Navigating Federal Funding Cuts: Strategies for Mission-Driven Organizations
Insights, delivered.
As we settle into a new administration, we’ve witnessed a string of executive orders intended to dismantle diversity, equity, and inclusion while unraveling decades of federal anti-discrimination policy. These will have rippling effects on nonprofits, associations, universities, and government agencies—and the people they impact. This week’s attempt at a federal funding freeze would have been the most consequential for these organizations, potentially affecting trillions of dollars and the lifeline they need to survive.
Here’s what we know:
On Monday night, the Office of Management and Budget (OMB) sent a memo to all federal agencies instructing them to temporarily pause all disbursements of federal financial assistance that could conflict with the president’s agenda (noted above, in part).
The White House intended to pause federal grants and loans effective 5 p.m. on Tuesday, January 28.
The National Council of Nonprofits and Democracy Forward filed a Motion for a Temporary Restraining Order in the U.S. District Court for the District of Columbia, successfully blocking the order from OMB with a stay until Monday, February 3.
OMB ultimately rescinded its memorandum on Wednesday, January 29 following the legal pushback and outcry across industries.
This week, it’s clear how dire the circumstance can become for countless organizations. The federal government is the largest employer in the nation. The National Council of Nonprofits estimates that nearly 1.5 million nonprofits in the U.S. employ over 12 million people. These decisions, left unchallenged, have the potential to upend entire industries.
While it may have been a near miss this time, we’re just at the tip of the iceberg with what may be a four-year battle. What can’t be done overtly can always be attempted covertly, and we’ve yet to see this administration’s full intentions play out. Hear us when we say that now is the time to be proactive. Below, we’ve outlined some short and long-term strategies that you can focus on right now:
1. Take Care of Your People
First…breathe. Yes, it’s time to tap in and dig deep—but you can’t pour from an empty cup. Your staff, volunteers, and stakeholders feel the tension and anxiety of the moment. Take time to recognize your humanity and that of the people around you. Your internal communications during this time can help validate and (hopefully) calm those feelings.
Acknowledge the gravity of the situation: Be transparent about the potential impacts a funding cut could have on your organization, and discuss the details or data openly. Be prepared to receive a range of responses and to communicate through them.
Support mental health: Provide a space for employees to express concerns and, if possible, offer mental health resources or counseling services.
Communicate a clear plan of action: Share immediate steps your organization is taking to address the challenges and keep open lines of communication for questions, concerns, and feedback.
2. Keep Your Finger on the Pulse
These circumstances will evolve and change along with the rapid news cycle. Staying connected with trusted industry partners and networks can help you anticipate challenges and identify opportunities.
Some key organizations to follow include:
Keep an eye on these industry leaders for timely updates, advocacy resources, and community support that can help you make informed decisions and adapt to major shifts.
3. Conduct an Internal Audit
You need to identify—and even quantify—your level of risk now. Understanding the specific impact of your organization’s federal funding is crucial for your operations right now. The auditing process is a holistic team effort. Engage your entire team in identifying risks and brainstorming solutions.
Evaluate funding streams: How much federal funding do you receive? Identify which grants and revenue sources are at risk.
Assess your budget: Forecast potential shortfalls and identify areas where you can cut costs without compromising your mission long-term.
Analyze program impact: Determine which initiatives may be most affected and develop contingency plans to ensure continuity of services.
4. Get Creative: Collaborate and Innovate
In times of crisis, creativity and collaboration can open new doors. Consider ways to be less reliant on federal funding through partnerships and innovative approaches.
Leverage community partnerships: Collaborate with local organizations, businesses, and foundations to pool resources and share expertise. Many of them have a volunteer program or even a volunteer force available to help. For example, we’ve heard of a local Austin nonprofit partnering with a local medical organization to continue providing at-home care as part of their suite of senior care services.
Explore new funding opportunities: Launch crowdfunding campaigns, apply for foundation grants, or host community fundraising events. Can you engage the private sector? How can you appeal to Corporate Social Giving efforts? Encourage corporations and private donors to step up and fill the gap left by federal funding cuts.
Think outside the box: Can you develop educational resources for sale? What about hosting virtual events to engage donors and stakeholders?
Necessity is the mother of invention. While it may be more of a long-term strategy, now is the time to think outside traditional funding models.
5. Raise the Alarm to Your Stakeholders
Your supporters and stakeholders want to help—you just need to show them how. Lead with thoughtful, transparent communication to educate and build support when you need it most.
Appeal to donors: Craft compelling campaigns that illustrate the real-world impact of potential funding cuts on your organization and the people you serve. Be specific with your messaging to target the people who really care about your mission, and while you’re at it, don’t be afraid to lead with emotion. This isn’t the time for a generic “support our cause!” email—paint a picture! The more concrete data you use, the more convincing and compelling your appeal will be (e.g. “the loss of funding means x people will go without our services.”).
Advocate and educate: Share stories that bring your causes to life and highlight why federal funding is critical to your mission.
Engage policymakers: Build relationships with industry leaders and government officials to advocate for policy changes that benefit your sector.
Reputation management: Consider how your organization will respond, especially in the online spaces where you exist. For example, you could have prepared responses for any social media commentary that may arise.
Right now, your external communications may feel strikingly similar to your most desperate brand awareness or donor campaigns—and they should be. Now is the time to highlight the people at the receiving end of these kinds of sweeping decisions. Advocating for your mission and continuing to organize around it is the best way to protect your organization.
6. Plan for the Long Term
All of these events serve as a stark reminder of how quickly everything can change. Every organization should obtain not only adaptability in their operational and financial strategy, but a strong sense of resilience, too.
Diversify revenue streams: Reduce reliance on federal funding by cultivating corporate partnerships, launching major gift campaigns, or developing earned income strategies.
Refine & adapt to survive: Operate within the constraints of the current administration while staying true to your values. You may explore temporarily adopting a more neutral tone in public communications or emphasizing shared goals to build bridges with potential funders.
We’re with You.
There’s no sense in sugarcoating the significant challenges ahead. Take a deep breath, and then use them as an opportunity to refine, innovate, collaborate, and build. We have a library of free tools and other resources for mission-driven organizations, and our team at Mighty Citizen is here to support you however we can!