Federal Funding Cuts: Four Active Developments

Federal funding to nonprofits is being disrupted on multiple fronts simultaneously. As of April 6, 2026, PANO is following these four developments that are directly affecting Pennsylvania organizations right now.

1. Department of Health and Human Services (HHS) Grant Freeze
   The Department of Government Efficiency’s (DOGE) “Defend the Spend” initiative has added a manual review and approval requirement to routine grant payment drawdowns across HHS. Organizations must now include a justification for each requested drawdown, and federal officials must manually review and approve each request before payment can be made — a process that previously happened automatically. The initiative is running across the National Institutes of Health (NIH) and the Administration for Children and Families (ACF), where roughly half the grants management staff has been laid off or departed. Pennsylvania lost $439 million in HHS funding in earlier clawbacks, and organizations are already navigating a depleted pipeline. Nonprofits drawing down HHS grants should expect delays and build buffer time into cash flow planning.

2. Combined Federal Campaign (CFC) Decommissioned
   The CFC online portal was shut down on March 4, ending the federal government’s employee charitable giving program. The National Council of Nonprofits (NCN) submitted formal opposition. The program’s future is uncertain, and no replacement mechanism has been announced. Organizations that received regular CFC contributions should remove this from projected revenue.

3. Public Service Loan Forgiveness (PSLF) Employer Rule
   The Department of Education (ED) finalized a rule on October 30, 2025, effective July 1, 2026, granting ED new authority to exclude certain nonprofit employers it deems to have a “substantial illegal purpose.” The key terms are vague and determined at the Secretary’s sole discretion. Organizations serving immigrant communities, providing gender-affirming care, or engaging in civil rights and equity work face the most direct impact under the rule’s listed examples. Three federal lawsuits are underway seeking to block the rule before July 1. The practical risk is not just losing eligibility — it is the chilling effect on recruitment and retention for staff making payments toward forgiveness. Nonprofits should audit their current exposure and communicate proactively with staff who rely on PSLF as part of their compensation planning.

4. DEI Executive Orders and Legal Challenges
   Courts have partially blocked DEI-related executive orders and the Supplemental Nutrition Assistance Program (SNAP) funding freeze, but agency-level enforcement is continuing regardless. The legal landscape remains unsettled. Organizations engaged in equity work, immigration services, or mission areas the Administration has targeted should be monitoring their grant terms and compliance requirements actively — not just at award or renewal.