The Crisis in Funding and the MacArthur Foundation’s Response
The John D. and Catherine T. MacArthur Foundation has announced plans to increase its philanthropic efforts over the next two years in response to a funding crisis exacerbated by the Trump administration’s freeze on federal foreign aid and federal grants. According to John Palfrey, president of the MacArthur Foundation, this decision is a direct reaction to the severe financial strain that many sectors are facing due to the federal government’s actions. "This is a major crisis for our sector, and it’s a time when those of us who can do more should do more," Palfrey stated in an interview with The Associated Press. The foundation, which had $8.7 billion in assets in 2023 and typically distributes around $400 million annually, plans to increase its giving from the minimum 5% of its endowment required by the IRS to at least 6% for the next two years. This change is expected to result in an additional $150 million in grants over the two-year period.
The Context: The Trump Administration’s Freeze on Federal Funding
The funding crisis began shortly after President Donald Trump took office, when he suspended foreign aid and directed the Office of Management and Budget to temporarily halt all federal grants and contracts. Trump’s administration sought to review whether these grants aligned with his policy priorities. While the freeze on federal grants has since been lifted, the initial suspension had a profound and far-reaching impact across various sectors, both domestically and internationally. The U.S. is the largest funder of global humanitarian responses, contributing $68 billion to foreign aid in 2023 alone. Additionally, nonprofits in the U.S. received $267 billion in government grants in 2021, according to an analysis by the Urban Institute. Foundations, on the other hand, contributed $103 billion in grants in 2023, as reported by GivingUSA.
The Growing Role of Philanthropy in Addressing the Funding Gap
In light of the federal funding cuts, Palfrey has called on other foundations to join the MacArthur Foundation in increasing their giving. He emphasized that philanthropy must adopt a more proactive approach during this critical time. "Philanthropy should act in a different way than we have in the past, which is historically, we’ve simply given out more money when the stock market has gone up and we’ve given out less money when the stock market has gone down," he said. The Freedom Together Foundation, formerly known as the JPB Foundation, has already answered this call. The foundation announced that it would double its grantmaking to 10% of its endowment in response to the Trump administration’s policies. Deepak Bhargava, the foundation’s president, drew parallels between the current situation and the AIDS crisis, during which activists successfully pushed the government to take action and effect meaningful change. "The movement made a way out of no way. That can happen again, as it has so many times throughout American history," Bhargava wrote. He expressed optimism that courage and collective action could overcome the current challenges, despite the widespread fear and uncertainty.
The MacArthur Foundation’s Initiatives and Commitments
The MacArthur Foundation, based in Chicago, is perhaps best known for its prestigious "genius" fellowships, which recognize and support extraordinary individuals working across various disciplines. Recipients of these fellowships receive an $800,000 grant to pursue their groundbreaking work. Beyond the fellowships, the foundation focuses on addressing some of the world’s most pressing issues, including climate change, criminal justice reform, and journalism. The foundation also has ongoing commitments to supporting projects in Chicago and Nigeria. By increasing its grantmaking, the MacArthur Foundation aims to provide critical support to organizations and communities affected by the federal funding cuts. Palfrey highlighted the foundation’s ability to adapt and respond to crises, pointing to its actions during the COVID-19 pandemic as an example. At the time, the foundation, along with seven others, issued bonds to borrow against their endowments, enabling them to increase their payouts. Palfrey suggested that similar strategies could be employed to address the current funding crisis.
Lessons from the COVID-19 Pandemic
During the COVID-19 pandemic, foundations like MacArthur demonstrated their ability to think creatively and act swiftly to support those in need. By issuing bonds and borrowing against their endowments, they were able to increase their grantmaking at a time when it was needed most. Palfrey believes that the same approach could be effective in the current crisis. "I think we need to do something different in 2025," he said. "But I think it’s the same rationale." This willingness to innovate and take calculated risks is crucial in addressing the ongoing funding challenges posed by the Trump administration’s policies. Nonprofits, which often serve as a safety net for vulnerable populations, are particularly reliant on this support. Elisha Smith Arrillaga, vice president of research at The Center for Effective Philanthropy, noted that nonprofits are currently facing a great deal of uncertainty and anxiety due to the federal funding cuts. "Really what nonprofits do is that they stand in the gap for all Americans," she said. Arrillaga expressed hope that individuals and organizations across the country would continue to support these nonprofits, especially during this challenging time.
The Importance of Advocacy and Collective Action
The current funding crisis underscores the critical role that philanthropy must play in addressing the gaps left by government cuts. However, it also highlights the need for advocacy and collective action. Nonprofits, foundations, and individuals must work together to ensure that those affected by the funding cuts receive the support they need. As Deepak Bhargava so eloquently put it, "There is a dispiriting tide of fear right now, and I’m disappointed by how few leaders and institutions are stepping up. But my own experience and our shared history teaches us a hopeful lesson: courage is contagious." The example set by the MacArthur Foundation and the Freedom Together Foundation serves as a powerful reminder that even in the face of significant challenges, collective action and courage can lead to meaningful change. As the philanthropic community responds to this crisis, it is imperative that they continue to advocate for the needs of the most vulnerable and work collaboratively to address the ongoing funding challenges.
