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Regulation and Compliance > State Regulation

States’ Budget Woes Cut Hole in Nonprofits, Foundation Center Finds

By Michael S. Fischer

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The thousands of U.S. nonprofit organizations that depend on state government grants for at least part of their funding are being hurt by cuts to public services many states are making in order to balance their budgets.

According to a survey of the Foundation Center’s Grantmaking Leadership Panel, 95% of foundation leaders said at least some of their grantees had been touched by state budget cuts, and 58% said all or most of their grantees had been affected.

Worse, 89% of respondents reported severe effects of state budget cuts on at least some of their recipient organizations, and 25% said some groups had had to suspend operations because of diminished state funding.

Three-quarters of foundation leaders said they expected the budget crises to continue through 2013 and beyond in many states.

The Foundation Center conducted its survey in March, receiving 75 completed responses from the Grantmaking Leadership Panel’s 220 members. The center presented the results in a new report, “Foundation Leaders Address the State Budget Crises,” released Thursday.

“Foundation budgets are dwarfed by government spending,” Steven Lawrence, director of research at the Foundation Center and principal author of the report, said in a statement. “Nevertheless, many foundations are trying to help keep the doors open at nonprofits until the state budget crises pass.”

Nearly half of survey respondents said they had awarded grants or provided other kinds of assistance in direct response to state funding cuts.

Foundations are helping in other ways as well. They are increasing the number of direct charitable activities they provide for affected nonprofits, such as offering technical assistance; seeking out opportunities to partner with state governments to address the budget crisis; and increasing support for public policy-related activities to inform budget debates. And some two-thirds of foundation leaders expected to boost funding for nonprofits that serve vulnerable populations.

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