Can We Survive This?

The sector holding the city together is down to its last good strands. Photograph by Mammiya / Pexels

The nonprofit sector holding Los Angeles together is running out of runway. What that means for what comes next.

Letters to the Housed | August 11, 2026 | By Paul Asplund | Second Grace LA

On July 30, the Nonprofit Finance Fund and the Center for Nonprofit Management put together a presentation called "Impact Forward." I wasn't in the room but a friend passed along the presentation and some notes from the discussion that followed.

The takeaway is these numbers lend credence to what we're experiencing at the street level. We are being starved of resources while the demand for what we do continues to grow, almost doubling since 2024.

While it reads like any status report, the story it tells is grim. Many of us are not going to survive this. Those who do have resources to stabilize their finances or the ability to move on the handful of recommendations the report advises. Here's where the story starts.

A third of Los Angeles nonprofits have two months of cash on hand or less. Nationally, this is the highest deficit rate the Nonprofit Finance Fund has recorded in ten years of running this survey. Fifty-six percent of LA organizations with government funding expect cuts greater than 10 percent this year. Sixty-four percent are receiving less than a 10 percent indirect rate from government contracts, even though updated federal guidance now allows for 15 percent. Twenty-nine percent are being paid more than 60 days late.

Only 40 percent of LA nonprofits can pay all of their staff a living wage. Among organizations with budgets under a million dollars, just 37 percent offer health insurance at all.

These are the organizations doing the work closest to the ground. The ones without a development department or a grants team. The ones you've read about in this newsletter for over a year now, the CLTs, the faith-based developers, the small outfits stitching together whatever they can find to keep people housed and fed. Nearly two out of three of them can't offer their own staff health coverage.

Backstopping The Failing Government Response

During the panel discussion that followed the presentation, my friend offered something that makes sense. Government, she said, is effectively using the nonprofit sector as cheap labor. Not by design exactly, but by default. When public systems fail or get gutted, nonprofits absorb the gap, because someone has to and the people who need help can't wait for a budget cycle to sort itself out.

This means even organizations that aren't dependent on government funding, the ones doing "well" by any normal measure, are feeling the pressure. When one part of the safety net tears, the whole net has to hold more weight. Nobody signed up to be the shock absorber for federal and county funding decisions made hundreds (and thousands) of miles away, but that's the job now. We've seen this dynamic before, just aimed at a different set of funders.

And traditional philanthropy, the foundations, the galas, the donor-advised funds, isn't built to move at the speed this moment requires. Nothing is performing the way it used to, even a few years ago. The tools that worked in a stable funding environment aren't built for a collapsing one.

When one part of the safety net tears, the whole net has to hold more weight.

Investing Over Spending

CANCEA taught us that spending on housing now prevents bigger costs later. This idea works differently. It's not asking funders to spend more. It's asking them to change what they're funding, treating a nonprofit's payroll, rent, and vendor contracts as investment in the local economy, not just a program to keep alive year to year.

There's a name for this in philanthropy circles: enterprise capital. Andrea Levere, who helped build this idea through her work at Capitalize Good, argues that nonprofits are businesses, just with a different tax status. A restricted, single-year grant works like a customer paying for a service. It disappears the moment it's spent. Enterprise capital works more like an investor buying equity. It builds the organization's balance sheet. It lets a nonprofit hold reserves, hire ahead of need instead of behind it, and survive a bad quarter without laying off the people doing the work.

A restricted, single-year grant works like a customer paying for a service. It disappears the moment it's spent. Enterprise capital works more like an investor buying equity.

The LA data backs up why this matters here specifically. Forty-three percent of LA nonprofits in this survey spent more than $100,000 with local vendors last year. The organizations in this sample alone employed over 12,500 people. That's payroll, that's rent, that's money moving through neighborhoods that need it moving. When a funder gives a nonprofit an unrestricted, multi-year grant instead of a project-specific check that has to be spent down to zero, they're actually capitalizing a local employer.

This is a genuinely different ask than the ones we've made before in this newsletter. It's not about proving that investment saves money later. It's about changing the mechanics of what a gift actually is.

What's Working

There are a few working examples of nonprofits responding to exactly this pressure here in LA County.

The Nonprofit Sustainability Initiative has spent more than a decade helping local organizations formally restructure so they can survive without burning out or shutting down. Not mergers as a last resort or an admission of failure, but as a strategy chosen from a position of strength. Two charter schools in South LA combined to strengthen their STEM programming instead of both quietly struggling alone. Four health centers, Eisner Pediatric, Saban Community Clinic, Venice Family Clinic, and South Bay Family Health Care, restructured together rather than each absorbing the same rising costs in isolation. The YWCA Glendale and Pasadena came together under one structure and had their strongest fundraising year in nearly two decades as a result.

Nonprofits sharing what doesn't need to be duplicated, back-office functions, HR, accounting, makes it possible for more of every dollar to reach the people who need it.

Nationally, nearly one in five nonprofits merged with a peer organization in the past year, and half say they're likely to do it again in the next twelve months.

How We Survive

The advice for staying financially healthy right now isn't complicated. Build six months of reserves or more. Hold onto restricted, long-term assets like property. Diversify revenue around what you're already good at instead of chasing whatever grant happens to be available. And where it makes sense, share what you can with another organization instead of each of you quietly running out of runway on your own.

None of that is radical. It's what any stable business would do. The radical part is that so few nonprofits have ever had the kind of funding that makes any of it possible. Restricted, single-year, program-specific grants don't build reserves. They can't. That's not how they're designed.

So here's what comes next, as far as I can tell. Funders who actually want this sector to survive the next few years are going to have to change how they give, not just how much. And the rest of us, the people reading this who care about what happens to our unhoused and struggling neighbors, need to understand that the organizations doing that work are running on fumes that have nothing to do with how hard they're working or how much good they're doing.

If you give to a nonprofit this year, and I hope you do, consider asking what an unrestricted gift would let them do that a project-specific one can't. It's a different question than the one most of us are used to asking. It might be the more important one.

If you give to a nonprofit this year, and I hope you do, consider asking what an unrestricted gift would let them do that a project-specific one can't.

More soon.
Paul

Letters to the Housed, Nonprofit Sector, PhilanthropyPaul Asplundnonprofits, nonprofit funding, Los Angeles, philanthropy, enterprise capital, Nonprofit Finance Fund, Capitalize Good, Andrea Levere, unrestricted funding, nonprofit mergers, Nonprofit Sustainability Initiative, homelessness, housing justice, Second Grace LA, Letters to the HousedComment