California nonprofit leaders warn federal cuts will force service reductions, urge state backstop

Leaders of California community foundations, food banks and statewide nonprofit associations told a joint California State Senate and Assembly select committee hearing that recent federal funding reductions and policy changes threaten the ability of nonprofits to deliver services across the state.

"These are not abstract. They impact real communities, real families, and real lives across all of California," Laura Seaman, CEO of the League of California Community Foundations, told the committee, describing national funding disruptions and a rapid rise in demand for services.

Seaman said California's nonprofit workforce numbers about 1,700,000 people and that public funding plays a central role in operations: "In California, just over $42,000,000,000 in government funding helps fuel the work of nonprofits in our state," she said. She framed the moment as both a crisis and an opportunity for the state to reduce administrative friction in contracting and to institutionalize a voice for the sector inside state government.

Monica White, president and CEO of FoodShare Ventura County, described specific, local impacts she said her organization has already absorbed after federal program changes. FoodShare, she said, receives roughly 25% of its food from federal sources and 10% of a $9,000,000 annual budget from federal programs; a cancelled USDA shipment cost the organization about 200,000 pounds of food — which White said cost roughly $400,000 to replace — and forced cuts to other programs.

"HR 1 represents the most severe cuts to our safety net programs in history," White said, adding that she expects as many as 5,500,000 Californians could be affected by proposed SNAP (CalFresh) reductions and that Feeding America projects an additional 50,000 Californians could fall below the poverty line if SNAP benefits are reduced.

Speakers repeatedly urged reforms the committee has already begun to consider: expanded use of advanced payments for state grants and contracts, better indirect-cost coverage to allow nonprofits to pay finance and compliance staff, and prompt payment reforms so organizations are not required to operate for months on reimbursable-only contracts.

Panelists and public commenters also raised workforce concerns. Alfredo Cruz Jr., executive director of Community Resource Project, said payment delays of up to three months and reimbursement-only contracting force nonprofits to borrow, draw reserves, or reduce services. Several speakers cited recent survey results showing a substantial share of California nonprofits have insufficient cash reserves — "just over half of organizations have three months or less of cash," Annie Chang of Nonprofit Finance Fund said — and that delayed payments force organizations into lines of credit and program cutbacks.

The hearing included examples of disaster-sector partnerships in which philanthropy and private companies provided donated flights, shelter credits and goods, and Cal OES officials described systems that route donations and coordinate nonprofit volunteers during declared disasters. Still, witnesses said long-term funding for local long-term recovery groups (LTRGs) is inconsistent, especially in rural areas.

Committee members asked witnesses for concrete steps. Witnesses offered short- and medium-term proposals: pilot and normalize advanced payments; require or systematically adopt prompt payment timelines across state agencies; increase use of the OMB uniform guidance default indirect-cost allowances; and create a standing office within state government to coordinate nonprofit–government partnerships.

The hearing produced no vote or formal action. Lawmakers said they would continue to pursue policy options and local outreach, and multiple speakers invited legislators to spotlight nonprofit operations in their districts to attract private philanthropy and public attention.