Months before the November election, leaders at World Relief — which relies heavily on federal funds — built two budgets for the year ahead.
One was roughly in line with the previous year: $190 million to support about 2,000 staff who help resettle refugees in the United States and respond to humanitarian crises around the world. The other — a slimmed-down “adverse budget” — was based on an assumption that government funds for refugee resettlement could be slashed to zero.
As the Trump administration’s Department of Government Efficiency has moved to cut off the flow of funding to domestic and international nonprofits, the reality has been much more dire, said Myal Greene, CEO of World Relief.
Many nonprofits find themselves in a similar bind: how to meet their missions and plan for a future where government funding is not guaranteed. Indeed, if government funding disappears, 60 to 80 percent of nonprofits that receive government grants could fail to cover their expenses, according to data analysis from the Urban Institute.
“When we compared the adverse scenario to what’s actually happened, the rate of decline in federal funding has been much more rapid than we anticipated,” said Greene.
He expects this year’s budget will be around $130 million, down about 30 percent from last year. That’s despite an influx of donations from local churches, individuals, and other private donors, who have contributed more than $8.7 million since late January. That’s forced the 81-year-old organization, the humanitarian arm of the National Association of Evangelicals, to reduce its operations in conflict-affected countries like Sudan and Haiti and furlough or lay off about 400 employees.
The charity has long been a recipient of funds from the U.S. Agency for International Development and the State Department. Along with money from local governments and the United Nations, government support usually makes up between 65 percent and 80 percent of the group’s budget.
Since President Trump began his second term, “our finance team has re-forecasted our budget at least five times and had to constantly rebuild and adjust cash-flow models,” said Greene. Normally, that kind of major budgeting exercise, based on five-year economic models, would happen just two or three times a year.
Although the administration’s freeze on federal funding for a wide range of nonprofits was temporarily blocked, many continue to report stops and delays. Agencies across the federal government continue to cut sources of funds that nonprofits rely on, and federal layoffs have made it increasingly difficult for some nonprofits to access information about the status of grants and funding programs.
Last month, World Relief received stop-work orders for USAID-funded programs, some of which later received waivers to continue. Grant awards were canceled and then restarted.
“The federal grant process has been fraught with confusion at every step of the way,” said Greene. “It’s very inefficient in terms of being effective in our work.”
Payments for work completed that would ordinarily take just a few days are now taking months or more. On March 12, World Relief received its first repayment since December 2024 — $527,000 for work done prior to the stop-work orders.
“For organizations that work primarily on a reimbursement basis, this has just crippled cash flows,” Greene said.
Widespread Impact
With federal funding streams cut off, financial harm could be felt by nonprofits with a diverse set of missions.
In Alaska, a state that is one of the largest recipients of federal funds per capita, roughly 37 percent of its annual budget comes from the federal government, according to Laurie Wolf, president of the Foraker Group, an association of Alaskan nonprofits and tribal groups.
“While the situation is changing daily, it is certain that fear, confusion, distraction, and chaos are causing nonprofits, tribes, and local governments in Alaska to question how to move forward with staffing, service delivery, and construction projects,” Wolf said at a recent press conference.
“They’re looking at their programs and their budgets to assess how or if they will be able to move forward without federal funding,” she said.
In a recent survey of Foraker Group members, half the 130 respondents noted that their organizations rely on federal funds for 50 percent or more of their budget. More than 10 percent said a continued funding freeze would put them out of business. Many of those groups provide essential health and social services.
Nonprofit-finance experts suggest building contingency budgets as a best practice to mitigate potential risks.
“Scenario budgeting, combined with reaching out to funders, is something that we would suggest even in the best of times,” said Kristine Alvarez, a senior consultant for the Nonprofit Finance Fund.
“That can feel really overwhelming when there are so many threats to the system,” she acknowledged. “Nonprofit leaders are making decisions now that are having an immediate impact on communities. If you can’t count on that funding, then you can’t hire the staff that you need or buy the things that are necessary to deliver services.”
Scenario budgeting can offer nonprofits the kind of clarity that allows them to talk to funders about specific needs, said Alvarez.
She emphasizes that looking for new sources of revenue takes time and that it’s not a realistic solution to assume private donors can make up for reduced contributions from government — especially for the many organizations providing an important safety-net service. Still, she said, “philanthropic funders can also take action right now,” by committing flexible, long-term support to their grantees. “It’s really important that they are part of this, to help shore up that uncertainty.”
Planning Impeded
A funding freeze at the Environmental Protection Agency has meant climate groups like GRID Alternatives, which helps low-income communities install solar-energy systems, may not be compensated promptly “or at all, in a worst-case scenario,” a GRID spokeswoman said.
While GRID’s work is primarily funded by state programs and assisted by federal tax credits, the group received more than $350 million from the EPA through the Inflation Reduction Act to support work with affordable-housing nonprofits and tribal communities.
“The funding uncertainty impedes our planning to deploy thousands of solar systems,” Wanda Heard, senior public relations and advocacy manager for GRID Alternatives, said in a statement provided to the Chronicle. “Uncertainty has also injected risk into hiring processes already underway.”
All kinds of groups are feeling the pinch.
The Lancaster Cleft Palate Clinic, which supports children with craniofacial birth defects, also finds itself in limbo. About one-sixth of the clinic’s $3 million budget comes from federal sources, doubling funds provided by the state of Pennsylvania. Those funds typically arrive in the summer.
“We have no idea if the funds will be federalized like usual,” said director of development Deanna Meyler. Her colleagues, she said, are “experiencing tremendous stress, anxiety, and helplessness.”
The clinic is preparing two budgets for its next fiscal year, which begins in July. “We have our budget for if everything goes to plan,” Meyler said, and one with $450,000 missing. “If we lose these funds, we are unsure what our next steps are.” Changes to Medicaid would have a more dramatic impact on its ability to serve clients, a disproportionate number of whom receive government insurance.
Staff members have gone through the budget line by line to identify what they can afford to cut. That could mean, for example, holding off on hiring a new dental assistant or speech-language pathologist, despite the need. With 37 employees, the staff is already lean.
“We’re trying to be thoughtful about our current budget and make sure that we don’t have any deficit going into the new fiscal year,” Meyler said.
In conversations with donors, she’s trying to strike a balance — conveying the uncertainty while “not sounding doomsday,” she said. “We don’t want them to be afraid that we won’t fulfill our mission.”
‘It’s Daunting’
Many nonprofits were already facing financial stressors and workforce challenges before the federal government froze or eliminated funding. In a recent national survey of 230 nonprofits by the accounting firm Forvis Mazars, almost half of respondents said they lack sufficient money to deliver their programs and services. Almost two-thirds said they are hampered by staffing shortages.
The Little Tokyo Service Center, which provides an array of social services and builds affordable housing in Los Angeles, has been squeezed by the state’s insurance crisis, said CEO Erich Nakano. The insurance bill for its roughly 1,000 units of affordable housing increased by more than 250 percent in the last year — from $800,000 in 2023 to $2.9 million in 2024.
“That’s a huge budget crunch for us,” Nakano said. “Combined with the threat of federal cuts, it’s daunting.”
Roughly 40 percent of the nonprofit’s $14 million annual budget comes directly from federal sources or federal dollars that pass through the state or the county. Now the status of several key grants is up in the air.
The center gets around $50,000 annually via the Department of Housing and Urban Development’s Section 4 program, which supports housing and community development for low- to moderate-income households. Those funds are distributed by three larger nonprofits — Enterprise Community Services, LISC, and Habitat for Humanity — though HUD said it would cancel contracts with two of those regrantors, effectively removing $60 million for small community development groups.
The Little Tokyo Service Center has a pending grant from Enterprise, though it’s unclear whether that funding will materialize. “We probably are going to have to put a moratorium on new projects,” Nakano said.
Additionally, the Small Business Administration has provided a $70,000 grant to support the Asian and Pacific Islander Small Business Center to support immigrant small businesses. That program is run by a collaborative of six organizations, including the Little Tokyo Service Center. The SBA sent a memo to grantees under the Women’s Business Centers funding program asking them to report whether they comply with Trump’s anti-DEI executive order. Nakano’s team replied that the center is in compliance — and now the staff is waiting for a response.
“Worst-case scenario, if we can’t make up that funding, we would probably have to lay off one staff person,” Nakano said.
His executive team is figuring about what programmatic and staffing priorities rise to the top and which will have to go on the back burner. But they’re not putting together alternative budgets, he said. “We feel like it’s not worth the time spent planning for things we just can’t predict.”
For now, Nakano said, “The main disruption is just a whole lot of leadership time being taken up dealing with all this crap on top of the existing work.”
