Catalyst Weekly Policy Briefing Issue III: Planning for Scrutiny

The Catalyst community shares a commitment to lift up those around us. Whether your goal is to eradicate hunger, stoke innovation, or ensure every child has a place to call home, the needs across San Diego and Imperial Counties are both plentiful and rapidly changing.  

This week’s briefing reviews recent policy developments, highlighting the role of funders in helping our region navigate these changes. 

 

THE FACTS 

Non-Governmental Organization (NGO) scrutiny continues 

• The Administration issued a Memorandum for the Heads of Executive Departments and Agencies on February 6 instructing agencies “to review all funding that agencies provide to NGOs.” The memo directs agencies to align funding decisions with the goals and priorities of the Administration, as expressed in executive actions and by law. 

• While this does not in itself specify shifts, it makes clear that all nonprofits receiving federal funds will be under scrutiny. 

• Based on 2023 data from the Urban Insitute, 21% of California nonprofits received federal grants and six percent had a federal contract. Far more than half — 69% — receive government funding, meaning in addition to federal impacts, State and County funding stability are the cornerstone of programs that ensure our region’s well-being. This study excluded hospitals and higher education. 

• Across the United States, government funds account for more than 25% of revenue for one-third of nonprofits and more than 50% of revenue for one-fifth of them. 

• Work is being done to gather more data for our region. Nonprofit organizations are invited to respond to this survey from the Nonprofit Institute at the University of San Diego to understand how recent executive orders and federal funding changes are impacting nonprofits in San Diego.

 

Charitable giving and the federal budget 

• Both houses of Congress continue negotiations over a budget blueprint, which Republican leaders hope to pass via budget reconciliation. If you’re curious about the mechanics, here’s a primer. 

• The Senate Budget Committee advanced a budget resolution focused on the border, military, and energy. They will enact a second resolution addressing tax cuts and spending later in the year. 

• The sticking point in the House, whose Budget Committee was still in negotiations as of Thursday afternoon, is how much they will reduce spending in exchange for an extension of tax cuts enacted in 2017 as part of the Tax Cuts and Jobs Act (TCJA), which are set to expire at the end of this year.  

• Why does this matter? This tax policy led to an estimated $20 billion reduction in charitable giving and eliminated federal tax deduction incentives for 20% of taxpayers, according to a July 2024 study by the National Bureau of Economic Research. 

 

TAKEAWAYS: What philanthropy can do 

It might feel like you are navigating decisions alone, or that you’re stuck in an echo chamber. Below are a few of the things we have heard from our philanthropic community. If you want to get in on the conversation, please share your thoughts. I’d love to hear from you. 

 

Questions Catalyst’s members are asking 

• Do I act now, or wait to understand longer-term impacts? 

• Should I increase my payout this year? 

• Will I be scrutinized if I make grants to a specific demographic group? 

• How do I do good diligence, but also invest quickly? 

• Should I make grants to those directly impacted by federal funding changes instead of renewing an existing grantee? 

 

Ways to learn 

• Talk with grantees to understand their concerns and plans. 

• Talk with funder colleagues about what they are doing, and how your giving can complement or leverage what’s already happening. 

• Sign up for newsletters from organizations tracking impacts. In addition to ours, we suggest checking out the National Council of Nonprofits and Council on Foundations. (If you’re doing this work, and it’s not listed here, let us know!) 

• Examine your financial statements and forecast to decide what you can do, as well as what is not on the table. 

• Check out Sacramento Advocacy Day 2025, and if this sounds like the right event for you, indicate your interest here. 

 

Things to remember 

• No one of us can respond on our own, it’s okay to not do everything. 
• Collaboration is key. We each have different strengths, whether it’s speed and flexibility, grant administration expertise, communications platforms, or community connections. Lean on each other to build our collective strength.
• Shape your actions using sources of reliable information, taking into account an understanding of local needs. 

 

This moment calls on philanthropy to act, but the goal is not to replace public funds, it is to equip our region to navigate uncertainty and change. Here are five ways you can do that now: 

• Provide flexible funding through new grants or changing restrictions on existing funds 

• Support nonprofits to analyze their current and projected finances and plan for a variety of scenarios. 

• Consider funding for mental, physical, and cyber safety, as well as legal consultation for nonprofits. 

• Fund civic engagement and organizing so that communities and nonprofits are able to tell their stories. 

• Recognize that not everyone is in a position where they feel they can speak out, but everyone deserves to be heard.  

 

Thank you for staying curious, for taking the time to learn, and for seeking connection with one another. We are here to navigate this moment with you, and the work will continue.