The Trump administration is changing the nonprofit landscape. A recent report from Granted AI found that federal grants to “everyday” charities that are not hospitals or universities dropped more than 40 percent when comparing the months from February to September 2025 with the same period a year earlier.
The Chronicle of Philanthropy has sounded the alarm, noting, “Nonprofits have long relied on federal funding to help them provide vital services to their communities.” And since this funding was “often viewed as more reliable than funding from grant makers, which can shift priorities,” the loss of federal money has “upended finances for charities across the country.” But maybe such an earthquake is long overdue.
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First, it’s important to understand what counts as an “everyday charity.” In addition to the well-publicized cuts from the U.S. Agency for International Development (USAID), which supported NGOs operating in foreign countries, the Trump administration also “abruptly canceled grants to criminal-justice groups, cut funding to arts and humanities organizations, and canceled funding for NPR and PBS.” No doubt some of these cuts resulted from groups running afoul of the administration’s anti-DEI agenda. And the leadership of these organizations would surely argue that they were targeted for political reasons. But the question is: What obligation does the federal government have to support such groups, and what would happen if these groups had to rely more on private donations for their operations?
While the Chronicle refers to the problem of losing federal support and instead being forced to rely on “donors whose interests can be fickle,” those donors are definitely looking for some bang for their buck. And yes, the donors may decide to withdraw funds from organizations that are not accomplishing what they want. But maybe this will force organizations to be more responsive to a wider audience. The donors might still cater to large foundations with liberal agendas, but there’s only so much of that money to go around. The nonprofits may have to rely more on funds from members of their communities. Will criminal-justice nonprofits take the same radical approaches when they need to appeal to a more moderate swath of the population for support? Will NPR be forced to tone down its “woke” reporting?
Relying on public funds also distorts the mission of many nonprofits. Religious organizations, for instance, whose goals are to help kids in foster care or adults with drug rehabilitation, have been effectively neutered by their reliance on public funds to the point that they often function no differently from other government contractors. There is a difference between asking a nonprofit to operate with certain government-set guidelines about, say, licensing foster homes, and simply turning the organization into another government subsidiary.
At least 30 percent of nonprofits receive government grants, totaling $300 billion annually, according to a Candid analysis. That’s almost triple the amount that private foundations give to the same groups. Federal generosity toward these nonprofits has other ripple effects, no doubt encouraging a certain coziness between these organizations and public agencies. While many on the Left and the Right have touted “public-private partnerships” as a way of saving taxpayer money and making projects more efficient, they have also blurred the boundaries between public and private services and decision making.
The depth of these entanglements becomes apparent on the rare occasions when the relationships break down. In 2024, the MacArthur Foundation withheld a grant of $625,000 from the San Francisco District Attorney’s Office until the office showed that it was “fully committed to the goals and strategies” of criminal-justice reform. The foundation leaders announced that they would not pay out the grant until the DA’s office reduced the jail population and launched a fellowship program in collaboration with a local nonprofit called the Bright Research Group to bring people with criminal backgrounds into weekly meetings with DA staff. Who would have thought that a private foundation and its nonprofit subsidiaries could make demands on a local DA’s office?
To be clear, the DA’s office is accountable to the public (which, in San Francisco’s case, ousted its most progressive candidates). But it isn’t accountable to advocates at nonprofits. Those voices have gotten louder and more influential in the past few years, and it’s due in part to the financial nexus between nonprofits and public agencies.
Finally, the fact that government, especially the feds, allocates so much money to nonprofit groups has pushed the entire sector into becoming advocates for more government spending. Once a group receives a federal grant, it soon turns its attention to receiving the next one, and it becomes part of a larger operation calling for more spending at a time when the federal government is already almost $40 trillion in debt.
It’s time for a reset of the relationship between the public and nonprofit sectors. The Trump administration is off to a good start.