5 minSociety
Nonprofit Crisis Deepens as Foundation Giving Falls Short, Researchers Warn
A new analysis finds that U.S. foundations are not increasing their giving enough to offset massive federal cuts to the nonprofit sector, leaving food banks, shelters, and housing groups struggling to meet rising demand.
U.S. foundations are failing to mount an adequate philanthropic response to an existential crisis facing the nation's nonprofits, according to researchers tracking the fallout from a sweeping federal assault on the social sector that began in January 2025. Despite controlling $1.8 trillion in charitable assets, foundations increased their giving by only 3 percent in inflation-adjusted terms in 2025, a fraction of the 15.6 percent surge they provided during the pandemic in 2020, even though the current crisis is more severe.
The nonprofit sector has been reeling from a series of actions by the Trump administration and its allies in Congress, including freezing federal funds, terminating grants, investigating nonprofits, censuring specific causes, holding congressional hearings, threatening to revoke tax-exempt status, and tying federal funding to political priorities. At the same time, demand for services has soared as federal cuts to social safety net programs have taken effect. One analysis cited by the researchers found that federal funding for nonprofits was slashed by nearly 40 percent — some $14 billion — in just the first eight months of the second Trump administration, a figure that has likely grown since.
The human consequences are mounting. Food banks are rationing supplies, domestic violence shelters are closing, organizations helping low-income families find housing are paring back services, and environmental groups are shutting down. Nonprofit leaders report alarming burnout rates, and more organizations are facing financial challenges that have spurred layoffs and closures. The researchers, Phil and Elisha, whose team has been monitoring the philanthropic response, do not mince words: the overall foundation response has been insufficient.
Foundations, especially larger endowed ones, are uniquely positioned to step up during crises. They hold concentrated charitable assets and operate with long time horizons, often managed to exist in perpetuity. In 2020, they rose to the occasion, increasing giving by 15.6 percent even as federal funding flowed into nonprofits through the Paycheck Protection Program and other initiatives. In 2025, by contrast, federal funding has been slashed, yet foundation giving has barely budged. A survey conducted in May and June found that 65 percent of independent foundations said their payout rate was «typical» this year, with many defaulting to the IRS-mandated minimum of 5 percent of assets spent on charitable distributions.
Foundation CEOs themselves acknowledge their response has been lackluster. Only 8 percent said the foundation response to the current context has been «very effective,» and just 12 percent graded their own foundation's response as «very effective.» A majority cited risk aversion as a reason they haven't done more, with many pointing to their boards as an impediment. Other reasons include concern about protecting endowments for future giving, a sense that there are insufficient opportunities to make an impact, and a belief that foundation funding cannot fill all the gaps left by federal cuts. Some leaders even told the researchers they hope the crisis weeds out weak nonprofits.
That attitude ignores the reality on the ground, the researchers argue. The organizations struggling are not just the weak or ineffective; highly effective groups that have been pillars in their regions are also at risk. Some foundations have stepped up admirably. On the national stage, Marguerite Casey, MacArthur, and Robert Wood Johnson have increased giving significantly and spoken out to defend the sector. Regionally, the Skillman Foundation in Detroit and the Mary Reynolds Babcock Foundation in North Carolina have done the same. But these are exceptions rather than the rule.
With endowments generally grown by a strong stock market, the researchers urge foundation leaders and their boards to reconsider. The choice, they suggest, is between protecting perpetuity and protecting communities that are already in crisis. The data so far points to a philanthropic sector that has not yet met the moment.
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