It’s Time for a Sector-Wide Reality Check

The Center for Effective Philanthropy (CEP)’s newly released report, “A Sector in Crisis: How U.S. Nonprofits and Foundations Are Responding to Threats,” provides a telling look into the current state of the nonprofit and philanthropic fields in the face of an overwhelming onslaught of funding cuts, legislative actions, and executive orders affecting the communities we collectively seek to support.

The report provides glimpses of hope from examples of nonprofit resilience and clarity, and from examples of funders stretching to meet the moment. It also paints a picture of a sector mired in a chaos, uncertainty, and desperation that mirrors what we are increasingly seeing in communities across the country.

Most of all, it serves as a clear message that we all need to grapple with the reality we find ourselves in. We need to find greater clarity and recognition of the current context, and to be clear and transparent with one another about what philanthropies and nonprofits should do, what we can do, and what our priorities are.

Reality Check for Funders: Our Response Hasn’t Measured Up (Yet)

One of the most compelling messages that those of us in the philanthropic field can take away from CEP’s findings is that, as a sector, we are not meeting the moment as well as we think we are. 

Clearly, there are leaders within our sector taking bold action and moving resources at a scale, and in a manner that reflects an understanding of the seriousness of the context we find ourselves in, but for the most part, our assessment of our own response to the current environment claims a much more robust and positive effort than our grantees are experiencing on the ground. 

Notably, 93% of funders surveyed rated themselves as “moderately” or “very effective” in understanding grantees’ challenges, and 91% said the same for their own responsiveness, while only 54% and 59% of nonprofit leaders rated their funders as effective in those areas, respectively.

Looking more deeply, it’s not hard to see how such a stark gap in perception is emerging between nonprofit leaders and their funders. While 70% of nonprofit respondents report losing funding from one or more sources over the last year, and a similar number express concern for the financial stability of their organization, less than a third of funders report increasing their payout, and only 28% provided or increased multi-year giving. In fact, nonprofits were slightly more likely to report losing foundation funding in relation to the current federal context (35%) than they were to report losing federal funding (34%). 

Considering the Case for Bold Action

Too many of our nonprofit partners are clearly communicating that the current context is an existential threat to their organizations and, in some cases, their communities.  Even if funders don’t have the power to fully shield our partners from harm, we must agree that we are obligated to step out well beyond business as usual given the extremity of the moment.

The CEP report is one of many indicators that we are living through the proverbial “rainy day,” and our communities, our missions, and our grantees  are under threats in ways we have not seen in recent memory. If we listen to our grantees as well as we say we do, it will be hard for any of us to dispute this. 

The report measured philanthropies’ action on a number of important fronts: increased payout rates, multiyear grants, unrestricted funding, new forms of assistance beyond the grant, and funding emergency/rapid response. It is clear that more of all of the above are called for, and called for immediately.

At the Maine Health Access Foundation, we have made an effort to utilize all of the tools examined in the report: operating at an increased payout rate, making significant new commitments of unrestricted funding, making mostly multiyear grants, and engaging in new forms of assistance beyond the grant, including supporting many of our grantee partners to engage support from national experts to conduct scenario planning for the new funding landscape we are finding ourselves in.

We also provided emergency/rapid response funding in 2025, both independently, and collectively with other funders through a pooled funding approach, a strategy that deserves to be more common in our evolving response to the current context.

Don’t Overlook the Potential of Pooled Funding

In Maine, our rapid response pooled fund was hosted by the Maine Philanthropy Center, a statewide philanthropy infrastructure organization that works to make philanthropy more effective and equitable. The fund engaged eight foundations and a slate of individual donors to pool resources to support Maine nonprofits to prepare for and respond to loss of federal funding, cuts to social programs, and targeted harassment of marginalized communities through legal consultation, data and physical security, crisis communications, and more.

This collective approach does a number of things that we should be striving for as we navigate philanthropy’s response to the threats our communities are facing. First, it creates a central source for support that can save time and energy for nonprofits, rather than being forced to make a series of cases to many funders for support, typically through engaging in a series of bespoke funder processes that require re-framing to match the specific nuances of each funder’s strategic priorities. 

It also makes space for multi-issue or multi-constituency organizations to access resources that can be difficult to obtain, especially if they don’t fit neatly into the narrow boxes that funders have established.

The threats we are currently facing exist on multiple fronts, representing an interconnected web of policies and actions designed to sow chaos and split people from different communities and identities from one another. The response must be an interconnected web of solidarity, community care, community organizing, and policy action. This requires us to reduce our funding silos and support aligned work across issues and communities. Collective funding strategies can help us move in this direction.

An evaluation of one pooled fund response to COVID-19 public health efforts in California showed that pooled funding has the potential to reduce administrative burden on grantees, allow funders to stretch beyond their typical silos, and boost learning and community impact.

Pooled funding approaches certainly have potential pitfalls, including a risk of funds being concentrated to efforts and organizations that most cleanly fit a mainstream common denominator. But if approached with a clear commitment to directly impacted leadership and power sharing, they deserve a more prominent place in our response, as they can provide a scale more appropriate to the moment and help funders get out of their own way and out of their narrow silos.

Reality Check on the Scale of the Threat — and Our Capacity

The final reality check that CEP’s report prompts for me is one that both funders and nonprofits will need to grapple with in the coming months and years: a clear-eyed assessment of the scale of funding cuts and community harm in comparison to the capacity of philanthropy to mitigate it.

For example, in my home state of Maine, total annual foundation giving was approximately $359 million in 2023, the most recent year for which we have data. Maine is also expected to lose an average of approximately $500 million in health-related federal Medicaid funding alone per year over the next ten years, as a result of the federal budget passed in July. This does not include funding losses for substance use treatment and prevention, environmental protection efforts, education, arts programs, or any of the numerous other examples of the ongoing stripping of resources from our communities. 

Even if all of us in the philanthropic field heed the call from our nonprofit partners (as we should), and make significant increases in our payout rates, unrestricted grants, emergency response funds, and collective funding efforts to the fullest extent of our capabilities, the avalanche of cuts and the explicit targeting of already under-resourced communities cannot be fully mitigated.

While bold action is clearly called for from philanthropic organizations and donors, it needs to include explicit conversations with communities about those things we absolutely cannot afford to lose, with a recognition of the scale of the harm we are facing and the difficult choices we are all going to need to make together about our shared priorities.

Despite the onslaught of despair-inducing news we see every day, and the challenges like the ones explored in CEP’s report, I still hold a lot of hope that philanthropies and nonprofits can work together to build a more robust system of community care and collective action to bolster us through what will undoubtedly continue to be a disastrous time for so many.

In order for that hope to be realized, we need to face the realities before us, step up, and do everything in our power to live up to our missions and values.

Jake Grindle is president and CEO of Maine Health Access Foundation.