This is a (hopefully) weekly summary of risks created by federal policy changes
Summary of Risks Stemming from Federal Changes - Week Ending February 28, 2025
It is virtually impossible to keep abreast of the number and magnitude of federal changes affecting the nonprofit sector since January 20, 2025. To make decisions in times of uncertainty, nonprofit leaders need to know what is going on and what they need to pay attention to. I’m starting a weekly annotated blog post providing my insights into what’s most important. Here is a curated list of recent U.S. federal government actions that may significantly impact nonprofits for the week ending Friday, February 28, 2025. The first three items, with larger headlines, are the unfortunate leaders in a very busy and very risky week.
You need to be aware of these actions. Even if you receive no government money, changes at the federal level are going to have profound impacts in our communities. You also need to message these points to your stakeholders, making them understand how these changes would affect your nonprofit and others in your community. Don't count on your stakeholders understanding the implications on their own. They are tied up in their own world, their own concerns. Explain it to them like they are five years old. In this busy world, there's no room for ambiguity.
I could never in a million years believe that I would be writing this paragraph, but the stark reality is that Elon Musk, the richest man in the world, is engaging in an effort to vilify the work of nonprofit organizations. That would be horrible even on its own, except that Musk is apparently in complete control of efforts to reduce federal spending using his DOGE commission. If you think I am exaggerating, please go look at the quotes yourself.
Officially entitled Implementing the President’s ‘Department of Governmental Efficiency’ Cost Efficiency, this Executive Order in fact creates a new series of profound impediments to the processing of federal payments and contemplates that political appointees at government agencies will be empowered to order “modif[ication] of] existing contracts to promote Government efficiency and the policies of [the Trump] Administration.”
This EO aims to ensure that even if the Trump Administration is bound by the federal court preliminary injunction issued February 26 requiring it to stop freezing federal grant and contract funds, existing fund disbursements will be subject to extraordinary new restrictions that must be created and implemented in 30 days – meaning by Friday, March 28, 2025. In case you have any doubt, there is no possibility of anyone meeting that deadline. Thus the Administration, which has railed against federal bureaucracy, has just announced the creation of an entirely new and utterly unrealistic new bureaucratic tangle.
The EO also contemplates that every payment issued by a federal agency would need to promptly submit for review an individual “brief, written justification prior to that employee's approval of a payment under covered contracts and grants” before any payment is issued. There were, of course, already processes in place to confirm the proper processing of payments, so it seems that these new provisions will add to that existing regulatory burden or slow processing down while this new add-on is integrated with existing rules.
Finally, provisions in the EO appear to contemplate that existing contracts are subject to complete renegotiation. Traditionally, federal regulations provided a narrow set of circumstances under which the federal government could change an existing contract. This new EO purports to fundamentally change the contracting rules. (If you would like to see an analysis of the old way of doing things, go to Perplexity.com and input the following prompt: “Prior to 2025, under what circumstances was the US federal government permitted to renegotiate or otherwise change the terms of a grant that had been awarded to a recipient nonprofit?”)
Officially entitled Ensuring Lawful Governance and Implementing the President’s ‘Department of Governmental Efficiency’ Deregulatory Initiative, this Executive Order essentially attempts to apply a broad interpretation of the Supreme Court’s recent Loper Bright Enterprises v. Raimondo decision, which severely constrains federal regulatory agencies when they attempt to interpret and enforce ambiguous federal statutes.
From my first day of my first class at Harvard Law School almost 40 years ago, I was taught that almost every statute is ambiguous. In fact, my property professor had an entire portion of his syllabus devoted to what he called “Gaps, Conflicts, and Ambiguities,” and he emphasized that any lawyer who couldn’t make a provision sound ambiguous wasn’t doing his or her job.
Before the Loper decision, regulatory agencies were empowered to interpret ambiguous statutes and create regulations in a vast array of potential areas, including the environment, housing, health and safety, consumer protection, and anti-poverty, to name a few. If challenged in court, the federal agency’s interpretation of the statute would be upheld if it was reasonable. Now, however, a court hearing a regulatory challenge would be empowered to make interpretive decisions that had been vested in agency experts. This new EO takes that even further and orders all federal agencies to review all regulations in their jurisdiction to flag what they believe are “unconstitutional” regulations, “unlawful delegations of agency power,” “anything other than the best reading of the” statute, “implicate matters of social political, or economic significance” not “authorized by clear statutory authority,” “impose significant costs upon private parties,” “harm the national interest,” or “impose undue burdens on small business” or “impede private enterprise and entrepreneurship.” The agencies will then “deprioritize” enforcement of any such regulations.
In substance, this EO instructs each regulatory agency to stop enforcing any regulation that the Trump Administration believes is policy inconsistent with its political preferences. The federal regulatory state, in other words, will be dismantled, except for those portions the Trump Administration supports.
To some extent, every presidential administration decides to deemphasize some rules and emphasize others. What is stunningly different here is that the Trump Administration apparently intends to expressly abandon large swaths of existing federal regulations.
EPA Freezes $20 Billion in Climate Grants
The Environmental Protection Agency (EPA) has frozen $20 billion in climate grants, leaving eight nonprofits unable to access their funds since February 18. This action threatens these organizations with bankruptcy, as they cannot cover essential expenses like payroll and rent. The grants were intended for projects such as solar installations and electric buses. The freeze aligns with the Trump administration's efforts to retract funds from Biden-era climate initiatives
Termination of $75 Million Tree-Planting Grant
The U.S. Forest Service canceled a $75 million grant to the Arbor Day Foundation, initially allocated under the Inflation Reduction Act. This decision disrupts tree-planting programs aimed at low-income and communities of color, affecting environmental projects in areas like New Orleans, Montana, and Oregon. The cancellation undermines environmental justice efforts and community sustainability.
Cuts to Fair Housing Enforcement Funding
The Department of Housing and Urban Development (HUD) is reducing grants that fund organizations enforcing the Fair Housing Act. Nearly half of the 162 active grants are affected, potentially leading to closures or reduced services among nonprofits handling the majority of fair housing complaints. This move comes amid rising housing costs and discrimination complaints, impacting fundamental civil rights protections.
Withholding of $1.9 Billion from Illinois
Governor JB Pritzker accused the Trump administration of withholding $1.9 billion from Illinois, despite a federal judge's order to release the funds. Additionally, proposed federal budget cuts could result in 770,000 Illinois residents losing Medicaid coverage, severely impacting healthcare access for low-income populations.
Executive Order Establishing English as Official Language
President Trump signed an executive order making English the official language of the United States. This allows government agencies and federally funded organizations to choose whether to offer services in other languages, potentially creating barriers for non-English speakers in accessing essential services, including those provided by nonprofits.
Foreign Aid Funding Freeze
Foreign aid organizations have petitioned the U.S. Supreme Court to compel the Trump administration to release nearly $2 billion in frozen funds. The funding freeze disrupts global humanitarian aid, affecting nonprofits' ability to deliver essential services worldwide.
EPA and DOGE Halt $67 Million in Environmental Justice Grants
The EPA and the Department of Government Efficiency (DOGE) have halted over $67 million in grants intended for environmental justice initiatives. This affects nonprofits and universities working on programs to benefit disadvantaged communities, raising concerns about the future of these essential services
Lawsuit Against Anti-Transgender Policies
San Francisco-based LGBTQ organizations, along with eight other nonprofits, filed a lawsuit against the Trump administration, challenging executive orders they allege target transgender and nonbinary communities. The policies in question could limit access to gender-affirming care and participation in activities aligning with individuals' gender identity, impacting services provided by these nonprofits.
Legal Challenges Involving DOGE and Trump Administration
Over 85 lawsuits have emerged in response to the Trump administration's measures to reduce the federal government's size through the Department of Government Efficiency (DOGE). These legal challenges could have long-term effects on financial regulation, federal oversight, and data privacy protections, impacting nonprofits operating in these areas.
USAID Funding Pause Threatens Faith-Based Organizations
The freezing of most foreign aid and sidelining of the U.S. Agency for International Development (USAID) has severely impacted faith-based organizations like World Relief and Catholic Relief Services. These nonprofits have been forced to halt lifesaving programs and lay off staff, jeopardizing essential services for vulnerable populations.