We’re researchers tracking the nonprofit crisis. Philanthropy’s response is not enough

The nonprofit sector in the United States is undergoing a critical crisis, triggered by actions taken by the Trump administration and its allies in Congress since January 2025. These actions include freezing federal funds, terminating grants, investigating nonprofits, censuring specific causes, holding congressional hearings, threatening to revoke tax-exempt status, and tying federal funding to Trump's political priorities.

Despite this, the demand for services provided by nonprofits has increased due to cuts to social safety net programs.

Our research team, Phil and Elisha, has been diligently monitoring the fallout and the philanthropic response from US foundations, which collectively manage $1.8 trillion in charitable assets. These foundations contributed $117 billion out of the total $617 billion in charitable giving in 2025, accounting for nearly one-fifth of all charitable donations.

However, our findings indicate that the overall response from foundations has been insufficient. Nonprofit leaders are reporting alarming burnout rates, and many organizations are facing financial challenges, leading to layoffs and, in some cases, closures. The impact of these challenges is being felt across various sectors, with food banks rationing supplies, domestic violence shelters closing, and organizations working to assist low-income families with housing services being reduced. Environmental organizations are also shutting down due to the crisis.

While foundations, especially larger endowed ones, have the potential to respond effectively due to their significant charitable assets and long-term focus, their current actions do not match the severity of the crisis. In fact, foundation giving in 2025 increased by only 3% (inflation-adjusted dollars), compared to a 15.6% increase in 2020 during the pandemic.

This decrease is particularly concerning considering the substantial federal funding cuts for nonprofits, with some estimates suggesting a nearly 40% reduction in the first eight months of the second Trump Administration.

In our recent survey of independent foundations, 65% reported their payout rate as "typical" this year, with many adhering to the IRS-mandated minimum of spending 5% of assets on charitable distributions. Many foundation CEOs are making other changes, but the majority are not increasing the proportion of their assets allocated to grantmaking.

Foundation CEOs we surveyed rated their foundation's response to the current crisis as "very effective" by only 8%, with 12% rating their own foundation's response as "very effective."

Some reasons cited for this inadequate response include risk aversion, concerns about protecting endowments for future giving, a sense that there are insufficient opportunities to make an impact, and the belief that foundation funding cannot fill all the gaps left by federal funding cuts. However, these reasons do not justify the lack of action.

Some foundations have responded admirably, such as Marguerite Casey, MacArthur, and Robert Wood Johnson, and regional foundations like Skillman in Detroit and Mary Reynolds Babcock in North Carolina. Yet, these instances represent exceptions rather than the norm.

We urge foundation leaders and their boards to reconsider their approach. The nonprofit crisis affects highly effective organizations that are pillars in their communities, providing essential services to vulnerable populations, protecting natural habitats, and bringing arts and culture to communities. The consequences of these organizations' struggles will become increasingly evident in the months to come.