Hawaiʻi nonprofits face losing more than $100M in federal cuts

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Hawaiʻi's nonprofit sector is facing budget cuts and program changes that could disrupt essential services statewide. A new analysis by the University of Hawaiʻi Economic Research Organization (UHERO) and the Hawaiʻi Community Foundation provides an early warning system to identify grants, organizations and subsectors at risk, allowing local leaders to prepare responses in advance. Key findings of the October 2 report include:

• Political risk: 74 federal grants to 59 Hawaiʻi nonprofits-worth $126 million in unpaid balances-are politically vulnerable. More than half of this risk is concentrated in healthcare programs, with significant exposure also in human services, environment and education. Programs serving Native Hawaiians account for more than half of the state's politically vulnerable funds.
• Financial risk: Roughly 1 in 3 federally funded nonprofits depend on Washington for more than 20% of their revenue. Human Services nonprofits are among the most financially exposed: federal direct grants provide 36% of all dollars spent in the subsector and make up 28% of the average recipient's revenue. The environment, healthcare, and education subsectors also show high levels of exposure.
• Structural risk: Highly concentrated fields, such as science and voluntary health, rely heavily on a few anchor organizations, while fragmented fields, such as youth development and sports, depend on hundreds of micro-organizations operating on shoestring budgets. While these traits are not in themselves negative, they reveal that the results of cuts in federal funding may vary by subsector, requiring tailored policy responses.

Although only a small share of Hawaiʻi's nonprofits receive direct federal funds, the analysis reveals pockets of heightened vulnerability. Cuts in healthcare, housing and education would also compound strains from reductions in Medicaid, SNAP and other safety net programs.

Federal cuts are unpredictable, but their impact in Hawaiʻi can be mitigated. According to the report, potential strategies include rapid response funding, diversification of revenue streams, capacity-building, coordination and contingency planning. By acting together, leaders in government, nonprofit organizations, philanthropy and business can ensure that Hawaiʻi's nonprofits remain resilient and continue to provide critical services to the state's most vulnerable residents.

"Major changes in federal funding are often difficult to predict, but their ripple effects can be devastating when they land," UHERO Executive Director Carl Bonham said. "By mapping out which grants and organizations are most at risk, this analysis gives Hawaiʻi leaders the tools they need to be proactive rather than reactive."

"We've reactivated the Hawaiʻi Resilience Fund and funded UHERO's analysis because we need clear data to respond strategically, understanding which services and communities face the greatest risk so we can target support effectively," said Terry George, President and CEO of Hawaiʻi Community Foundation. "This is about building nonprofit capacity, adaptability, and local sustainability for the long term, not just short-term relief. By partnering with funders, government, and community organizations, we're strengthening the social safety net that holds Hawaiʻi together, ensuring the organizations deeply rooted in our communities can navigate this transition and emerge more resilient."

"Nonprofits across our state face urgent challenges as funding becomes increasingly uncertain and they navigate shifting priorities, federal cuts and the strain of meeting growing community needs with fewer resources," said Michelle Bartell, President and CEO of Aloha United Way. "Aloha United Way thanks UHERO and Hawaiʻi Community Foundation for investing in vital research that will help direct resources where they are needed most."

See the entire report on UHERO's website.

UHERO is housed in UH Mānoa's College of Social Sciences.