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Across generations, America has come to depend on nonprofits to meet many of its most basic human needs: feeding the hungry, housing the homeless, supporting families, and responding to crises. Over time, this reliance has deepened, often without the resources to match it.
This system has long been stretched thin. But now, according to the 2025 National State of the Nonprofit Sector Survey, that strain has reached a breaking point: funding cuts, delayed payments, and inadequate cost coverage are colliding with record levels of need.
This represents not only a structural failure, but a challenge to our shared sense of responsibility. And its impact will fall hardest on those who rely on these organizations for the essentials of daily life.
The Economic and Structural Challenges Facing Nonprofits
Nonprofits across America are facing an unprecedented convergence of challenges in 2025:
Escalating Costs and Mounting Inflation: 86% of nonprofit leaders report that high costs due to inflation affected their organizations and the people they serve in 2024. From rent to insurance to basic supplies, every expense has climbed, but their funding hasn't kept pace.
Deep Government Funding Cuts: Among organizations that receive government funding, 84% expect cuts as a consequence of the 2024 election results. Even more alarming: 65% anticipate these cuts will exceed 10% of their government revenue. For many organizations, this means the difference between keeping doors open and shutting down entirely.
Surging Demand for Services: 85% of nonprofits expect demand for their services to increase in 2025. Nearly half (48%) couldn't meet increased demand in 2024, and 54% don't expect to meet the rising demand this year.
The math is unforgiving: expenses keep climbing, resources keep shrinking, and need keeps growing.
Feeding More With Less
Nowhere is this crisis more visible than in America's food banks and hunger-relief organizations. Food security ranks among the top critical community needs identified by nonprofit leaders nationwide, yet the organizations meeting that need are being stretched to their limits.
A human services leader in Texas captured the urgency: "As federal funding recedes, competition for philanthropic dollars will increase significantly. Government funding freezes are especially harmful in the area of reimbursements for funds already spent. Freezes in federal funding will lead to very significant changes in funding for food banks and the availability of low-cost food for local distribution."
Consider what this means in practice:
- Over one-quarter of Americans were living near or below the poverty line in 2023
- 80% of surveyed nonprofits reported that service demand increased in 2024 compared to 2023
- Financial security and food security were identified as top community needs across the country
- Yet 36% of nonprofits ended 2024 with an operating deficit, the highest percentage in a decade
Food banks are being asked to feed more people with less money, less support, and less infrastructure while facing their own mounting operational costs.
The Cost of Broken Systems
The relationship between government and nonprofits has long been marked by imbalance, but the current crisis exposes how deeply that imbalance runs.
Delayed Payments Create Cascading Strain: Among nonprofits with government funding, 55% reported being paid late in 2024. Eleven percent experienced average payment delays longer than 90 days. Imagine delivering services today but waiting months for reimbursement. Organizations must dip into reserves, pause programs, or delay paying vendors, sending ripples throughout the communities they serve.
Funding Falls Short of Real Costs: Seventy percent of surveyed nonprofits said they could only charge an indirect cost rate of 10% or less on government contracts. This is a rate recently acknowledged by the federal Office of Management and Budget as insufficient to run a healthy organization. This means nonprofits are subsidizing government services with donations, volunteer labor, and by underpaying their own staff.
Financial Resilience Is Eroding
- 52% of nonprofits have three months or less of cash on hand
- 18% have one month or less
- Only 20% have more than six months of reserves, down from previous years
This isn’t sustainability. It’s survival mode.
When the Safety Net Stretches Too Thin
The ripple effects of this crisis extend far beyond organizational balance sheets:
- Only 41% of organizations can pay all full-time staff a living wage
- Just 67% offer health insurance (and only 12% of small organizations)
- 68% report staff burnout as a challenge
- 75% struggle to employ enough people to do the work
One California human services leader put it bluntly: "A key financial challenge we are facing is managing the rising costs of operations, particularly due to inflation and supply chain disruptions. These factors have led to increased expenses for materials, labor, and logistics, which are putting pressure on our budget."
When nonprofits can't pay living wages, can't hire enough staff, can't cover operational costs, and can't build reserves, the people who suffer are those who depend on these services:
- Families who need food assistance
- People experiencing homelessness who need shelter
- Children who need quality childcare and education
- Communities recovering from disasters
- People seeking mental health support
These aren't abstract statistics. These are neighbors, family members, and fellow citizens.
What We Owe Our Nonprofits
Over time, the U.S. has shifted much of its social responsibility onto nonprofits, often without ensuring they have the means to meet that responsibility.
The government:
- Routinely delays payments, leaving nonprofits to bridge the gap with their own limited reserves
- Underfunds the true cost of services, forcing organizations to subsidize essential work
- Requires extensive reporting while providing inadequate administrative support
- Reduces funding during periods of greatest public need.
- Places impossible expectations on organizations it fails to fully support.
And now, as 84% of nonprofits brace for funding cuts and 85% anticipate increased demand, the government is pulling back even further.
It’s more than a policy failure. It’s a test of our collective values.
Respecting the Cost of Care
There’s a lingering belief that nonprofits should simply be grateful for whatever support they receive. That passion and purpose can make up for inadequate resources, and that financial stability is somehow less virtuous than self-sacrifice.
But here's what the data shows: Nonprofits are economic engines. The organizations in this survey alone:
- Employed more than 84,000 full-time and 31,000 part-time staff
- Spent over $100,000 at local vendors (44% of respondents)
- Contributed more than $500,000 in salaries (53% of respondents)
Nationally, nonprofits employ over 10% of the US private workforce and contribute around $1.4 trillion to the economy each year.
When we underfund nonprofits, we don't just hurt organizations. We hurt entire local economies. We hurt workers. We hurt families. We hurt communities.
Where We Go From Here
Without decisive action, the infrastructure that sustains community life will begin to fracture.
- More nonprofits will close or dramatically scale back services
- Experienced staff will leave the sector for jobs that pay living wages
- Demand will continue to rise as economic pressures mount
- Communities will face growing gaps in essential services
- The most vulnerable will bear the greatest burden
From the survey, an education leader in Michigan captured both the challenge and the determination: "Leadership is scenario planning (so hard given the extreme uncertainty!!) We are also focused on supporting staff morale and on linking arms with partners even more actively, and perhaps finding new ways to engage in mutual support."
Building a Sustainable Future
Preserving the infrastructure that supports our communities will require real commitment and collective action.
From Government:
- Pay on time. Any delay weakens the very system communities rely on
- Fund full costs, including indirect rates of at least 15%
- Provide multi-year, flexible funding that allows organizations to plan and build capacity
- Treat nonprofits as essential partners, not inexpensive contractors. They deliver public good; they deserve public investment.
From Philanthropy:
- Increase payout percentages to match the urgency of the moment
- Give unrestricted support so organizations can respond to urgent needs
- Make multi-year commitments that provides stability beyond short-term crises
- Lift restrictions on existing grants to free organizations to respond in real time
From All of Us:
- Recognize that nonprofits are infrastructure, as essential as roads, schools, and hospitals
- Advocate for adequate funding at all levels of government
- Support local organizations directly, through donations, volunteering, and partnership
- Hold leaders accountable for investing in the systems that sustain our communities
The Strength that Holds Us Together
A human services leader in California said it perfectly: "We are building, not breaking. We are healing, not hiding. We are fighting, but not falling."
Nonprofits across America are showing up every single day, running food banks, providing shelter, offering mental health services, educating children, supporting families, responding to disasters, and holding communities together. They're doing this with insufficient funding, late payments, burned-out staff, and shrinking reserves.
Nonprofits have been asked to do more with less for decades.
How much longer can we ask nonprofits to sustain the nation’s safety net on sheer will and underfunded capacity? And what does that say about the values guiding our society?
The 2025 data is unmistakable: the strain is all too real and growing too quickly. The time to act is now.
Our next actions will reveal whether we are a country that invests in the wellbeing of all its people, or one that allows inequity to persist by neglect.
Nonprofits are still doing the work of holding communities together. The next step is ours to stand beside them.
Data in this article comes from the 2025 National State of the Nonprofit Sector Survey conducted by Nonprofit Finance Fund, which surveyed 2,206 organizations across the United States between January 30 and March 14, 2025.