The social sector is in severe distress, and the money trail is easy to follow.
Researchers Phil Buchanan and Elisha Smith Arrillaga say nonprofits across the country have faced an existential crisis since January 2025, when the Trump administration and its allies in Congress began freezing federal funds, terminating grants, investigating nonprofits, censuring specific causes, holding congressional hearings, threatening to revoke tax-exempt status, and tying federal funding to Trump's political priorities. At the same time, demand for nonprofit services has increased because of cuts to social safety net programs.
Their work focuses on philanthropic foundations, which control $1.8 trillion in charitable assets. In 2025, foundation giving totaled $117 billion out of $617 billion in total charitable giving, nearly one in every five charitable dollars, according to Giving USA.
Yet the overall response was not enough, Buchanan and Smith Arrillaga say. Foundation giving increased by just 3% in 2025, adjusted for inflation, compared with a 15.6% increase in 2020, when foundations responded to the pandemic.
The contrast matters because the current crisis is hitting nonprofits while federal support is being cut. Buchanan and Smith Arrillaga cite one recent analysis saying the cuts were nearly 40% in just the first eight months of the second Trump administration, or some $14 billion. They say that total is now undoubtedly much higher.
Nonprofit leaders are reporting burnout, layoffs, and in some cases closures. Food banks are rationing supplies, domestic violence shelters are closing, housing groups are paring back services, and environmental organizations are shutting down.
A survey Buchanan and Smith Arrillaga conducted in May and June found that 65% of independent foundations said their payout rate was 'typical' this year, with many defaulting to the IRS-mandated minimum 5% of assets spent in charitable distributions. Only 8% of foundation CEOs said the foundation response to the current context has been 'very effective,' and only 12% graded their own foundations' responses that way.
A majority cited risk aversion, and many pointed to their boards as an impediment to doing more. The authors say the biggest lever was obvious: move a higher proportion of assets out the door and into grantmaking.
Some foundations did step up, including Marguerite Casey, MacArthur, and Robert Wood Johnson, which the authors say increased giving significantly and spoke out in defense of the sector.
But the broader picture is clear. Capital is sitting still while communities lose services, and the taxpayer is left to absorb the fallout when private institutions choose caution over action. Foundations control the assets. The question is whether they will use them as intended, or preserve balance sheets while nonprofits shrink.
