In November, we published this piece on preparing for the second Trump administration. We reflected on best practices developed by resilient foundations, nonprofits, and other social sector organizations during other disruptive moments, and recommended that organizations shift their focus to more geographically targeted (e.g., state, local) and collaborative strategies, while planning for significant uncertainty.
While we stand by our recommendations from November, we are now in a moment of increased urgency. The new administration has stayed true to its word to pursue aggressive change at a fast pace, seeking to reduce federal funding by $500 billion, lay off civil servants, and scale back global commitments to public health, development, and sustainability. In total, these moves represent a dramatic new role for the federal government in public life.
We are working with many of our clients to adapt their current strategies to navigate this seismic shift. For example:
- Education-focused clients are grappling with proposed deep cuts to the Department of Education and the Institute of Education Sciences (IES), both of which have played important roles in improving educational outcomes nationwide.
- Climate-focused clients are navigating a landscape of reduced federal regulations and the recent elimination of federally sponsored environmental justice initiatives.
- Human services and global development-focused clients are evaluating their funding models and service-delivery approaches, given uncertainties around federal funding streams and the potential collapse of well-established infrastructure, like USAID’s implementing partners.
- Democracy-focused clients are focused on responding to challenges to democratic norms, and on strengthening effective governance and civic engagement at the local and state level.
At periods of rapid change, it can be tempting to “wait and see.” But the nature of the change underway promises persistent uncertainty. If the courts ultimately agree with the Trump administration’s contentions on Executive authority, then we can expect the pace of change and “swinginess” of federal policymaking and spending, as determined by the White House, to remain high. If the courts ultimately check the administration and reaffirm Congress’s powers of the purse and historical checks on Executive authority, then we can reasonably expect the administration to continue to test the limits of its power in ways that might ultimately be reversed but are nevertheless disruptive in the short-term.
In this environment, therefore, waiting for definitive resolution to the current period of upheaval may do no more than sideline philanthropy and civil society organizations. Effective scenario planning and use of flexible infrastructure, like fiscally sponsored pooled funds, provide useful tools to move decisively in periods of uncertainty. But this moment also offers a plethora of “no regrets” opportunities for impact that require not novel approaches or new infrastructure but a clear-eyed bias for action.
-
Funders have the capital to dig deeper
Philanthropy cannot take on the mantle of the federal government (indeed, the proposed $500 billion federal spending cuts are about five times the size of all U.S. foundations’ annual grants), nor is that a desirable precedent to set. Yet a recent Redstone analysis found that 75% of large foundations do not meaningfully exceed their required 5% payout of distributable assets in an average year. With foundations’ endowments up 11.5% in 2024 due to strong investment returns, there is room to pay out more than 5% without risk of spending down the principal too quickly. And depending on each funder’s role in their respective ecosystem, seizing a moment like this one (e.g., to preserve critical infrastructure) may advance the mission more meaningfully than saving resources for the future.
Several years ago, Redstone participated in a workshop with the Atlantic Philanthropies to analyze how philanthropy can think about ripe moments for increased investment. Covid-19 provided an unfortunate demonstration of the benefits of an aggressive approach at a time of crisis. It is worth revisiting that work again now.
The social impact of philanthropic investments can and do change over time. This is a moment where for many strategies, the risks of overinvestment are significantly outweighed by the risks of underinvestment. These are complex decisions that must be evaluated in the context of funders’ unique position and issue priorities. But if the main barrier to digging deep this year is a desire to have resources for a “rainy day,” it may be worth carefully analyzing the tipping points that would instead inspire aggressive action.
-
Investment opportunities and talent abound
With USAID and other agencies’ futures unclear, it is possible that many highly impactful programs will be left in the lurch. For example, an analysis of five innovations developed under USAID’s Development Innovation Ventures yielded at least $17 in social benefit for each dollar invested. And in 2022-2023, USAID made impact investments worth $103M across 63 transactions that helped catalyze almost $2B in funding from other sources.
For funders who view themselves as impact investors, strategic philanthropists, or effective altruists, it is a “buyer’s market.” High-impact programs that have proven their effectiveness through years of rigorous evaluation may soon need new funding sources to continue their vital work. The potential withdrawal of federal support means that private philanthropy could step in to preserve and even scale programs with demonstrated social return on investment.
This transition also presents an unprecedented opportunity to bring experienced talent into the social sector. Thousands of skilled federal workers with deep expertise in program implementation, policy, and evaluation will be seeking new roles. Social sector organizations have a rare chance to recruit these professionals, bringing their knowledge and capabilities to foundation and nonprofit work.
-
Funders can be bold and strategic, modeling the path forward
While compliance with applicable laws is non-negotiable, this is not the time to preemptively overhaul strategies or investments solely to avoid scrutiny from the administration. The social sector’s independence and commitment to evidence-based approaches is more critical than ever. Organizations should stay true to their missions while finding ways to streamline their processes to meet urgent needs.
Indeed, Deepak Bhargava, President of Freedom Together (previously the JPB Foundation), recently spoke out about the “dispiriting tide of fear” that is hindering philanthropy from taking action. Reminding the sector that “courage is contagious,” he announced that Freedom Together is increasing its endowment payout to at least 10% to “provide rapid response grants to communities and organizations under attack.”
Times of massive change can actually present important opportunities to take strategic risks. Foundations should consider increasing their tolerance for innovative approaches that might have seemed too uncertain under the status quo. This could mean testing new collaborative funding models, supporting rapid-response capabilities, or investing in alternative delivery systems for critical services. The key is to maintain rigorous evaluation while accepting that some well-designed experiments may fail.
Furthermore, foundations can leverage their unique convening power to build stronger coalitions and knowledge-sharing networks. By bringing together diverse stakeholders – from community organizations to academic institutions to private sector partners – funders can help create more resilient support systems that do not rely solely on federal funding. This coalition-building work, while sometimes overlooked, can be especially valuable during periods of institutional disruption.
*
Overall, the federal funding disruption and the long-term revision to the role of the federal government it presages creates both a crisis and a catalyst for change in the social sector. While the scale of proposed federal cuts (roughly five times the total annual giving of all U.S. foundations combined) is daunting, this moment also presents an unprecedented opportunity to demonstrate new models of effective intervention. Foundations have the capital, talent, and strategic positioning to respond boldly. By acting decisively now, while staying true to evidence-based approaches, funders can help build a more resilient and innovative social sector. The question is not whether to act, but how quickly and strategically the sector will step up to meet this historic moment.