We’re researchers monitoring the nonprofit disaster. Philanthropy’s response shouldn’t be sufficient

The social sector is in severe distress. Nonprofits serving communities across the US have faced an existential crisis since January 2025, when the Trump administration and its allies in Congress began a series of actions targeting the sector.  Nonprofits have been reeling from these actions, even as demand for their services has increased as a result of federal cuts to social safety net programs. Phil and Elisha’s research team has been monitoring the falloutand tracking the philanthropic response among US foundations, which control $1.8 trillion in

The social sector is in severe distress. Nonprofits serving communities across the country have faced an existential crisis since January 2025, when the Trump administration and its allies in Congress began a series of actions targeting the sector: freezing federal funds, terminating grants, investigating nonprofits, censuring specific causes, holding congressional hearings, threatening to revoke their tax-exempt status, and tying federal funding to Trump’s political priorities.  Nonprofits that provide vital services to communities have faced these challenges even as demand for their services has increased as a result of cuts to social safety net programs.

We have been monitoring the fallout of these attacks on nonprofits, as well as tracking the philanthropic response. Our research is particularly focused on the response of philanthropic foundations, which control $1.8 trillion in charitable assets, and whose giving represented $117 billion out of total charitable giving of $617 billion in 2025 – nearly one in every five charitable dollars – according to Giving USA. 

We don’t want to mince words: the overall foundation response has been insufficient.

Nonprofit leaders are reporting alarming burnout rates and more and more organizations are facing financial challenges that have spurred layoffs and, in some cases, closures. The results are affecting communities across the country: food banks are rationing their supplies; domestic violence shelters are closing; organizations working to help low-income families find housing are paring back services; environmental organizations are shutting down.

Foundations, especially larger, endowed ones, play a crucial role in responding to the crisis facing nonprofits. They have the potential to step up their giving in response to crisis because of their concentration of charitable assets and their long time horizons (many are managed to exist in perpetuity). In 2020, for example, in response to the pandemic, foundations did just that. According to Giving USA, they increased their giving over the previous year by 15.6 percent in inflation adjusted dollars. 

In 2025, however, foundation giving increased by just 3 percent (again, adjusted for inflation). This despite the fact that the crisis facing nonprofits is in many ways more dire. During 2020 and 2021, federal funding was flowing intononprofits through the PPP forgivable loans and other programs. In 2025 and 2026, federal funding has been slashed for nonprofits: one recent analysis said the cuts were nearly 40 percent in just the first eight months of the second Trump Administration, some $14 billion. That total now is undoubtedly much higher.

Yet the overall foundation response to the current crisis continues to be much less robust than during the pandemic, even as endowments have generally grown in recent years due to the strong stock market. In a survey we conducted in May and June of this year, 65 percent of independent foundations said their payout rate was “typical” this year, with many defaulting to the IRS-mandated minimum 5 percent of assets spent out in charitable distributions. Foundation CEOs we surveyed report making other changes, but the majority are not pulling the most important lever of all: getting a higher proportion of their assets out the door and to nonprofits through grantmaking.

Perhaps that’s why they give themselves only modest marks on their response to the current crisis. Just eight percent of foundation CEOs we surveyed say the foundation response to the current context has been “very effective,” and only 12 percent grade their ownfoundations responses as “very effective.”  

A majority cite risk aversion as a reason they haven’t been more effective, with many pointing the finger at their boards as an impediment to doing more. 

To be clear, some foundations have stepped up admirably. On the national stage, foundations like Marguerite Casey, MacArthur, and Robert Wood Johnson have increased giving levels significantly and their leaders have spoken out powerfully to defend the sector. On regional stages, the same is true of foundations like Skillman in Detroit and Mary Reynolds Babcock in North Carolina. [DISCLOSURE: These three foundations – MacArthur, RWJF, and Skillman – give grant support TO CEP. And they’re all clients as is Skillman.]

But these have been more the exceptions than the rule.

Why? In addition to general risk aversion, foundation leaders with whom we’ve talked cite a range of reasons for not increasing spending levels: concern about protecting their endowments so their future giving levels are high in perpetuity; a sense that there are insufficient opportunities to make an impact; or knowing that foundation funding can’t fill all the gaps in federal funding (though that hardly seems to us like a reason to do nothing). Some have gone so far as to tell us they hope this crisis weeds out the weak nonprofits. 

We hope these foundation leaders and their boards reconsider. What we see are not just the weak or ineffective nonprofits struggling, but rather a widespread crisis that’s impacting highly effective organizations that have been pillars in their regions – doing essential work to serve those who are most vulnerable, protect natural habitats, or bring arts and culture to communities, to name a few examples. We believe the effects of these organizations’ struggles will become more and more evident in the months ahead.

With record levels of assets in foundation endowments, it’s time to move more money to nonprofits—and to the communities that rely on their services.

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