DOGE, Federal Funding Cuts, and Why AI Is No Longer Optional for Nonprofits
One in three nonprofits lost federal funding in 2025. At least 23,000 sector jobs disappeared. Private philanthropy cannot fill the gap. The organizations navigating this crisis are discovering that AI is not a productivity enhancement, it is an organizational survival tool.
In the weeks following the January 2025 presidential inauguration, nonprofits across the country began receiving notices they had never seen before: their federal grants were canceled, frozen, or under review. The disruption was not gradual. Organizations that had budgeted for the year based on executed agreements found those agreements voided. Staff received layoff notices. Programs serving vulnerable communities suspended operations. And the scale of what was happening became clear only as the weeks accumulated into months.
By October 2025, the Urban Institute had documented the scope in a nationally representative survey of 2,737 nonprofits: one in three nonprofit service providers experienced a government funding disruption in the first four to six months of the year. The administration had canceled or frozen roughly $425 billion in federal funds across health care, arts, education, and other sectors. The Chronicle of Philanthropy's nonprofit layoff tracker documented at least 22,757 full-time job losses between January 20 and June 30 alone, with researchers noting that the true figure was likely far higher since smaller organizations are not required to report layoffs to state WARN databases.
The National Council of Nonprofits called it "a potential 5-alarm fire for nonprofits and the people and communities they serve." That description captures the emergency without fully conveying the structural dimension: this is not a temporary disruption that ends when funding is restored. The sector is being forced to rethink how it operates at a fundamental level.
In that rethinking, artificial intelligence has emerged not as an aspirational technology investment but as a practical response to an immediate crisis. The organizations that understand this distinction, and act accordingly, are the ones most likely to maintain service delivery through the current period and emerge as structurally stronger on the other side.
The Scale of the Disruption
To understand why AI has become an imperative rather than an option, it helps to understand the magnitude of what the nonprofit sector has absorbed. The cuts attributed to DOGE and the broader federal funding freeze were not surgical reductions in marginal programs. They hit core infrastructure that many organizations had relied on for years.
AmeriCorps: $400 Million Cut
In April 2025, the administration cut 41% of AmeriCorps grant funding, approximately $400 million, shutting down over 1,000 programs and eliminating more than 32,000 positions. Members who had been responding to the Los Angeles fires, tutoring students, and caring for seniors received termination notices. Ohio alone lost $9 million in state AmeriCorps funding. California faced the loss of an estimated $60 million, affecting 87 programs and more than 5,600 positions.
Education and Housing Cuts
TRIO educational opportunity programs, which serve over 2,000 programs helping low-income students access and succeed in higher education, had $660 million in funding withheld. The Justice Department terminated 373 grants worth $820 million, including funding for violence reduction and victim services nonprofits. FEMA's Building Resilient Infrastructure and Communities program saw $750 million halted, with an additional $600 million in Flood Mitigation grants removed.
Health and Science Funding
The National Science Foundation terminated $1 billion in already-awarded grants. The National Institutes of Health cut $4 billion annually in research funding. The Department of Health and Human Services canceled $182 million in contracts. Public health nonprofits providing mental health services, addiction treatment, and disease prevention programs lost core operating grants, often with little notice and no transition period.
USAID and International Work
USAID was officially closed on July 1, 2025, with staff reduced from more than 10,000 to 15 legally required positions. U.S. foreign aid spending fell from $68 billion in 2024 to $32 billion in 2025. Dozens of U.S.-based international development nonprofits shuttered or severely contracted. Roughly 50,000 jobs connected to USAID programming were disrupted globally.
The Workforce Reality
The Chronicle of Philanthropy's layoff tracker documented at least 22,757 full-time positions lost between January 20 and June 30, 2025, an average of roughly 125 jobs per day. Researchers note this is a significant undercount because small nonprofits (fewer than 100 employees) are not required to report to WARN databases. The true total "could easily be 40,000 or perhaps higher." Beyond actual layoffs, hiring intent across the sector fell dramatically: from 52% of nonprofits planning to add staff at the end of 2024 to 38% by mid-2025. The percentage of organizations planning layoffs doubled from 3% to 7%.
Why Private Philanthropy Cannot Fill the Gap
A natural initial response to federal funding disruptions is to turn toward private philanthropy. If government funding is cut, can foundations and individual donors make up the difference? The data on this question is clear and sobering.
Government funding for nonprofits runs at roughly three times the level of total foundation giving. This is not a temporary imbalance; it reflects the structural role that government has played in financing nonprofit service delivery for decades. Disrupted nonprofits report that government funding accounts for an average of 42% of their revenue, compared to 28% for nonprofits overall. For social service, healthcare, and housing organizations, the government share can be substantially higher.
Even as individual donors have responded generously, with total U.S. charitable giving reaching $592.50 billion in 2024, the capacity of the philanthropic sector to replace federal dollars at scale simply does not exist. Private foundations are already being "swamped with requests" from nonprofits seeking to replace lost federal dollars. Those foundation dollars are finite and are being stretched across an unprecedented number of competing needs.
Candid's analysis of what full loss of government funding would mean puts the stakes clearly: if government funding were to cease entirely, more than 14,000 nonprofits would exhaust their reserves within three months, putting 2.8 million jobs at risk. The sector is not facing a funding gap that can be closed by writing more grant applications to private funders. It is facing a structural reduction in the resources available to deliver services that communities depend on.
This structural reality changes what "strategy" means. Revenue diversification remains important, and nonprofits should pursue it. But the organizations that are finding the most stable footing are those that have simultaneously addressed the efficiency dimension: how to deliver the same or more value to communities with fewer resources per unit of output. This is where AI becomes not a nice-to-have but a necessity.
The AI Response: From Exploration to Imperative
The nonprofit sector's AI adoption accelerated significantly in 2025, driven by exactly the combination of pressures described above. The TechSoup and Tapp Network AI Benchmark Report, based on over 1,000 nonprofits, documented that nearly two-thirds now use AI, with 90% of nonprofits and 94% of foundations saying they want to expand their use in the coming year.
This adoption is happening not because AI has become dramatically easier or because organizations suddenly have more budget for technology. It is happening because the alternative, attempting to maintain service delivery with fewer staff and less funding without any change to how work gets done, is increasingly untenable.
AI as a Workforce Multiplier
Doing more with smaller teams
The core arithmetic is straightforward. If an organization previously employed six grant writers and now has four, it faces two options: reduce the number of grants it applies for, or find a way to make four staff members as productive as six. AI tools, particularly for grant writing, reporting, and communications, can bridge a significant portion of that productivity gap.
Research consistently shows that AI reduces administrative time significantly for early adopters. Organizations that have deployed AI systematically find staff can redirect hours previously spent on routine documentation, data entry, reporting, and communications toward higher-value work. Early adopters have reported quadrupling their annual translation capacity and reducing response times to beneficiary inquiries by more than 75%.
The workforce equity dimension matters here too. When layoffs occur, the Chronicle of Philanthropy and sector researchers have documented that AI-skilled staff are 31% more likely to be retained, according to nonprofit managers surveyed about their retention priorities. AI competency has become a job-protection skill in a sector facing sustained workforce pressure.
- Grant writing support: nearly 25% of nonprofits now use AI for grant work, critical when 64.9% of organizations have just 1-2 grant staff
- Meeting transcription and follow-up automation reduces post-meeting administrative time substantially
- AI-powered donor communications enable personalized outreach at scales previously requiring additional staff
- Document summarization and reporting tools reduce time on compliance documentation
AI-Assisted Fundraising in a Competitive Environment
Competing for private funding as government support contracts
The funding landscape has intensified dramatically. Candid's research shows that 82% of nonprofits are pursuing more private and corporate grants as federal funding contracts. Organizations that previously submitted 20 grant applications per year are attempting 35 or 40. The volume of applications to private foundations and corporate givers has increased so significantly that many funders are experiencing backlogs they have never seen before.
In this environment, the quality and efficiency of grant applications matters more than ever. AI tools, from purpose-built grant writing platforms to general-purpose models used for drafting and research, allow development teams to maintain quality across higher application volumes. They also enable better research on funders, more tailored messaging, and faster turnaround on letters of inquiry.
Individual donor development is equally affected. AI-powered donor communication tools allow organizations to segment their donor base more precisely, personalize outreach at scale, and identify prospects who might be capable of increasing their support. Organizations using AI in fundraising have reported meaningful improvements in donor retention and gift size through personalized outreach.
- Purpose-built grant writing tools like Instrumentl's Apply module and Grant Assistant can help small teams maintain quality across higher submission volumes
- AI donor research tools help identify prospects among existing supporters who can step up as government funding declines
- Automated reporting tools ease the burden of more frequent foundation reporting required by private funders
AI in Program Delivery and Service Access
Extending service reach when staff capacity has contracted
Beyond the administrative dimension, AI is beginning to play a direct role in how nonprofits deliver services. This is perhaps the most consequential application in the current environment: as staff capacity contracts but community need grows, AI-assisted service delivery can help organizations serve more people without proportional increases in personnel.
Chatbots that handle initial intake, answer frequently asked questions, and route people to appropriate resources can extend service hours and capacity. Voice AI systems can provide multilingual support at scales that small teams cannot. Predictive models can help organizations better target interventions to those most likely to benefit, improving program efficiency at a time when every dollar and hour matters.
Bridgespan's research highlights organizations that have achieved dramatic gains: translation capacity quadrupled, response times reduced by more than 75%, beneficiary support extended without additional headcount. These are not case studies from well-resourced technology companies; they are mission-driven organizations that recognized the necessity of adaptation and acted.
The Widening Digital Divide Within the Sector
The funding crisis is not affecting all nonprofits equally, and neither is the AI opportunity. Research consistently shows that larger organizations are adopting AI at nearly double the rate of smaller ones: 66% of nonprofits with budgets over $1 million report using AI, compared to 34% of smaller organizations. This gap existed before the current crisis, but the crisis is widening it in ways that could permanently reshape the sector's competitive landscape.
The 48% of AI-powered nonprofits that report higher technology-related expenses after adoption are largely concentrated in mid-sized and larger organizations with the capacity to absorb those costs. Smaller organizations, precisely those with the fewest reserves and the fewest alternatives when government funding disappears, are the least equipped to invest in AI tools even when those tools would most clearly benefit them.
Several funding initiatives are attempting to address this gap. In July 2025, OpenAI announced a $50 million People-First AI Fund specifically for U.S. nonprofits, with applications open through October 2025. By year's end, $40.5 million had been distributed to 208 organizations in unrestricted grants. KPMG's U.S. Foundation committed $6 million to empowering nonprofits with AI. These investments signal that major players in the AI industry recognize the sector's need for technology support.
For smaller organizations navigating this landscape, the practical guidance from Bridgespan is relevant: funders should be asked to treat technology as a core operating cost, not a luxury. Technology investments, including AI tools and the staff time needed to implement them effectively, should be included in budget line items and covered by grant budgets where permissible. Organizations that have successfully made the case for technology investment in grant budgets have found many funders receptive in the current environment.
The Technology-Optimism Connection
Momentive Software's research on nonprofit sector attitudes in 2025 found a notable pattern: technology-forward nonprofits report significantly higher organizational optimism and confidence in their ability to navigate the current crisis than peers that have not invested in technology. This is not simply a case of larger, more resourced organizations feeling more confident. The research suggests that the experience of successfully implementing technology, and seeing it work, generates organizational confidence and adaptive capacity that is valuable independently of the specific tools deployed.
This finding points to something important: the value of AI adoption in the current environment is not purely about efficiency. Organizations that engage seriously with AI develop new problem-solving capabilities, a more experimental culture, and staff skills that make them more adaptable to future challenges. In a funding environment that will likely remain volatile, that adaptive capacity may be as valuable as any specific efficiency gain.
What Organizations Are Doing Right Now
The nonprofit sector's response to the funding crisis has been documented across several research reports and sector publications. While the picture is one of significant strain, it also reveals organizations responding with considerable creativity and determination.
Pursuing more private and corporate grants
Organizations are dramatically increasing their grant application volume to private foundations and corporate funders as federal dollars have disappeared. This volume increase requires efficiency tools to maintain application quality.
Expanding individual donor outreach
Donor development is receiving new attention as organizations seek to build sustainable individual giving programs that are less exposed to government funding volatility.
Reducing or eliminating programs
For many organizations, some program reduction has been unavoidable. The goal is to protect core mission delivery while finding efficiencies that allow high-impact programs to continue.
Pivoting to state and local funding
Organizations with federal funding disruptions are increasingly applying to state and local government sources, a landscape that is becoming significantly more competitive as many organizations pursue this strategy simultaneously.
In each of these responses, AI can play an enabling role. The organizations executing on these strategies most effectively are those that have invested in the right tools: AI-assisted grant research and writing for the application volume increase, AI-powered donor analytics and personalization for individual giving development, AI-driven program evaluation to make difficult decisions about which programs to protect, and AI grant prospecting tools for the shift to state and local funding.
A Framework for Acting with Urgency
For nonprofit leaders facing these pressures, the challenge is not recognition but action. Organizations that understand they need to adopt AI more aggressively often struggle with where to start, how to prioritize, and how to manage the implementation process while simultaneously managing a funding crisis. Here is a practical framework.
Audit the hours: where is staff time actually going?
Before selecting tools, understand the distribution of staff time. Track one week of work across all roles. You will typically find that 30-40% of knowledge worker time goes to administrative tasks: documentation, reporting, email, data entry, scheduling. These are the highest-priority targets for AI automation. The goal is not to eliminate jobs but to reclaim time for mission-critical work that only humans can do.
Start with grant writing and reporting
Grant writing is where the productivity crisis is sharpest. Most organizations have 1-2 people responsible for all development work, and they are now being asked to apply to more funders while also managing the administrative burden of the funding disruption. AI tools for grant writing, funder research, and report preparation offer immediate, measurable productivity gains with relatively low implementation complexity.
Build AI skills into retention planning
If your organization faces difficult staffing decisions, factor AI skills into those decisions. Staff who can use AI tools effectively are worth more to the organization than staff who cannot, all else being equal. Invest in AI training for staff who will be retained. This is both a retention strategy and a productivity strategy.
Make the technology case to funders
Include AI tool costs, training time, and staff development in grant budgets. Increasingly, funders understand that technology investment is a core operating cost, not overhead. Bridgespan has explicitly called on funders to adopt a 'pay-what-it-takes' approach. When making the case, frame technology investment in terms of the outcomes it enables, not the tools themselves.
Consider available AI grants and resources
OpenAI's People-First AI Fund ($50 million total), KPMG's AI Impact Grants ($6 million), TechSoup's discounted AI tool programs, and Google's AI for Social Good program represent significant resources targeted at exactly this moment. Organizations that have not explored these opportunities should do so urgently.
The Longer View: Crisis as Accelerant
It is worth naming something that can feel counterintuitive in a moment of genuine crisis: the organizations that navigate this period by investing in AI and building technology capacity are likely to emerge as structurally stronger than they were before the cuts began.
This is the pattern that researchers observe after major disruptions in other sectors. Companies that emerge from downturns having invested in technology and process improvement outperform competitors who simply weathered the storm. For nonprofits, the equivalent is an organization that has developed genuine AI capabilities, built a team with real AI skills, and created workflows that are more efficient than they were before the crisis.
The funding environment will not return to the pre-2025 state. Government funding for the social sector may recover over time, but the sector cannot plan on that recovery or its timing. Building resilience means building the capacity to operate effectively at lower resource levels while maintaining mission impact. AI is the most significant tool available for that work.
Several related articles on this site explore the specific tools and strategies available to nonprofits in this environment. Our coverage of AI strategies for nonprofits losing government grants provides a comprehensive toolkit for the funding diversification challenge. The Post-DOGE survival technology guide covers the full range of technology responses to the funding crisis. And our guide to revenue diversification with AI covers the fundraising dimension in depth.
For organizations just beginning to engage seriously with AI, the nonprofit leader's guide to AI provides a foundational framework. For those ready to move from exploration to systematic deployment, the nonprofit AI maturity curve provides a roadmap for progressing from basic tool use to genuine competitive advantage.
Conclusion
The scale of the federal funding disruption that began in early 2025 represents a genuine crisis for the nonprofit sector. One in three organizations experienced a government funding disruption. At least 23,000 documented jobs were lost in the first six months, with the real number likely far higher. Programs serving millions of people were paused, reduced, or eliminated.
Against this backdrop, the conversation about AI in nonprofits has changed character. It is no longer primarily about exploring what might be possible or debating whether the technology is ready. It is about organizational survival and mission preservation. The organizations navigating the current crisis most effectively are those that have accepted this reality and acted accordingly.
The good news is that AI tools, the technology itself, have never been more accessible, more affordable, or more capable than they are right now. The barriers are not primarily technical. They are cultural, strategic, and organizational. The organizations that overcome those barriers in the current moment will be better positioned not just to survive this crisis but to define what the nonprofit sector looks like on the other side of it.
That is not a prediction about distant future states. It is a description of something happening right now, in organizations across the country that decided, in the face of genuine disruption, to adapt rather than simply endure.
Building Resilience Through AI
One Hundred Nights works with nonprofits to develop practical AI strategies that match the realities of mission-driven organizations. We focus on what works, not what is theoretically possible.