Nila Kartika Wati
The landscape of American philanthropy is facing a transformative crisis as political pressures, shifting legal environments, and escalating global conflicts force a reevaluation of how private wealth supports social movements. As civil society organizations navigate a climate marked by what observers describe as "accelerated imperialism and rising domestic fascism," the philanthropic sector is under increasing scrutiny for its tendency to prioritize institutional risk reduction over the needs of the communities it serves. This tension has come to a head following the events of October 2023, with the struggle for Palestinian liberation serving as a primary catalyst for a broader debate on the future of progressive grantmaking.
According to a comprehensive analysis released by Funders4Palestine (F4P) in partnership with The Forge and Nonprofit Quarterly, many philanthropic institutions are retreating from long-standing commitments when grantees engage in politically sensitive advocacy. This phenomenon, often referred to as "the imperial boomerang," suggests that the tactics used to suppress dissent abroad are increasingly being applied to domestic civil rights and social justice organizations. The report argues that for philanthropy to remain relevant and effective, it must pivot from a "risk-reduction" stance to a "solidarity orientation."
The Historical Context of Philanthropic Risk Aversion
To understand the current friction, it is necessary to examine the structural foundations of American philanthropy. Private foundations in the United States are legally required under Internal Revenue Code Section 4942 to distribute at least five percent of the fair market value of their non-charitable use assets annually. For decades, this five percent payout has functioned as a "ceiling" rather than a "floor," with many of the nation’s largest foundations—which collectively hold over $1.1 trillion in assets—maintaining the vast majority of their capital in permanent endowments.
This financial structure often creates an inherent conflict of interest. While foundations are mission-driven, their governance is frequently tied to the preservation of the endowment and the avoidance of legal or reputational controversy. This "funder culture" has historically favored siloed strategies, where grants are restricted to narrow issue areas such as "criminal justice" or "environmental protection," leaving little room for the intersectional reality of modern organizing.
A Chronology of Philanthropic Retrenchment
The current wave of funding cuts and "mission-drift" accusations is not a new development, but rather the acceleration of a decade-long trend. Analysts point to several key moments where philanthropy struggled to keep pace with movement pivots:
- The 2014 Ferguson Uprisings: Following the killing of Michael Brown in Ferguson, Missouri, several multi-issue base-building organizations shifted their focus from environmental justice and labor rights to support the burgeoning movement for Black lives. At the time, many donors viewed this as "mission drift" rather than a strategic response to community trauma, leading to temporary or permanent funding gaps for groups on the front lines.
- The "Ban the Box" Campaigns: Organizations focusing on Black women’s labor rights in the South faced similar hurdles when they prioritized "Ban the Box" initiatives. Despite the clear link between criminal records and employment barriers for Black women, some "women’s rights" funders refused to support the work, categorizing it strictly as "criminal justice" rather than "gender equity."
- The 2023-2024 Gaza Conflict: Since October 2023, the philanthropic sector has seen an unprecedented level of internal strife regarding Palestinian advocacy. Reports indicate that multiple major foundations have canceled grants to organizations that signed ceasefire letters or expressed solidarity with Palestinian liberation, often citing "strategic shifts" as the formal reason for the termination of decade-long partnerships.
The Impact of Sudden Funding Withdrawals
The practical implications of these shifts are devastating for the nonprofit ecosystem. In recent months, two significant examples of retrenchment have sent shockwaves through the sector. In one instance, a large private foundation with a history of "trust-based" practices reportedly canceled grants that were already in the final stages of processing and payment. The affected organizations, which include major national progressive groups, were given no prior notice or "tie-off" funding to manage the transition.
In a second, more widespread event, a major progressive foundation notified over 100 long-term grantees via email that their support would be terminated. Many of these groups were intermediary grantmaking organizations that support thousands of grassroots movements in underfunded regions of the Global South and the United States. Observers noted a stark correlation: a significant portion of the organizations that lost funding had signed the 2023 "Funders for a Ceasefire" letter. While foundations often frame these moves as "realigning strategy," the timing has led to accusations of political retaliation.
The "Raise the Bar" Framework: A New Strategy for Solidarity
In response to these challenges, Funders4Palestine has introduced a new tool titled Raise the Bar: A Tool to Move from Harmful to Liberatory Funding Practices with Palestine as Your Compass. The framework outlines four critical action steps intended to reform the sector:
1. Swapping Silos for Solidarity
The framework argues that "single-issue struggles" are a myth. When funders force organizations to "stay in their lanes," they undermine the ability of communities to respond to interconnected crises. A solidarity orientation requires funders to move toward groups facing disproportionate risk rather than distancing themselves to protect their own institutional stability.
2. Redefining "Long-Term" Commitments
While many foundations consider a three-year grant to be a long-term commitment, movement leaders argue that structural change requires much longer horizons. The "Raise the Bar" tool encourages funders to treat the five percent payout as a minimum and to explore governance mechanisms that allow for the redistribution of power and decision-making to the communities served.
3. Power Mapping Within Institutions
The tool urges philanthropic staff to engage in "power mapping" to identify the real decision-makers within their foundations—often board members or anonymous donors—and to organize internally to hold these individuals accountable to the foundation’s stated values.
4. Commitment to Transparency
Philanthropy remains one of the most underregulated sectors in the U.S. economy. The new framework calls for radical transparency regarding how decisions are made, especially when grants are terminated. It encourages foundations to invite movement allies into the confidence of the institution, allowing them to help shape transformation.
Emerging Models of Liberatory Philanthropy
Despite the trend of retrenchment, new funding models are emerging that prioritize movement accountability over institutional preservation. The "In Our Name" fund has successfully raised over $6 million, primarily from individual donors, to support Palestinian-led work both in the Middle East and the United States.
Similarly, in 2025, the Women Donors Network launched the "Woven Futures Fund," a Palestinian movement-led fund and national donor collaborative. This fund is designed to strengthen the U.S. movement for Palestinian rights by centering the leadership of those directly impacted by the conflict. These initiatives represent a shift toward "democratized philanthropy," where the donors act as partners rather than gatekeepers.
Fact-Based Analysis of Future Implications
If the current trend of risk-aversion continues, the nonprofit sector may face a "hollowing out" of its most radical and effective elements. When large foundations withdraw support during times of political crisis, it creates a "chilling effect," where organizations may self-censor their advocacy to ensure financial survival.
However, the rise of funder-organizing groups like the Block and Build Funder Coalition and Funders4Palestine suggests that a significant cohort of professionals within the sector is pushing back. These groups are working to create narrative interventions that frame solidarity not as "mission drift," but as a necessary defense against the rising tide of authoritarianism.
The economic reality is that as wealth inequality continues to grow, the power of private philanthropy will only increase. Analysts suggest that without significant reform—either through internal organizing or increased federal regulation of payout requirements and donor-advised funds—the sector risks becoming a tool for maintaining the status quo rather than a vehicle for social transformation.
Conclusion
The current moment represents a "canary in the coal mine" for progressive philanthropy. The treatment of organizations advocating for Palestinian rights, racial justice, and immigrant liberation serves as a litmus test for the sector’s commitment to its stated values. As the political environment becomes increasingly repressive, the choice for funders is clear: continue to prioritize institutional safety through silos and censorship, or embrace a model of solidarity that shares the risks and rewards of the struggle for a more just future. The emergence of tools like "Raise the Bar" and new collaborative funds provides a roadmap for those willing to take the latter path, but the window for such a pivot may be closing as the geopolitical landscape continues to shift.
