Hawaii’s nonprofit sector, already strained by rising costs and growing community needs, is bracing for a wave of federal funding cuts that could ripple across health care, housing, education and human services programs.
A new analysis released Thursday by the University of Hawaii Economic Research Organization and the Hawaii Community Foundation (HCF) lays out the risks in stark terms: 74 federal grants to 59 Hawaii nonprofits —
totaling $126 million in unpaid balances — are politically vulnerable.
For many local organizations, that means facing an uncertain future. The UHERO-HCF analysis, titled The Vulnerability of Hawaii’s Nonprofit Sector to Cuts in Federal Funding, provides the first statewide “early warning system” to help leaders anticipate where cuts may fall and how
nonprofits can prepare.
Researchers found that while only a small fraction of Hawaii’s 8,200 nonprofits receive direct federal grants, those that do are highly exposed — and their collapse could leave service gaps that reverberate statewide .
“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 Hawaii leaders the tools they need to be proactive rather than reactive.”
The report outlines three overlapping categories of risk: Political risk, which identifies grants tied to programs that could be frozen, reduced or eliminated based on stated policy priorities;
financial risk, which measures how dependent organizations are on federal dollars; and structural risk, which examines how concentrated or fragmented subsectors are, revealing how unevenly the damage could be distributed.
Health care programs account for the largest share of politically vulnerable grants, followed by human services, education and the environment. Programs serving Native Hawaiians make up more than half of the state’s politically vulnerable funding. Meanwhile, nearly
one-third of federally
funded nonprofits rely on Washington for more than 20% of their revenue — making them especially fragile if budgets shrink or payments are delayed.
Human services organizations are among the most exposed: federal direct grants account for 36% of all spending in the subsector and nearly 30% of the average recipient’s revenue. Even in health care — a sector with broader revenue streams — nonprofits are responsible for $3.9 billion in annual services and await $563 million in federal obligations. As UHERO researchers note, even modest percentage cuts in health care could ripple widely through employment, treatment, and access.
Trey Gordner, a UHERO policy researcher, emphasized that the vulnerabilities are concentrated but severe.
“So the way grants work is that it’s a particular federal agency to a particular recipient for a particular public purpose,” he said. “We see particular risk to grants going to healthcare organizations, human services organizations, environmental nonprofits that are working on things like climate change and green energy, as well as arts culture and humanities and education.”
For frontline providers, the numbers translate directly into lives disrupted.
At Residential Youth Services and Empowerment, which provides shelter and support for homeless youth, recent cuts have already dealt a blow.
Executive Director Carla Houser said organizations were notified months ago that reductions to the Federal Youth Service Bureau’s outreach program were on the way.
“Approximately a quarter million dollars has been cut from the Federal Youth Service Bureau that provides street outreach to our most vulnerable,” Houser said. “RYSE was established to work in a continuum of support that really helped empower our young people to move beyond homelessness, and so these funding cuts make that work increasingly difficult.”
Houser warned that the fallout extends well beyond Oahu.
“Federal programs support thousands of Hawaii’s children, youth and young adults with support in education, health care, nutrition, child care, economic security. Funding cuts threaten the stability of these safety nets for our future generations,” she said.
With more than 300 homeless youth currently in housing subsidized by federal funds, she added, “all of those are potentially at risk of losing in this current federal funding cycle.”
The impacts, she said, will be felt across the islands — on Oahu, Kauai, Maui, and Hawaii island.
“As you can imagine, when a young person, ages 14 to 24, is on the streets without that lifeline from trusted adults, our efforts to reunify runaways with their families, our efforts to connect young people to mental health and substance abuse treatments are all going to be interrupted,” Houser said.
In the domestic violence field, the loss of federal dollars has already forced families into impossible choices. Mary Scott-Lau, founder of Women In Need — a nonprofit organization that supports women who have been through domestic
violence, homelessness, substance abuse and incarceration — said her organization had to close a pioneering shelter that allowed women and children to stay with their pets while fleeing abuse.
“It was run perfectly — they felt very at home, they felt very loved, they had all the wraparound services they needed,” Scott-Lau said. “And then we got cut federally, completely gone.”
Scott-Lau said WIN had to rehouse its clients, finding homes for five of them. Two others, however, could not be placed and “went back, which is very sad.”
The closures didn’t stop there.
“We had to lay off half of our employees,” she said. “We lost our house on Kauai because we lost funding over there — that was the only clean and sober house on the island. And from our domestic violence house, we lost people and their animals and the house itself. So it’s a big burden. A lot has been cut.”
The uncertainty is compounded by the unpredictability of federal actions. Some cuts are imposed abruptly, then tied up in court battles. Others are delayed or reversed. In the meantime, nonprofits must keep the lights on, pay staff and serve clients — without knowing when or whether reimbursement will come.
Michelle Bartell, CEO of Aloha United Way, said her organization has stepped in to help stabilize partners.
“We’ve accelerated some of our regular grant funding. We’ve sped up those payments. We’ve made it unrestricted funding,” Bartell said. “We’ve also auto renewed some of our safety net partners, recognizing that the last thing we want them to do is to have to reapply for something.”
Still, she noted, many nonprofits are working through their cash reserves.
“It just puts (the nonprofits) in a very tenuous position,” Bartell said.
The state Legislature tried to ease the strain earlier
this year by appropriating $50 million in emergency nonprofit support — an unprecedented move that leaders hailed as a sign of recognition. But those dollars have yet to flow.
“We’re eagerly hoping that (the dollars) will flow soon because nonprofits can’t wait much longer,” HCF President and CEO Terry George said.
He added that broader changes in federal safety net programs could compound the pressure.
“According to the Kaiser Family Foundation, (these policies) could affect 49,000 people in Hawaii with the risk of losing their Medicaid coverage … and an additional 22,000 people …
at risk of losing some of their food stamp or SNAP benefits.”
The indirect impact is that nonprofits may face increased demand for their services just as they are losing federal contracts.
HCF and other philanthropic partners are investing in strategies to help nonprofits adapt. Earlier this year, HCF launched its “Strength in Service” grants, designed to help organizations rethink their structures and revenue streams.
“Philanthropy really cannot replace the dollars that have been cut or are at risk,” HCF Program Director Justina Acevedo-Cross said.
She emphasized the need for organizations to become highly resourceful, exploring new revenue sources or partnering with other groups and businesses to boost operational efficiency.
UHERO’s report highlights similar strategies: rapid-response funding to bridge payroll crises, capacity-building in fragmented fields, diversification in concentrated ones and proactive contingency planning. Researchers emphasized that tailored responses are critical, since risks vary widely by subsector.
Despite the challenges, George said he sees resilience in the nonprofit community itself.
“We as a community need to stand with them and say, ‘we’re with you on this,’” he said. “They have the courage to get through this … but there’s some point at which there needs to be basic dollars provided to them, so they’ve got some certainty.”
The authors of the UHERO-HCF report stress that while federal cuts are unpredictable, Hawaii is not powerless if prepared. Local leaders, funders, and communities can prepare by targeting support where it’s needed most.
As Houser put it, the stakes could not be higher.
“The great work that has been happening to build a safety net around our youth who are experiencing homelessness and housing instabilities … it’s just a really drastic ripple across the continuum,” she said.
For Scott-Lau, the issue is just as urgent.
“It’s really a crisis right now for domestic violence people fleeing,” she said. “They don’t have anywhere to go.”