Nonprofits Reeling as Federal Funding Freezes Leave a Third Without Support

October 14, 2025

In early 2025, America's nonprofit sector experienced significant disruptions in government funding, according to the Urban Institute's October report. One-third of nonprofits faced funding losses, delays, or complete work stoppages between January and June, with federal agencies canceling grants and withdrawing committed funds. Large organizations relying heavily on government revenue were most affected, resulting in staff reductions, program cuts, and fewer people served.

Who is affected

Nonprofits providing essential services (job training, mental health services, independent living assistance, disaster relief, emergency shelter)
Large organizations with annual expenses above $10 million (56% reported disruptions)
Smaller nonprofits operating on less than $100,000 (18% reported funding loss or delay)
Organizations serving communities deemed "inappropriate or controversial" by the administration
Community members receiving services from these nonprofits
Staff members of affected nonprofits facing layoffs or reduced hours

What action is being taken

Federal agencies are canceling grants and pulling back committed funds
State and local governments are stopping multi-year contracts as they assess federal changes
Nonprofits are reducing staff (15% of all nonprofits, 29% of those with funding disruptions)
Organizations are cutting programs (23% of disrupted nonprofits) and reducing the number of people served (21%)
Some nonprofits are decreasing spending on essentials like food items to prevent staff cuts
Foundations and individual donors are shifting resources to larger organizations

Why it matters

The disruptions are weakening America's "moral infrastructure" of social services
Organizations cannot forecast and plan budgets effectively due to funding uncertainty
Staff reductions mean less capacity to deliver services when community needs remain high
Program cuts mean fewer vulnerable people receiving critical support services
Two-thirds of nonprofit leaders expect demand for their services to increase in the next 12 months
Small nonprofits face growing financial uncertainty as funding shifts to larger organizations
Communities are losing access to basic needs support during a time of increasing demand

What's next

No explicit next steps stated in the article

Read full article from source: The Washington Informer