By Thalia Beaty
DawnPriceSign rents checks worth around $160,000 a month to 79 people who help her nonprofit reside in Laguna Beach, California.
Typically, she logs in to the online portal to make sufficient withdrawal from an account funded by a grant from a federal housing agency. However, it was not possible in February. Access to many housing organizations was temporarily blocked as part of the Trump administration’s cuts and funding freeze.
Price, executive director of Friendship Shelter, which began as a community organization in 1987, said: Access was eventually restored, but was sacrificed to the episode.
“The government usually moves slowly. I think it was very difficult for the government to move very quickly,” she said.
Early in his second term, President Donald Trump freed, reduced or threatened to cut a huge range of social service programs, ranging from public safety to early childhood education and food support and services for refugee resettlement. Reducing staffing delivery to federal agencies also contributes to delays and uncertainties regarding future grants. Overall, his policies are poised to overturn the decades of partnership the federal government has built with nonprofits to support the people in their communities.
According to nonprofit leaders, researchers and funders, this vast, interconnected set of programs funded by taxpayers has been significantly dismantled in just a few months. Furthermore, it allows for deeper, permanent cuts. That uncertainty has also hit staff and the community, leaders said.
White House spokesman Kush Desai said in response to questions about cuts to grant funds, “It’s focused on unleashing America’s economic revival for the individual generosity of Americans, rather than the massive government that is often plagued by corruption, waste, fraud and abuse.”
He pointed to a new deduction for charitable contributions included in the recently passed tax and expenditure law that said it would encourage “natural altruism” among Americans.
However, experts say private donations are not enough to meet your needs.
According to an analysis by the Urban Research Institute published in February, $267 billion was granted to government nonprofits at all levels in 2021. The data includes tax-free organizations such as local food pantries, universities and nonprofit hospitals, but underestimates the total funds that nonprofits receive from the government. Grants are included but not including service contracts or refunds from programs such as Medicare. The smallest nonprofits are also excluded and submit different summary tax forms.
However, this figure gives us a sense of measure of historic and solid relationships between the public sector and nonprofit organizations over the past 50 years. The system is currently at risk, and leaders like price say the cost of canceling it will be “devastating.”
Government funding for nonprofits reaches widely
The Urban Research Institute analysis shows more than half of all state nonprofits that received government grants in 2021.
In the majority of the country, typical nonprofits run a deficit without government funding. One, which includes parts of Orange County, California, would not be red if the typical nonprofit organization loses all its funds for public grants, only in two suburban areas west of Atlanta, the analysis found.
But in Orange County, famous for its stunning beaches, mansions and extraordinary wealth, funders, nonprofits and researchers said the discovery was amazed. In part, it is due to the economic inequality of the county and its high cost of living.
Talympalumbo, executive director of Orange County grant makers, said the nonprofit is not optimistic about resilience.
“They’re seeing their budgets go down 50% or 40%,” she said. “Or they have to consider how they run, how they serve, or the number of people they serve.”
Last year, the local Samuelli Foundation commissioned a non-profit need survey as it had significantly increased its grants from $18.8 million in 2022 to an estimated $125 million in 2025.
The foundation responded by opening applications for both unlimited grants and supporting investments in buildings and land. For this $10 million potential award, they received 1,242 applications for over $250 million, said Lindsay Spindle, president of the foundation.
“It conveys a really tough picture of how important an incredibly deep and broad needs are,” Spindle said. “There are no parts of the nonprofit sector that don’t cater to these funds. Every topic you can think of, like poverty, animal welfare, arts and culture, civil rights, domestic abuse, etc., is loud and clear that they are struggling to stay alive.”
Charities have played a special role in the United States
One of the American founding stories is the importance of the voluntary sector, the neighbors who help their neighbors, and the individuals who solve social problems. Other liberal democracies have built strong welfare states, but the United States prefers to look to the charity sector to provide a substantial portion of its social services.
Since the 1960s, the federal government has primarily funded these social services by funding nonprofits, universities, hospitals and businesses. At the time, several new policies converged to create this system, and with the expansion of federal income taxes during World War II and codification of tax-free charities in 1954, the Kennedy and Johnson administrations began directly funding federal money as part of city renewals and great social programs.
“It was a key approach to medieval liberalism, like addressing the issue of poverty, civil rights and racial inequality, but not expanding the scale of government,” said Claire Dunning, assistant professor of public policy at the University of Maryland College Park. Conservatives also tend to support working through local, private and non-profit organizations for reasons different to liberals, she said.
With various expansions and cuts between different presidents, the federal government continues to provide funding to nonprofits at a substantial level, essentially hiding the government clearly, Dunning said. The scale and importance of nonprofit devices suddenly became visible in January when the Trump administration tried to freeze federal grants and loans.
Dunning said the speed, hostility and scale of the proposed cuts were broken by a long legacy of bipartisan support for nonprofits.
“People didn’t know that the public health information and services they received, their meal-on-wheel programs, their after-school tutoring programs, and the cleaning of local parks were actually possible by public government dollars,” she said.
A coalition of nonprofits challenged the court freeze in an ongoing case, but in six months since then, the administration has cut, suspended or halted a huge number of programs and grants. The impact of some of these policy changes was immediately felt, but many people will not hit the ground until they run out of funds for the current grants.
Private donations cannot replace the scale of government support
Laguna Beach’s Friendship Shelter has an annual budget of approximately $15 million, of which $11.5 million comes from government sources. Price said government funding housed 330 people and was “woven” in a complex way to support it. They have already lost rental refund grants from the U.S. Housing and Urban Development Agency. However, the Samuelli Foundation intervened for three years to fill up the lost funds.
Such support is very unusual, she said.
“We don’t know the massive private charity response to accommodating people because it’s an eternal commitment,” Price said. “They will be in the home and will need subsidies for the rest of their lives. These are serious disabled people with multiple issues that they need help.”
She also believes that even in wealthy places like Orange County, private donors are not ready to give five, six or eight times the current one. The donor has already granted government grants, and she has stated that she pays 69% of the actual program fees.
“We’re making a loss to the government for this service, losing our business, and embedding that loss with these Medicaid dollars and private funding,” she said.
She said her organization discussed that if government funding was cut further, her organization would need to drive people out of bringing people back on the streets.
“I think that signalled me that something is deep and deeply wrong about how I see these issues,” Price said, “If we were making a bet, I think there’s still good things to the government that are enough to prevent it.”
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Original release: July 22, 2025 6:02am EDT
