Nonprofits face financial instability: How the sector is faring

The nonprofit sector has been under extraordinary pressure, facing funding cuts, increased demand for services, and staff burnout. How are nonprofits and their leaders faring as they continue to serve their communities?

A recent survey by the Center for Effective Philanthropy (CEP) asked nonprofit leaders about their experiences in the current moment, including financial instability, evolving relationships with funders and the pressures they’re under. Many nonprofit leaders reported facing a more difficult and unpredictable funding environment since January 2025. Here are some of the most salient findings from State of Nonprofits 2026 and their implications:

1. Nonprofit leaders report rising insecurity around foundation funding

• Almost 60% of nonprofit leaders in the survey said it’s been harder to secure foundation grants.
• More than 40% reported seeing reduced funding from foundation funders.
• Over a third shared that the biggest challenge their organization was facing, other than the need for increased funding, was the uncertainty that comes with the current funding environment. 

2. Government funding disruptions are affecting the entire sector

An Urban Institute analysis found that a third of all nonprofits experienced some form of disruption in their federal government funding—loss; delay, pause, or freeze; and/or a stop work order—in the first four to six months of 2025. CEP’s latest research also found:

• Over a third of nonprofits reported reduced funding both from the federal government (36%) and state or local government (34%) since January 2025.
• Nearly half shared that it’s been harder to secure funding from the federal government.

These challenges in securing government funding have wide-ranging implications for nonprofit’s financial instability, even for organizations that don’t receive federal funding. As one survey respondent explained: “Although we are not directly impacted by loss of federal funding—because we do not and have not gotten federal funding—we feel the downstream effects acutely. Those who previously relied on federal funding are now turning to our existing donor base, resulting in overload for donors and less money to be distributed to individual organizations such as ours.”

3. Nonprofit leaders and staff are under increased stress due to funding pressures

In this difficult funding environment, nonprofit leaders are facing concerns about financial instability, staff and program cuts, and burnout.

Financial instability. Our research found that two-thirds of nonprofit leaders say they have concerns about their organization’s financial stability, with 39% reporting a deficit in 2025, up from 22% in 2022. Of those organizations reporting a deficit last year, nearly 60% cited lower-than-expected foundation giving as a top contributor to their financial status.

Staff and program cuts. For some, a financial deficit has meant making extremely difficult decisions to cut staff or programming to stay afloat, even as 73% reported their organizations have experienced increased demand since January 2025. One leader, after noting they’d cut more than 25% of their staff, also described austerity measures the organization has taken: “There are no cost-of-living raises and only one raise to bring a staff member up to the new minimum wage level. We are doing everything we can to cut any and all corners.”

Burnout. Amid such pressures to cut costs while community needs grow, the proportion of nonprofit leaders who report that their own burnout is “very much” a concern rose to 46% in 2026, up from just under 30% in 2025. Almost 40% were concerned about their staff and board’s well-being and safety; a quarter said burnout was significantly impacting their staff in 2026, up from 17% in 2025. As one shared: “When funding revenue is insufficient or insecure, the staff feels it every day. They are the ones who must look into the eyes of someone seeking help and tell them that we cannot provide services for them. It is demoralizing….As the leader, I am carrying the weight home every day.”

4. Nonprofits are making changes to survive

Financial instability has also led to nonprofits making strategic adaptations and operational changes to survive. Nearly half are beginning or considering a joint or collaborative fundraising effort with other grantseekers. Over two-thirds are starting or considering sharing operational functions such as H.R., tech, and accounting. Notably, over 40% are considering drawing on reserve funds to improve their finances.

These changes reflect the mounting pressures nonprofits face from funding disruptions, and their compounding impact on leadership, staff, and the organization as a whole. As CEP research has shown, in times like these, it’s imperative that funders listen to their grantees and actively seek to understand their challenges. To weather this challenging period, nonprofits need funders to establish consistent channels of communication and take their grantees’ lead on how best to support them and the communities they serve.

See the full State of Nonprofits 2026 report.

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