Executive orders carve out funding from Indiana nonprofit sector, more uncertainty follows

Uncertainty has descended on nonprofits in Indiana — and around the country — as the government reevaluates public funding under new federal and state policies.

Executive orders from President Donald Trump and Governor Mike Braun targeting DEI, gender affirming care, and the environment have already resulted in cuts to nonprofit contracts and grants.

According to a new national analysis, there is cause for concern. Financial data from the Urban Institute shows that 2 in 3 nonprofits have at least one government funding source.

“Our analysis shows that most nonprofits that receive government grants don’t have a large enough operating surplus to weather the removal of these funds,” the report stated. “A prolonged pause or loss of government funding to nonprofits could lead to major disruptions, including a reduction in essential programs and services and fewer nonprofit jobs.”

The Urban Institute is a Washington, D.C.-based think tank that studies social and economic policy impacts on cities. Its analysis examined public filing data for the entire country from the U.S. Internal Revenue Service in order to quantify total government grants and impacts on nonprofit budgets by county, Congressional district, state, and sector.

The analysis found between 60 and 80 percent of nonprofits with government funding might not be able to cover their expenses without this support.

The institute highlighted that nonprofits provide a vast array of services in communities across the country, including disaster response, food and housing support, suicide prevention and intervention, free and low-cost health care, and community groups.

“I think there is an enormous amount of anxiety among nonprofits,” said Kirsten Grønbjerg, an Indiana University researcher who studies nonprofits and philanthropy. Grønbjerg is director of the university-based Indiana Nonprofits Project.

Government grants and contracts, once awarded, are a predictable source of funds for organizations. Other sources of revenue like donations can be less reliable and fluctuate with the economy, Grønbjerg said.

The connection between the nonprofit and public sectors grew stronger between the 1930s and the 1960s, Grønbjerg said. “So it’s a longstanding relationship.”

The analysis shows that nonprofits in most counties in Indiana would have a negative operating surplus if they lost this source of funding. It found $3.3 billion in contracts and grants supports over 2,000 nonprofits across the state.

Over a third of that government funding helps 488 organizations in Marion County alone, where two thirds of nonprofits have some form of public support.

Grønbjerg said organizations like homeless and domestic violence shelters, community action programs, and food pantries are “particularly likely to be hard hit.”
 

One Central Indiana nonprofit has already lost government funding for health care services

The Damien Center has been working to end HIV in Indianapolis since it was founded in 1987 amid the AIDS crisis. While there have been major advances in health care for people with HIV and AIDS, the epidemic isn’t over.

Alan Witchey is the president and CEO of the nonprofit. He said they’re feeling the effects of the executive orders and the complicated ways that they’re playing out in agencies, courts, and organizations.

“One day, you're receiving a notice that you have to comply,” Witchey said, “The next, you're being told it's on hold, and then maybe the federal one becomes on hold, but the state one doesn't.”

The Damien Center lost one federal contract for HIV testing and care management for the transgender and nonbinary community after the federal funding freeze, he said, but a federal judge paused the order and the contract was reinstated 2-3 weeks later.

The nonprofit also lost a contract for roughly $800,000 over four years from the state health department for mental health counseling for the LGBTQ community, which experiences disproportionate rates of mental health conditions.

Witchey said that the Damien Center hasn’t been able to get that contract reinstated. It also lost about a million dollars from the state related to a reduction in Medicaid spending.

He said the Marion County Public Health Department has also reduced a percentage of funding for one contract and decided not to fund another that would have helped people of color who have AIDS. Black people are disproportionately impacted by HIV. The health department told the nonprofit that they didn’t know if they would be able to get federal reimbursement, according to Witchey.

Although the Damien Center expects additional losses, it’s looking for new ways to cut back on services that will allow the organization to still help people, but they may not be able to serve as many as the around 12,000 people they helped last year.

“It may mean that we have to turn people away that have no other options in the community,” Witchey said. “We don't know the total impact yet, and it's continually evolving.”
 

Other nonprofits are also dealing with cuts and uncertainty

The United Way of Central Indiana is a nonprofit that aims to address systemic issues that contribute to poverty, including housing, education, economic opportunity, and basic needs. It oversees large grants, mainly from private and corporate philanthropy, and distributes funds to 90 partner organizations in Marion County and Central Indiana.

UCWI recently surveyed partners and found that seven have already lost a grant or contract potentially worth millions of dollars, said Sam Snideman, Vice President of Government Relations.

“We have a system where organizations have become really reliant on government funding because they serve populations that are hard to serve and may be hard to fundraise for,” he said. “When those funds go away, the needs don’t, but those populations are still hard to fundraise for.”

The Fair Housing Center of Central Indiana, the state’s only affordable housing nonprofit that advocates against housing discrimination, recently lost the remaining 20 percent of a grant from the U.S. Department of Housing and Urban Development for about $139,000, the Indianapolis Star reported.

Snideman said the $3.3 billion of public funding for nonprofits in Indiana likely can’t be replaced by large donors or foundations.

“I don't think it would be a stretch to call this an existential crisis for many organizations,” Snideman said.

If the federal government decides to suspend funding for organizations that work with minority populations like the LGBTQ community, it can stigmatize them and influence other kinds of funders, like foundations and private donors, he added.

The National Council of Nonprofits sued the Trump administration over the direct and indirect impacts executive orders are having on nonprofits across the country, challenging the memo from the White House Office of Management and Budget that froze all federal funding. It’s the group’s first lawsuit in its history.

“This order is a potential five-alarm fire for nonprofit organizations and the people and communities they serve. From pausing research on cures for childhood cancer to halting food assistance, safety from domestic violence, and closing suicide hotlines, the impact of even a short pause in funding could be devastating and cost lives,” said president Diane Yentel in a February statement.

The memo was halted by a federal judge before the OMB rescinded it.

The National Council of Nonprofits is tracking executive orders, court cases, and other impacts to nonprofits. It regularly updates these resources with new developments.
 

Contact WFYI data journalist Zak Cassel at zcassel@wfyi.org.