit ineligible to receive funding it had historically gotten. Make sure your organization adheres to all appropriate IRS regulations regarding lobbying (where the line versus advocacy can be blurred) and political activities to ensure your continued tax-exempt status.
KEEPING YOUR TEAM FOCUSED, PREVENTING BURNOUT
With so much complexity and animosity in a society where political and social divisions are widening, the challenge of maintaining clarity of mission, financial stability and sustainability has never been more formidable for today’s nonprofit. High levels of staff burnout due to increased workload, stress with having to navigate the current political and economic environment, as well as the sea of changes to funding and organizational operations can make it difficult to feel like you’re making any progress at all.
Nonprofit staffs need to be more adaptable than ever to the fluctuation and increased scrutiny and volatility — and ‘double down’ on the importance of their mission. “Be bold and public in support of (whatever cause you support), and of civic engagement,” divulged one CEP survey respondent. “The most helpful funders are not just grantmakers — they are partners in social change, willing to stand with organizations like ours as we work to build resilient, engaged, and equitable communities in the face of political uncertainty.”
We hope we’ve been able to lend some insight as to what nonprofits across the nation are feeling in the wake of political circumstances in 2025. They know that the need for their societal solutions is greater than ever, yet they’ll likely have to stretch every already-thin funding dollar even further under the threat of decreased or uncertain support.
Please reach out to us for any counsel we can provide to help you navigate these unprecedented challenges.