It came as no surprise to the team at Casa Familiar when the U.S. Environmental Protection Agency told the organization early last month that its $12.7 million federal grant was being terminated.
Casa Familiar had planned to use the money from the Community Change Grants program to improve San Ysidro’s air quality through a low-cost, zero-emissions mobility project to bring electric transportation to the community.
But the EPA had already terminated the nonprofit’s Environmental Justice Community Problem Solving grant for $500,000, awarded last year. So after months of uncertainty fueled by the Trump istration’s sweeping cuts across the federal government, the nonprofit was expecting the other shoe to drop.
And it was already feeling the financial strain. Casa Familiar had spent about half of its $500,000 grant and had budgeted to spend the remaining half this year.
The EPA grants function as reimbursements to backfill recipients’ spending: Groups must first have money to spend and then file for reimbursement with the agency.
“We were already doing the activities,” including hiring staff and distributing almost 200 air purifiers to people in the community, said Lisa Cuestas, Casa Familiar’s executive director. “That’s going to show up as a loss on our budget for this fiscal year.”
Without federal dollars coming in, Casa Familiar and other San Diego nonprofits are reevaluating their overall budgets in order to keep operating day to day. Their previously federally-funded projects are now stalled — but in addition, many groups have also been forced to cut staff, pay and services.
“We are pivoting and doing what we need to do so that our work can continue,” said Franco Garcia, the executive director of the Environmental Health Coalition, which — with its partner, the San Diego Foundation — had a $20 million EPA grant terminated.
The EPA announced in late April that it was canceling nearly 800 environmental justice grants, including those awarded under the Inflation Reduction Act’s Community Change Grants program. The legality of the terminations is still being challenged, since the funding was approved by Congress under the 2022 law.
Nearly $216 million in Community Change grants were allocated to California, and nationwide the program provided nearly $1.6 billion for environmental and climate justice projects in disadvantaged communities.
As with several departments across the federal government, the EPA has been reviewing its grant programs to ensure they “align with istration priorities,” according to an EPA spokesperson.
“Maybe the Biden-Harris istration shouldn’t have forced their radical agenda of wasteful DEI programs and ‘environmental justice’ preferencing on the EPA’s core mission of protecting human health and the environment,” the spokesperson said in an email.
The Trump istration has moved to terminate grants from other agencies as well, including the National Endowment for the Arts, Institute of Museum and Library Services and the National Institutes of Health.
Many of the moves are being challenged in court, and some grants have been reinstated as a result of federal rulings. But in the meantime, nonprofits are figuring out what comes next.
Federal funding is crucial to the operations of many of San Diego County’s roughly 13,000 nonprofits. In 2023, roughly $940 million in federal money was awarded or contracted to about 3,600 local nonprofits alone, according to a report this month from the San Diego Regional Policy & Innovation Center.
Cuestas says Casa Familiar has had to re-forecast its budget on a near-weekly basis since January to for the changes at the federal level.
The nonprofit spent about $20,000 of its $12.7 million grant for its zero-emissions mobility project, an amount it was able to get reimbursed despite the uncertainty. And it began hiring staff for the project, which Cuestas says would have brought about 30 new jobs to San Ysidro.
But the organization had expected to pay staff and cover programmatic costs with about $2 million of its federal funding over the next three years, and it had factored the funding into its roughly $9 million annual budget. As a result, the organization has laid off staff, including eight employees hired to work on environmental justice projects.
The Environmental Health Coalition spent about $150,000 to $200,000 on its EPA-funded climate projects, Garcia said, including one to build a linear park at Boston Avenue in Barrio Logan and another to make homes more resilient to climate disasters.
The projects are two of about a dozen that are included in “Rooted in Communidad, Cultivating Equity,” a t initiative with the San Diego Foundation to fund climate justice efforts in neighborhoods such as Barrio Logan, Shelltown and Mount Hope.
Without funding coming from the federal government, though, the Environmental Health Coalition hasn’t been reimbursed for everything it has spent. The nonprofit has had to lay off, furlough or cut pay for about half of its staff of 15, Garcia said.
The San Diego Foundation says it has asked the EPA for more information about reimbursement for remaining expenses but has yet to hear back. A spokesperson said the foundation couldn’t give details on how much has already been spent on the projects overall as it works to prepare a final ing of all expenses incurred.
It’s common for federal grants to operate on a reimbursement basis, says Hampton Dohrman, who runs a nonprofit management and consulting firm in San Diego. “It is reasonable for the federal government to have extra scrutiny on dollars,” he said — it can ensure that the programs “hit the boxes that were approved in the grant.”
But such grants can pose challenges for recipients, he adds. Nonprofits can only progress on projects as long as they can pay for them up front.
Federal grants also often come with indirect cost rates, which can be used to pay for istrative and other costs associated with running a program, such as paying the rent or electricity bill.
Those were some of the costs that the Museum of Us was counting on having covered by its federal funding, said James Hadden, the museum’s senior director of development and external communications.
That institution had grants from the National Endowment for the Arts and the Institute of Museum and Library Services (IMLS) terminated earlier this year. A federal judge ordered the IMLS funding reinstated — but to the organization it’s still uncertain.
Micah Parzen, the museum’s CEO, told The San Diego Union-Tribune earlier this year that the istration’s IMLS cuts in particular posed a threat to the institution’s work. “Certainly future work on existing projects is in jeopardy, and future projects,” Parzen said at the time.
More recently, museum leaders have identified different budgetary and planning scenarios going forward and remain committed to not laying off any staff, Hadden said.
The museum and other nonprofits awarded federal grants, such as the Anza-Borrego Foundation, either hadn’t yet used them or were able to get reimbursed for payments they had already made.
But without the expected federal funding, nonprofits may not have the financial reserves to weather these types of situations for the long term.
And there are already signs that some local nonprofits’ financial stability has been hit hard in recent years — especially as help from COVID-19 funds has dried up.
During the pandemic, many nonprofits benefited from emergency funding to keep providing services to their communities, which allowed them to build up their reserves, said Tessa Tinkler, the senior director of research and evaluation at University of San Diego’s Nonprofit Institute.
But according to the 2024 State of San Diego Nonprofits, a report published by the institute in January, a quarter of the organizations surveyed had less than three months of cash reserves last year. The overall average dropped from eight months of reserves in 2023 to six months the following year.
And about 40% of nonprofits surveyed used cash reserves to cover operational costs — a figure Tinkler expected to rise this year even before the Trump istration’s cuts.
“It was already going to be a year that we were probably going to see people dipping more and more into their cash reserves,” Tinkler said. “And then this happened.”
Surpluses can help ensure that a nonprofit doesn’t have to dip into its reserves in the first place. But nonprofits’ surpluses are heavily ed by federal funding — no longer so reliable.
More than half of the San Diego County nonprofits reviewed in a report from the San Diego Regional Policy & Innovation Center had operational surpluses in 2023 — with their federal grant funding. Without federal funding, that share dropped to 17%.
To Alan Berube, the report’s researcher, that’s a clear sign federal money is keeping local nonprofits afloat.
“It’s clear that taking those grants away is a huge fiscal blow to their finances,” he said, “and something that they probably can’t weather for very long without significantly cutting services, cutting payroll and maybe ultimately having to close their doors.”
