Nonprofits navigate Trump’s drastic funding cuts

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STACY PALMER: We’ve just never seen something this nasty. The anger, the kind of feeling that none of this aid matters, it’s deeply disturbing to people, really of any ideology because they don’t see that there is an ideology. If you were motivated to want to be a nonprofit or philanthropy worker, why would you do that after somebody has made it sound like it’s the dirtiest profession ever rather than a call to public service?

BOB SAFIAN: That’s Stacy Palmer, the CEO of the Chronicle of Philanthropy. The world of public service is in turmoil with President Trump’s dramatic cuts to U.S. government grants, traumatizing nonprofits and foundations, and destabilizing a swath of civic society. I wanted to talk to Stacy to better understand the on-the-ground realities for organizations that suddenly find themselves in the new administration’s crosshairs. We talk about the unfolding battle over funding, how it’s re-shifting nonprofit priorities, the impact on corporate giving, and whether the private sector can take the place of government support. The president’s recent address to Congress included harsh examples of alleged waste in grantmaking, but there’s still broad uncertainty about Trump’s overarching philosophy about nonprofits. So let’s get to it. I’m Bob Safian, and this is Rapid Response. 

I’m Bob Safian. I’m here with Stacy Palmer, CEO at the Chronicle of Philanthropy. Stacy, thanks for joining us.

PALMER: Delighted to join you.

Copy LinkThe turmoil in nonprofit funding under the Trump administration

SAFIAN: Thousands of not-for-profits, aid groups, universities, hospitals rely on government grants. The Trump administration has targeted that aid, first announcing a full-on freeze of grants and loans in late January, later rescinded, but many subsequent cuts. Then in his recent address to Congress, he name-checked a litany of what he framed as wasteful, absurd grants. What’s going on? What is the mood like in the philanthropy world? Is it anger, is it fear? Are there any cheers?

PALMER: Nonprofits and foundations are mostly terrified, for a lot of different reasons. One is about just the philosophy of cutting off this aid. One is about the direct impact on their organizations. The other is that there’s fear for the safety of their staffs. A lot of concern about whether all of this targeting of nonprofits might lead to physical or cybersecurity or other kinds of threats. So I would say most people in the nonprofit world are in a very bad state, worse than I’ve seen before in my history of covering these organizations, and worse than it was in the Reagan administration when we saw a lot of cuts.

Even the conservatives who feel strongly about cutting government and see that there’s waste are very upset about the fact that this seems so haphazard, that there’s not a philosophy of the idea that we should ask philanthropy to take up the charge and we should be organized about how we think about that. This all seems very random. It comes, it goes. It means that nonprofits can’t make payroll. It means that foundations can’t figure out what the smartest strategy is to do. So it’s a pretty rough time in the nonprofit and foundation world.

SAFIAN: I mean, beyond the funding, you mentioned concerns for physical safety. Are there examples of that or stories of that? Are you just hearing that from certain kinds of organizations?

PALMER: I’ve talked to several grantmakers who said that the first request they’re getting for extra funding is to beef up security, and that organizations that deal with the most controversial issues, immigrants, LGBTQ rights, those kinds of things, feel threatened. They say that they’re concerned about doxxing, and I don’t have any examples, but I can’t tell whether they’re withholding the examples because of fear.

SAFIAN: Things are moving so fast. I mean, there have been lawsuits filed to challenge the administration. It’s hard to follow all the back and forth. I know you guys have launched special coverage to try to keep up with the Trump agenda as it moves around. Is money still flowing but nobody knows for how long or has it been cut off, and is that what we’re talking about? Like a faucet being turned all the way off?

PALMER: Some groups, even though a court said the money has to keep flowing, they say that the money isn’t flowing and that they’ve suffered freezes. Environmental groups, for example, say that they can’t figure out what’s going on with their banks not releasing the money to them, and so there have been disputes over that. So it’s not that no aid is flowing. I think some is, but it’s in no organized way that you can figure out why is it coming from some agencies and not, and when you think about it, all the federal workers who have been laid off, those are the people who would turn on the spigots and make sure that things are flowing and happening. Well, you can’t call the person in the federal government who you used to call. They’re not there anymore.

Copy LinkReactions from the first federal funding freeze

SAFIAN: I’m curious that the morning of that first freeze memo in early January, where were you? How did you react? Did you sense that this was the start of something very different?

PALMER: Yes, absolutely. We knew that things were going to be different than they were in the first Trump term, which really rattled nonprofits in a lot of ways, but it was clear this was different. The part that was most striking to me was how quickly nonprofits responded. They took the federal government to court right away. They worked through the night. As soon as they heard about it, they were taking action. That is incredibly unusual in the nonprofit world, and honestly, they work in the arts, they work in the environment, they work in religion. They don’t always have coalitions that are very strong and agile, but in this case, they did, and they were quickly able to persuade the courts to say, “Wait a minute, halt.” This is not something that really conforms to the law. And so far, they have had quite a few victories in court. There’s still more to come, but they have been winning.

Copy LinkThe role of philanthropy & non-profits in society

SAFIAN: When you refer to the Trump administration’s philosophy behind their actions, I’m curious how you would describe the sort of role of philanthropy and of nonprofit organizations overall in our economy and our society.

PALMER: One of the things that people don’t really understand is they see billionaires who are incredibly wealthy, and they see them giving away money. People like Bill and Melinda Gates, Warren Buffett, and the dollars are striking. They’re more than any of us could think about giving, but they are tiny compared to what the federal government spends. The Gates Foundation could spend all of the money in its coffers, and it would just keep government operating maybe for a day. It’s just the scale is quite, quite different. So it’s very important to understand the role that government plays, and it’s twofold. One is direct funding of nonprofits. The second is when the federal government and the state and local governments pull back, there are more people in need. That means they turn to nonprofits for extra help. So often what happens in these cutbacks is not just that the nonprofits lose the support they need to provide services, but they have more people at their doors.

So the scale of what philanthropy can do versus the federal government is really important to understand. Now, that’s not to say that philanthropy can’t pick up more. There has been enormous run up in wealth as we all know. There are many billionaires who could give very generously and make a difference. So nonprofits are certainly calling on them to do more and calling on the nation’s foundations, Ford, Rockefeller, all the names that you all know, asking them to step up. But it would be foolish to think that any private entities can make up for what the government’s doing.

Copy LinkHow non-profits are reconfiguring their funding

SAFIAN: And so just to play devil’s advocate, for-profit businesses, the private sector, wealthy individuals, they can’t enable all of this work. It has to fall on the government to be the funder?

PALMER: I think there could be a shift in the proportion for sure that comes from wealthy individuals, and so there are some ways to go at it. I think even the biggest defenders of government would say, there are some programs that aren’t really as efficient as they ought to be, and it’s time to re-examine this. I think everybody’s open to that, but it’s this haphazard, not very thoughtful way of doing it that’s causing a problem. Philanthropy can’t know how to step in in this case. Now, you see people like Michael Bloomberg stepping in and giving to the World Health Organization as soon as those cuts were made. So some of these things are beginning to happen, but whether somebody like that could sustain all of the federal government’s contribution is a question. The other thing we have to think about is, do we want the billionaires setting the agenda?

Some of them are very well-intentioned, but some of them are looking out for their own business interests. Some of them are just not aware of all the problems on the ground. That’s one of the difficult things about philanthropy is that you don’t necessarily see billionaires giving to the local food bank. They just don’t know the scale of the problems. So those are the organizations that suffer. You’ll see big gifts perhaps to the well-known institutions. Harvard and MIT will probably continue to get donations, but will the community groups get it if we leave it to the billionaires? Probably not.

SAFIAN: I mean, I can imagine that on the one hand there are grant recipients, not-for-profits, universities that sort of have to reconfigure how they think about what their funding is going to be. And then I guess on the other side, there’s sort of foundations and individual donors who maybe are reconfiguring who and where and what they’re giving to.

PALMER: Yeah, there’s a great reset that’s going on even amid this lack of information. So I know especially at research universities, for example, all those cuts you’ve heard about at National Institute of Health, National Science Foundation, those kinds of things, those are big drivers of the funding to those kinds of institutions. That might mean tuition increases, they might not be able to give as much student aid. They’re going to have to figure out how they make their budgets. Many of them have come to very immediate halts. They’re all reviewing their spending. I don’t think if you’re on a university campus, you can spend a dime now without checking to be sure that it’s still okay to do that. And some foundations have already stepped up and said they’re going to distribute more funds. So the MacArthur Foundation said it would increase the amount it would distribute over the next few years.

Several other foundations are doing it. Foundations are only required to give 5% of their assets every year, and so they’ll ratchet it up to six or 7%. Some nonprofits are saying, “Wait a minute, this is a time of crisis. It needs to be 10%, 15%,” and there’s a precedent for that in that during COVID, we saw really tremendous need and a very swift response from many philanthropies, many big donors to say, “We get it. We need to give more right now.” And so there’s a giant call from nonprofits to say, “We really need you to start giving generously right away.”

SAFIAN: Well, I can imagine too, these donors sort of thinking, “Well, the need has grown for places I’ve committed to. I can’t necessarily match all of those needs.”

PALMER: Right. And some donors also want to stay out of the political fray as much as possible. So they’re thinking about that calculation too and thinking about what’s most important to them. They are also very concerned that they may become targets. So some of them are giving anonymously. They’re often pooling their funds so that it will come from a donor collaborative, a group of people rather than any one individual that then could be targeted.

Copy LinkThe dilemma of corporate philanthropy amid political pressures

SAFIAN: What have you seen in corporate philanthropy efforts? Because we’ve seen a lot of businesses seemingly worried about how they look to the administration, and I can imagine that extends to their corporate philanthropy.

PALMER: I think the biggest cuts that we’ve seen are in diversity, equity, and inclusion programs. So a lot of corporations, everyone will remember after George Floyd, almost every company in America announced a commitment to say that it was going to do more both through philanthropy programs and to support Black-owned businesses. Most of those commitments have been ratcheted back. Now you see some examples of companies that say, “Uh-uh, we’re not going to do that. We’re going to keep our programs. We’re expanding, and we’re going to stay strong.” But for the most part, you see companies like Walmart have cut back on some of their grants, some of their commitments. So I think we’re going to probably see more of that happening quietly. Corporations care deeply about their relationship with the government, and so right now, if they don’t think the mood is good for supporting some things that are unpopular with the administration, they’re going to cut back.

SAFIAN: Stacy’s pulse check on the nonprofit world is pretty bracing, especially if there’s already a chilling effect on corporate philanthropy and other donors. So what’s Elon Musk’s role in all of this? We’ll talk about that after the break. Stay with us. 

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SAFIAN: Before the break, Chronicle of Philanthropy CEO Stacy Palmer outlined how the nonprofit world is reacting to the Trump administration’s cutback on grants and funding. Now, she talks about the role of Elon Musk as a philanthropist and in the government, plus the rise in green hushing, what makes her most worried and most optimistic about nonprofits and more. Let’s dive back in.

Copy LinkElon Musk’s ‘damaging’ impact on the nonprofit sector

I have to ask you about Elon Musk and sort of what do folks think of him in the philanthropy world? I mean, there is a Gates Foundation. Bloomberg has a foundation. Musk is not necessarily known for that, and he’s having kind of a different impact.

PALMER: Yeah. Well, first of all, let’s talk about him as a philanthropist. But he has also, along with President Trump, said some of the most destructive things about nonprofits themselves, that they are horrible organizations that are just sleazy and just trying to make money off of things like homelessness. So there’s been a lot of nonprofit bashing by both Musk and Trump, and that’s incredibly damaging. If they don’t believe in the value of these organizations, it’s going to cause damage in the short term in terms of resources. But if you were a young person trying to decide where you were going to have a career, if you were motivated to want to be a nonprofit or philanthropy worker, why would you do that after somebody has made it sound like it’s the dirtiest profession ever rather than a call to public service? But both President Trump and Elon Musk have had issues in philanthropy.

I think we all remember that President Trump was stripped of his ability to run a foundation because he was not doing a good job or an ethical job of that. We learned about that during the first Trump administration. Elon Musk has said he’s putting money into his foundation, but we can’t find evidence of what it’s going to and what it’s doing. Very small amounts are, but compared to what other people with resources are giving in terms of percentage of assets or disclosing where the money’s going, we are not able to track it. And I have not seen any evidence that very many of the other reporters who are investigating are deeply trying to figure out where do those dollars go. Given the extent of wealth that he has, certainly a lot of concern that especially the cuts that were being made to international development that were really leading to deaths of children. There are certainly a lot of people saying, “Elon Musk, you could, you have the resources to help stave that off. Do you really want to be starving people around the world? That’s not a good look.”

SAFIAN: This harks back to what you were saying at the beginning about the philosophical confusion about what the White House and Trump are doing, because on the one hand, government is inefficient, so we should lay people off. They’re not doing a good enough job. And on the other hand, the nonprofits are not doing a good job, that that’s wasteful also. And it’s like, who is good at what they’re doing or who is worthwhile? I mean, is that what you’re talking about when you talk about the confusion?

PALMER: The confusion is that there’s no real philosophy to say, “We’ve evaluated this program and it’s not working, so we’re going to end this one, but this one’s doing great work in education, let’s say, and we’re going to put more money into that, or at least not cut it.” Something that is a more systematic evaluation based on evidence and results, do the research to say, is this program making a difference and is it making a difference in the short term, in the medium term, in the long term? Is it really changing lives, or do we need to change course, do something differently, end it? How do we think about that? So if government wanted to invest in that, it could say, “That program’s more effective than something else. Let’s give there,” but that’s what we’re not seeing.

SAFIAN: Yeah. And I guess in the corporate and the nonprofit reactions in their programs, on attacks on things like DEI or environmental, how much of that is a shift in semantics versus a shift in mission? I’ve seen the term green-hushing rise, sort of the opposite of greenwashing. So hiding sustainability efforts, renaming things that had been DEI to be something else. What about this is semantics versus mission?

PALMER: Yeah, I think that some, I know pretty much every foundation we’ve talked to said that they’re looking at every word on their website and seeing whether there are trigger words. Just as you see in the federal government, lawyers are reviewing absolutely everything a foundation does to make sure things are okay. In the absence of really clear guidance from the administration, you can imagine why that’s taking a really long time, but it is not leading anybody to move quickly.

Copy LinkThe precarious state of small nonprofits under new regulations

SAFIAN: When I was listening to President Trump address Congress, and he was sort of name-checking through these different programs that he was really kind of making fun of, right? Describing the country of Lesotho as if it were a joke, even though it’s home to 2 million people. But there are plenty of small programs here in the U.S. that find themselves at risk. I’m just curious how they’re responding.

PALMER: It’s the hyper-local organizations that don’t have the resources to really spend time. They don’t have the money to spend on lawyers. They’re responding to immediate needs. They may not have the best information about all of the kinds of things that are happening. It does mean sometimes they just pull back entirely and say, “We can’t do this. This is going to get us a in trouble. We’re going to cut those programs, and we’ll do only the kinds of things that are really safe.” Other organizations will be scrappy and courageous and do things that they believe that they need to do. They probably will make some language changes. I think they will try to watch, make sure their staffs are protected. They might want to take a very low profile. Let’s say the groups that are working with immigrants who are at risk of being deported, you’re going to be very careful about how you do something like that.

So organizations are responding, but they definitely do not have the resources to do it in a way that’s smooth or any of the ways that we would all want that. Some of them will probably be wiped out by some of this. Nonprofits did not come into this crisis with a lot of reserves. COVID really hit most of them very hard. There was federal government money infused into many organizations. All of that has dried up. Inflation has led to amazing increases. In all the amounts that we pay for more goods and services as individuals, well, a nonprofit food bank, for example, is paying the same kind of increase and dealing with it. Nonprofits aren’t on the strongest footing even before all of this stuff happened, and now some of them will not be able to make payroll. So those are the organizations that I’m worried about that could really just disappear in the next few weeks.

Copy LinkNavigating new ventures in this time of uncertainty

SAFIAN: In the for-profit world, there’s always a lot of attention on new organizations, right? New start-ups, certainly right now around AI. Starting a new nonprofit initiative right now must be impossible, right? I mean, it’s never easy, but has that just come to a dead stop?

PALMER: Often what does happen, and it’ll be interesting to see what the federal government workers who are laid off do. They are very public service oriented. They know some of the kinds of things that are needed to do good, and they may think that they have great ideas that private philanthropy may want to support. “Let me try the nonprofit route,” rather than saying, “let me go work for a nonprofit that does similar things,” “I’m going to go on my own.” Those organizations don’t usually do all that well, and they don’t necessarily survive. But I wouldn’t be surprised if we see a wave of that. And it’s possible a few of them will have brilliant ideas that solve problems in new ways. But right now, I would not advise anybody to start a nonprofit.

Copy LinkHow Chronicle of Philanthropy is responding to this cutback in federal spending

SAFIAN: Your organization, the Chronicle of Philanthropy, is itself a nonprofit, if I’m remembering that right? Is that right?

PALMER: Correct.

SAFIAN: How is your organization dealing with these changes? Do you feel like there are risks to you in all of this?

PALMER: Yeah. One of the reasons we became nonprofit is we thought it would enable us to do a whole lot more innovation. There’s been tremendous growth in nonprofit journalism organizations, and when I told my staff that we were doing this, I said, “This is where all the cool kids are now. And this gives us an ability to really think differently about how we do journalism and how close we are to our readership.” Do we worry about the same kinds of things our readers are going through? Absolutely. I think we feel more a sense of purpose. Our newsroom has been reinvigorated by the challenge of covering all these stories. I think they’re all so exhausted. They definitely need to cover these things.

And I have talked to other nonprofit journalism leaders who are concerns that this administration’s hostility to the press could be a problem for tax-exempt status organizations that cover the kinds of issues that the administration doesn’t like. We’ve certainly seen with the Associated Press that the unwillingness to talk about the Gulf of America rather than the Gulf of Mexico has caused them problems. Well, how long until that trickles into the nonprofit journalism organizations that have tax-exempt status? I don’t think any of us are going to stop covering things the way we cover them and that we believe in what we do, but we do know that there are some risks.

Copy LinkHow this era compares to the Reagan administration

SAFIAN: Is there any time in history that you’re looking to as you cover this shifting dynamic in the White House and beyond, or is this so unprecedented that there’s really no place to look?

PALMER: Yeah. Some of my colleagues have asked me that very question, is this precedented? Because we’ve been covering this area since 1988, and so they figured I would be the person to ask and to know. And at first I said, “Oh, absolutely unprecedented.” And then I said, “Wait a minute. I want to check my facts and turn to the experts who I would turn to as a reporter and ask them that question.” The Reagan administration is the one that comes closest because there were these very serious cutbacks, and there was this whole discussion about what is the role of philanthropy and what is the role of nonprofits and how should we do it? So we have asked experts about what kinds of things they have to say. I have two conservatives and two liberals who were involved at that moment who were working in the nonprofit arena, and they all agreed it was unprecedented.

And the reason they said that is is this haphazardness, and what one said, who is a very strong conservative, said, “We’ve just never seen something this nasty.” The anger, the kind of feeling that none of this aid matters, it’s deeply disturbing to people really of any ideology because they don’t see that there is an ideology. They want to talk about what is the view of government. There can be robust debates on that, but this seems unprecedented to the people who have watched this over a long period, which is making it hard to have a playbook. And I think that’s why nonprofits and foundations are struggling is what do you do when you can’t look to history and you have to figure out all fresh what’s happening and how to come together?

SAFIAN: Philanthropy and the work of nonprofits, in a lot of ways, it’s inherently optimistic. Is there anything that’s making you optimistic right now?

PALMER: I think as long as we continue to have nonprofits that are willing to work collectively to make a difference, that does make me optimistic, because sometimes nonprofits just worry about their own communities, their own causes, their own coffers, and don’t take collective action. But if they will come together and continue to do that and stay strong, that could make a big difference.

SAFIAN: Well, Stacy, this was great. Thanks for doing it.

PALMER: Oh, thank you for asking me. I enjoyed the conversation.

SAFIAN: Listening to Stacy, I’m concerned that a layer of our civic society might be being hollowed out if the nonprofit world can’t make up for lost government grants by leaning on private philanthropy. If nonprofit workers have become fearful for their physical safety, it just makes you wary. And with so many historical institutions already under pressure, public schools, houses of worship, community organizations, this could be another blow to the ties that bind Americans together. I hope there’s a plan in the U.S. administration or at local and state government levels to address that risk. I used to think employers and companies might fill the gap, but these days, I’m less sure. I know I’m struggling to find my own optimism, and I just hope that Stacy’s right, that those who are mission-driven to care for others keep the flame burning. I’m Bob Safian. Thanks for listening.