A US Federal Funding Freeze: What Now?

Over the past four years, federal investments totaling trillions of dollars have been directed toward forgotten regions of our country. These bipartisan investments have fueled innovation in technology, spurred research and development, and tackled foundational issues such as literacy gaps, broadband access, bridge repairs, and more. Now, all of it is at risk. 

Last week, in an unprecedented move, the White House proposed a wide-sweeping freeze of federal grants, effectively holding hostage billions—possibly trillions—of dollars in commitments.

This action not only threatened the rule of law but also jeopardized hundreds of economic ecosystems that have been painstakingly built across the nation. Even though the memo was quickly rescinded after 24 hours of chaos, the damage could already be done.  

A few weeks without funding could cripple any state or local government. The anticipated impacts of these policy changes extend well beyond state and local government entities: the many nonprofit organizations that serve as intermediaries to enable the delivery of services through American schools, workforce centers, and community spaces are soon to be in dire straits as well. Federal grants authorized by the CHIPS Act have been awarded to many regional nonprofit partners to spur new K-12 pathways, career-technical education programs, apprenticeship expansions, workforce trainings, capital investments, and many other benefits to enhance our nation’s preparedness as a world leader in technological advancement. 

Take Birmingham, Alabama, for example.

In recent years, Birmingham has won upwards of $125M in federal awards, including the Good Jobs Challenge, the Recompete Pilot Program, and Tech Hubs. These dollars represent re-investment in a city that suffers deeply from a legacy of racism and historical disinvestment. The City’s recent $20.2M Recompete award, for example, has the potential to create over 4,500 new jobs, provide workforce training for 2,500 residents, and impact over 4,700 K-12 students in four persistently distressed neighborhoods (North Birmingham, Northside, Pratt, and Smithfield). 

Through the leadership of the City of Birmingham and Lawson State Community College, the coalition plans to build a workforce training hub that would connect Birmingham residents to good jobs, supplemented by strong K-12 career pathway programming led by local community organizations Birmingham Promise and EdFarm alongside Birmingham City Schools. Now, with the recent executive order freezing federal grants, these plans hang in the balance. Thousands of Birmingham residents—students, workers, families—stand to lose critical opportunities, as the city’s efforts to break cycles of disinvestment are stalled by political uncertainty. 

What now? How do we respond to this looming disaster?

All is not lost. Many entities will find themselves whole again after some delay. However, many others may become examples of the political damage wreaked by the boundary-pushing of the new administration. In the latter case, supporting communities with rescinded awards to pivot their proposal, adapting them to our new political norms, will be their best way forward.

Philanthropy has a critical role to play.

With timely federal funding in jeopardy, nonprofits face acute challenges—salary bills, rent, and contract payments that, if delayed even briefly, could unravel years of progress. The philanthropic sector has a unique capacity to act swiftly and decisively. Here’s how:

1. Treat this like the crisis it is. When a natural disaster strikes or a pandemic sweeps the globe, philanthropic organizations mobilize with urgency. This moment demands a similar response. The first priority should be to make grantees whole. Funders and mission-driven lenders like Climate United and Enduring Planet have already made funding commitments and bridge grants to organizations in the climate space. Philanthropies have the power, and nimbleness, to step in quickly and provide emergency funding to keep organizations afloat during the federal funding freeze.

2. Deploy immediate support to help communities analyze and pivot ongoing efforts. Through the federal grants of the last four years, communities have built up impressive local capacity, expertise, partnerships, and human capital. A deep look at how to save what’s preservable, malleable, and transferable will benefit communities. The support of national partners, lobbyists, federal grant experts, and other organizations like the Community Funding Accelerator can make all the difference.

3. Consider providing emergency funding, including emergency grants and loans. For those with capital, consider establishing a loan initiative to bridge the gap. When—or if—federal funding resumes, grantees can repay these loans. If the federal dollars don’t return, then accept this as a risk for the greater social good—a risk no private lender would take, but one that is essential in preserving the progress made.

4. Uplift examples and stories of success and impact. Many people don’t see or understand the important role federal funding of all kinds plays in their daily lives. Funders with platforms can lift up real stories of that impact so the general public—and lawmakers engaged in this debate—will see how important this funding is. Philanthropy can play a unique role in helping to tell those stories of success in all kinds of communities. 

5. Use your voice and influence. The philanthropic sector wields significant influence and can act quickly to support communities across America in unique ways. We saw this during the early days of the COVID-19 pandemic, when philanthropies sprung into action to meet the needs of individuals, communities, and organizations impacted by school closures, job losses, and public health concerns. Use that power. Advocate for continued investment in bipartisan priorities by elevating the stories of communities transformed by these federal investments. Build coalitions across political and social divides to demand the preservation of progress and stability.

The stakes are too high to wait.

The pause on federal funding is not just a bureaucratic hiccup—it’s an existential threat to programs that have breathed life into underserved regions and provided hope to millions. The philanthropic community must act decisively, creatively, and collaboratively to ensure that the momentum of the past four years is not erased. This is not just a test of philanthropy’s capacity but of its moral resolve. The time to act is now.

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Photo by Tabrez Syed on Unsplash