Editor’s note: This is the first in what will be a monthly blog column by CEP President Phil Buchanan in 2026. His posts will generally run on the second Tuesday of each month.
In a little less than a year, the U.S. nonprofit sector — comprised of more than 1.5 million organizations, employing 14 million people, engaging millions more as volunteers, and collectively improving quality of life for every American — has been massively destabilized.
That’s a mild word for it, really.
In 2026, many nonprofits across myriad areas of work in communities across the country will struggle to continue to operate as they face both decreased funding and increased demand for their services. Those they serve, in communities in every region of this country, will suffer as a result.
The statistics are staggering. As my colleague Elisha Smith Arrillaga, PhD, described at CEP’s conference late last year, a majority of nonprofits in our nationally representative nonprofit voice panel (comprised of organizations that receive at least some foundation funding) have or anticipate that they will experience a loss in government funding. Nearly half are concerned their organization may need to close or merge. A majority either have cut staff or anticipate that they will. More than 80 percent have experienced — or anticipate — an increase in demand for their services.
This is just some of the data that we will include in a comprehensive report we will release later this month that chronicles the experiences of nonprofits in the current context. Based on surveys as well as in-depth interviews, the report also describes foundations’ responses.
At the time we collected our data, in August and September, fewer than a third of foundations said they had increased payout from planned levels. In addition, we see a striking disconnect between foundations’ sense of their own effectiveness in responding to the challenges of the moment and how nonprofit leaders judge foundations. This should prompt reflection, introspection, and, most importantly, action in foundation boardrooms across the country.
Yet I know, from many conversations I have had with leaders of foundations, that there are a number of concerns expressed frequently in foundation boardrooms that are standing in the way of bolder responses from some.
Let me address three common ones here.
Concern 1: “We can’t possibly fill the gaps left by cuts in government funding.”
That’s undoubtedly true, as I have noted in previous posts, but also hardly a good reason not to act. Funders need to understand the degree to which their grantees are impacted by the current context and then prioritize based on an assessment of both grantee needs as well as alignment with the foundation’s goals and strategies. Increases in overall funding levels (more on this in a moment) will be required.
It’s true funders can’t make up all the gaps; brutally tough decisions will need to be made. But they can make strategic choices to shore up the organizations they believe are most vital. They can also ensure they are using their non-monetary resources – including their public voices, reputations, and connections — to assist key grantees.
Concern 2: “We have a fiduciary responsibility not to erode the purchasing power of the endowment.”
I hear this frequently from private foundation board members, but that’s not, in fact, what fiduciary responsibility — a term that is often distorted in arguments to keep payout low — actually means. It does not require ensuring the purchasing power of the endowment remains constant or increases. Even if it did, spending well beyond the minimum five percent wouldn’t compromise this, at least not in recent years. The S&P 500 inflation-adjusted return has been about 10 percent annualized since 2020.
Look, I understand that many foundations are committed to existing in perpetuity, and I have long believed such foundations play a crucial role in our society. But they can pursue that goal and still take a flexible response to conditions, taking advantage, as MacArthur Foundation President John Palfrey has urged, of that long time horizon to be a counter-cyclical force in times of challenge. “Why don’t we spend more when the need is greatest?,” Palfrey writes. “We should be countercyclical when the situation calls on us to do so.”
There is now an organized effort underway to get funders to pledge to increase their payout; to date, it seems to have attracted mostly progressive foundations but given the way challenges are affecting the sector broadly, foundations of every stripe should be reconsidering their payout rates.
Concern 3: “We need to be careful not to be seen as partisan or to make ourselves a target for politicized attacks.”
Obviously, nonprofits, including foundations, need to operate within the legal confines of what it means to be non-partisan. But, as I have noted on this blog over the past year, I have been disappointed to see more than a few donors and grantmaking institutions needlessly turn their backs on what had been priorities to them just a year ago — like racial equity and climate — apparently just out of a fear of drawing the ire of this administration. Others have fallen eerily, and uncharacteristically, quiet.
But, as George Gund Foundation CEO and CEP Board Chair Tony Richardson put it at the CEP conference, “our values are not illegal” — and it’s crucial that funders fight for what they believe in. CEP works with — and is funded by — funders occupying various points along the ideological spectrum (and many that I’d have a hard time even categorizing). I would hope they could all agree that they should all be free to pursue their perfectly legal programmatic objectives without interference from the federal government. Indeed, this notion of philanthropic freedom has long been championed by conservative organizations like Philanthropy Roundtable as well as more progressive ones.
Foundations should exercise their freedoms and fund what they believe in, not walk back past commitments — or go quiet – out of fear.
As we head into the second year of this presidential administration, it’s easy to imagine that some may become inured to what’s happening. Others may feel understandably relieved that certain threats seem not to have materialized, or not yet at least. But the challenges for nonprofits are likely to keep intensifying. We may or may not weather the same flurries of executive orders in 2026, but the storm — in terms of impact on the ground as funding cuts to nonprofits as well as vital programs roll out — will only intensify, requiring more vigilance and more courage of conviction from funders.
To read the words of nonprofit leaders we surveyed and interviewed for our research is to understand how dire the situation is for many. “The stakes are that we might not make it as an organization,” says one leader.
“We want to be able to come out of this,” says another. “We won’t be unscathed because it’s already affecting us, but we’re trying to make the best decisions possible so that we will continue to exist in the future.”
About a year ago, I wrote on this blog: “Nonprofits are facing significant, arguably unprecedented, challenges and it’s crucial that donors, whatever their ideologies or particular programmatic goals or priorities, pay attention.”
That was then. The situation for nonprofits is far worse today.
More is needed from more foundations in 2026.
Phil Buchanan is president of the Center for Effective Philanthropy, author of “Giving Done Right: Effective Philanthropy and Making Every Dollar Count,” and co-host of the Giving Done Right podcast.
Disclosures: The MacArthur and George Gund Foundations are both clients and general operating support funders of CEP.
