When Trump returned to his second term, he wasted no time making his mark on the nonprofit sector. Within days, the Office of Management and Budget (OMB) issued a sweeping memorandum temporarily suspending all federal grants to nonprofits deemed to “undermine national interest.” Targeted areas range from Diversity, Equity and Inclusion (DEI) to “woke” gender ideology. Though the memo was rescinded following nationwide litigation, the damage was already done. Nonprofits across the country reported mass layoffs, suspended programs, and uncertainty fueled by cuts in the federal budget. Yet not all were equally affected. While some scrambled to survive, others remained virtually unscathed.
Why? The answer lies in how well some nonprofits have adapted to today’s marketized nonprofit sector.
This phenomenon began in the 1980s under Ronald Reagan’s “New Federalism,” which slashed social spending by over $30 billion and transferred responsibility to states and private charity. While touted as a way to empower “small town values,” this marketization forced nonprofits to act like businesses—competing for funding, charging fees, and prioritizing contracts favoring more affluent clients. Though financially stabilizing for some, this commercial turn raised concerns about whether nonprofits could continue serving the most vulnerable—a dilemma that persists today.
Amid this uncertainty, one type of nonprofit has emerged as particularly resilient: intermediary organizations. These groups don’t rely on federal funding but work closely with publicly funded agencies. Their relative independence allows them to navigate Trump’s funding upheavals more deftly maintaining operations without compromising their mission. So, the question becomes: How do nonprofits survive and stay true to their mission in this politically and economically volatile moment?
The Professional Theatre and Dance Youth Academy (PTDYA) offers arts education to students in under-resourced South and West Side communities in Chicago. Funded through service contracts with public schools, the organization has recently faced mounting challenges, with shrinking education budgets choking off access. “It’s become really hard to work with traditional public schools,” Ahava Silkey-Jones, the co-founder of PTDYA told me.
Rather than scale back, PTDYA made a strategic pivot: partnering with charter schools that have more flexible funding and a willingness to invest in arts enrichment. While some might see this as a retreat from their mission, the data tells a different story: Chicago’s charter schools serve 98% students of color, many from low-income families—the very communities PTDYA was founded to serve. “This doesn’t dilute our commitment,” Silkey-Jones affirms, “It preserves our impact in a shifting landscape.”
That strategy—adapting without compromising core values—is what sets resilient nonprofits apart. Take Kids First Chicago (K1C), for example. Since its founding, K1C has prioritized financial independence, drawing support from a diverse mix of foundation, corporate, and individual support. It steers clear of city funding to preserve its role as a partner in policy. “We don’t take money from the City of Chicago,” explains Chief Operating Officer Kristin Pollock, “It clouds the idea that we’re an independent policy advocacy organization.” That independence—rooted in diversified funding—allows K1C to serve as a trusted, “critical friend” to CPS, uplifting parent voices through forums and workshops.
Together, these stories reflect a hard truth: no money, no mission. As Christa Velasquez, nonprofit lecturer at the University of Chicago, puts it: “If [nonprofits] don’t have the money, they can’t do their work.” Diversifying funding is no longer optional— it’s a strategic imperative.
Not every city offers the same safety net. Chicago, situated within a Democratic-led state, has generally resisted Trump’s funding rollbacks. In response to threats to cut $3.5 billion in promised federal dollars, Mayor Brandon Johnson has established a working group determined to “defend Chicagoans from any unconstitutional or unlawful attempts” to halt funding.
The city also benefits from a robust philanthropic ecosystem. Fidelity Charitable, the nation’s largest donor-advised fund, reports $634 million in total grant dollars recommended by Chicago—the fourth highest total in the U.S. Take the MacArthur Foundation: sitting on a nearly $8 billion endowment, the Chicago-based foundation made a grant commitment of over $69 million to the Chicagoland region. On a national level, they have also announced a 1% increase in annual payouts on grants earmarked for charitable purposes, unlocking an estimated $150 million in additional nonprofit support this year.
But this shouldn’t breed complacency. As Velasquez warns, philanthropic giving is highly vulnerable to both economic downturns and political pressure, especially when it comes to polarizing issues. In a climate shaped by escalating trade tariffs and hardline immigration policies, it’s not surprising that private funders—particularly corporate donors, of which many nonprofits rely on—may scale back support as they feel the effects of federal and market instability.
That’s why the arguably most powerful strategy is alliance-building. Silkey-Jones explains that “in really hard times, there’s not enough funding for us to stand on our own.” Her sentiment is echoed across the sector. The MacArthur Foundation has publicly urged foundations to “stand together on a series of very important bedrock principles.”
Strategic alliances are also vital for navigating the uncertainty of policy change. Erika Poethig, Vice President of Strategy and Planning at the Civic Committee of the Commercial Club of Chicago, describes how she has been tracking political developments alongside sister organizations to assess their impact on their programs. Their hiring initiative, which connects low-income Chicagoans to local employers, is especially sensitive to economic shocks. “If jobs disappear,” Poethig says, “our work is undercut at the root.”
In short, building ecosystems of support is an essential buffer against today’s unpredictability. Even the most financially savvy nonprofit cannot thrive in isolation. But these intermediary leaders are showing us that it’s possible to not only weather the storm—but to emerge more resilient than before. In today’s volatile climate, staying alive and staying true no longer need to be at odds. It might just be the new model.