Bay Area nonprofits face funding cuts as DEI programs come under fire

San Francisco Chronicle​

18-05-2025

Nonprofit organizations across the Bay Area and nation are facing existential threats amid mounting challenges to diversity, equity and inclusion programs under President Trump's second administration. Many fear they could lose federal, corporate or foundation funding — and some already have.
The Chan Zuckerberg Initiative in Redwood City, established by Facebook founder Mark Zuckerberg and his wife Priscilla Chan, is perhaps the largest and most public example of a major donor that has ceased funding DEI-related programs.
But changes like those at Chan Zuckerberg are just one big challenge facing nonprofits today. Other foundations have made more subtle shifts in grantmaking or messaging. Meanwhile, critics of race-conscious programs are ramping up legal challenges. That's creating fear and uncertainty among nonprofits over what's ahead and how to respond.
In the most immediate threat, agencies across the federal government have cut funding to hundreds of nonprofits because the grants 'no longer effectuate the program goals or agency priorities.'
In a March 4 speech before Congress, Trump said, 'We've ended the tyranny of so-called diversity, equity and inclusion policies all across the entire federal government and, indeed, the private sector and our military. And our country will be woke no longer.' Regardless of your profession, 'you should be hired and promoted based on skill and competence, not race or gender.'
The current climate marks a sharp turnaround from 2020, when there was an outpouring of support for nonprofits working toward racial equity and related causes, according to Candid.org, which provides data and research on nonprofits. However, not all pledges made during that period turned into grants, and commitments appeared to decline starting in 2021, according to the Philanthropic Initiative for Racial Equity.
Even before Trump took office in January, opposition to DEI programs had been mounting for years. In 2023, the Supreme Court effectively banned affirmative action in college admissions. Although the decision was largely confined to higher education, it raised questions about DEI policies in grantmaking, contracting and employment — issues that are being pushed to the forefront now.
Facebook, Meta and CZI
In January, Facebook parent Meta — whose CEO is Zuckerberg — became the latest large corporation to eliminate or roll back DEI programs. It cited the changing 'legal and policy landscape surrounding diversity, equity and inclusion efforts,' according to a memo to employees obtained by Axios.
At that time, employees at the Chan Zuckerberg Institute reportedly were told the move at Meta would not affect them. However, in a Feb. 18 blog post, CZI said that 'given the shifting regulatory and legal landscape, we will no longer have a Diversity, Equity, Inclusion, and Accessibility team at CZI.' It said it had reassigned its three-person DEI team and discontinued its 'diverse slate practice' used in employee recruiting.
CZI's decision to disband the internal team 'was separate and apart from Meta,' a CZI spokeswoman said via email.
Although it's often called a nonprofit, the Chan Zuckerberg Initiative is a limited liability company that can invest in private companies. It also makes tax-deductible contributions to 501(c)3 charities through its own tax-exempt entities including the CZI Foundation (now the nation's 18th largest foundation by assets), the CZI Biohub and the CZI donor-advised fund at the Silicon Valley Community Foundation.
When they started the initiative in 2015, Chan and Zuckerberg said its mission was to 'advance human potential' and 'promote equality.' In a Facebook post, they said, 'We must make long term investments over 25, 50 or even 100 years. The greatest challenges require very long time horizons and cannot be solved by short-term thinking.'
In its early years, CZI gave to biomedical and education research, political and social advocacy and causes related to diversity, equity and inclusion.
According to CZI, its shift away from DEI-type funding to focus on 'the intersection of biology and AI' was years in the making. CZI leadership 'made the decision a few years ago to wind down our social advocacy work and have since discontinued that funding,' Chief Operating Officer Marc Malandro said in the Feb. 18 website post. 'This includes our previous work on immigration reform, as well as our racial equity grantmaking as we've completed the five-year program we announced in 2020. We haven't launched new programs in this area for a few years.' It said it would honor a 'small number' of multi-year grants, 'but none of these will support political activism.'
The changes at CZI flew somewhat under the radar until The Primary School — a K-8 private, tuition-free school in East Palo Alto that was founded and funded by CZI — announced on April 21 that it and its newer preschool program in San Leandro would shut down after the 2025-26 school year.
The school serves minority students, with a stated commitment to DEI. It gave no reason for the closures, but a former administrator told the Chronicle that the school's board and many faculty members were not satisfied with the school's academic outcomes. A school board member told the Chronicle that the school was closing due to financial challenges.
Based on CZI's and the school's tax filings, it appears that The Primary School received virtually all of its philanthropic funding from CZI entities. CZI's grantmaking database, which begins in 2018, shows it had given about $100 million to the school, including about $20.3 million in 2024.
The Internal Revenue Service requires most tax-exempt public charities to meet a 'public support test' that shows they are not overly reliant on a single donor. Schools, churches and hospitals, however, are considered public charities by default and therefore don't have to meet this test, said Brian Mittendorf, an accounting professor at Ohio State University who specializes in nonprofits.
But even if tax laws don't require donor diversification, sound management does. 'The school's problem was that it valued diversity more than diversification,' said Leslie Lenkowsky, professor emeritus at Indiana University.
Jean-Claude Brizard, the school's board chairman, did not return requests for comment. But he told the New York Times that it struggled to attract other donors and it was his decision to 'put on the table the nuclear option' of disbanding the school.
The CZI spokeswoman said the impending closure was the school board's decision and 'was not DEI related, in fact CZI has committed $50 million' over five years to communities the school served for college savings accounts, transition and other services.
Lenkowsky said it can be hard for a nonprofit to attract outside funding when it is so closely associated with one individual. 'The fact that it was related to Chan Zuckerberg could be a problem for fundraising. He's so wealthy, it's expected he would pay a large share of the bills. This is not uncommon,' Lenkowsky said.
Chan Zuckerberg is not the only major donor that has backed away from DEI funding.
In early February, the Howard Hughes Medical Institute abruptly killed a $60 million 'Inclusive Excellence' program aimed at helping underrepresented students stay in university science, technology, engineering and math majors. An extensive description of the program also disappeared from its website.
The institute said in an email that it ended the program because it is 'refocusing resources to provide direct support to outstanding scientists across all career stages who are currently part of people-centered programs for graduate students, postdocs, and faculty pursuing biomedical research.'
Backing away 'quietly'
Other donors appear to be backing away 'more quietly,' said Ryan Schlegel, director of research with the National Committee for Responsive Philanthropy. They are deleting or editing webpages to remove terms related to DEI or 'reframing program strategies to de-emphasize equity and inclusion. Especially those with connections to living donors are changing how they talk about their work from their website.'
The Omidyar Network in Redwood City, founded by eBay founder Pierre Omidyar and his wife, Pamela, is another LLC that invests in companies and contributes to nonprofits through its tax-exempt foundation. A year ago, its homepage prominently said, 'We invest to build more inclusive and equitable societies,' according to images of the site preserved on the Internet Archive. One of its three program areas was 'building cultures of belonging.'
Today there is no mention of diversity, equity or inclusion on its homepage. A page titled ' diversity and inclusion ' has disappeared since February. The network did not return requests for comment.
A more startling example, though not local to the Bay Area, is the Sherwood Foundation, founded by billionaire Warren Buffett's daughter Susan A. Buffett. In early February, the foundation's homepage said it 'values equity and social justice with a generous heart for women and children' and featured a colorful photo illustration of a home with seven yard signs including Black Lives Matter, Equal Rights, Gender Equity and a rainbow.
By late February, all that had been removed and replaced with a simple map of Nebraska and the words, 'The Sherwood Foundation provides grants that help make Nebraska a better place to live, work, learn, and play.' It did not return a request for comment.
It's hard to say if such moves represent 'a change in grantmaking strategies or communications or both,' said Geoff Green, CEO of the California Association of Nonprofits.
The Marin Community Foundation removed a 'climate justice' page from its website that said 'due to historic redlining practices, communities of color are often close to industrial sites and have the added risk of buried toxic industrial chemicals intermixing with intruding water.'
Vikki Garrod, a spokeswoman for the foundation, said it is 'rebranding' its Climate Justice Initiative, 'which is why it's currently off the website.' Combining the terms climate and justice 'was confusing to folks and it was becoming a barrier' to effective communication and support. It will now be named Building Resilient Communities.
'We will continue to remain focused on those communities that are most vulnerable to impacts and most lacking in resources to address them,' Garrod said via email.
In mid-April, San Francisco's Walter & Elise Haas Fund identified 'racial justice' as one of four focus areas on its homepage. Its recently revamped home page makes no mention of racial justice.
'We are not de-emphasizing or eliminating DEI-related activities,' spokesman Anthem Salgado said via email. 'The fund has been working on a years-long strategy refresh which we finally launched recently. It details how we integrated our former programs for more cohesiveness, which explains why Racial Justice no longer appears as a stand-alone program area. We continue to highlight equity and justice in our definition of Belonging.'
It's too early to know for sure what impact the DEI backlash has had on actual grantmaking. Many foundations still have not filed their 2024 annual tax filings, which disclose grantmaking, with the IRS. But Green said he has seen funders and charities 'quietly walk back from certain types of work. They are not going to advertise that they are obeying the Trump administration.'
Government funding
Although foundations are an important source of funding for nonprofits, they pale in comparison to program revenues (such as fees for services) and government grants.
Since taking office, Trump has issued dozens of executive orders, some of which seek to eliminate DEI and accessibility programs that violate 'anti-discrimination' laws from the federal government, schools, universities and nonprofits.
His first order, on Jan. 21, called for 'encouraging the private sector to end illegal DEI discrimination and preferences' by, among other things, having the attorney general and government agencies 'identify up to nine potential civil compliance investigations of publicly traded corporations, large non-profit corporations or associations, foundations with assets of 500 million dollars or more, state and local bar and medical associations, and institutions of higher education with endowments over 1 billion dollars.'
While many of his executive orders are being challenged in court, they are still causing anxiety among nonprofits and their donors. Many charities have already had federal grants canceled, revoked or paused, Green said.
For example, on April 22, the U.S. Department of Justice's largest grantmaking arm, the Office of Justice Programs, cancelled about 370 grants awarded to 221 nonprofits and local governments. The grants were originally worth about $820 million, though some portion already had been paid out, according to the Council on Criminal Justice. It estimated the amount remaining was $500 million.
They supported programs for crime victims, opioid addiction, gun violence, community violence prevention and intervention, safeguarding incarcerated youth and re-entry services for people exiting incarceration. Grantees were given 30 days to appeal.
CASA/GAL, a national organization that supports regional programs matching volunteer court-appointed advocates with abused and neglected children, lost three federal grants. It said the termination notice from DOJ said the grants 'no longer effectuate the program goals or agency priorities,' which includes 'protecting American children.' CASA/GAL added, 'Since that is in fact the mission of the CASA/GAL program, we strongly disagree with the decision to terminate the grants.' The grants initially were worth nearly $50 million, according to a database posted on Reuters, but it's not clear how much remained.
In the Bay Area, the wave of grant cancellations hit about 14 nonprofits, along with the city and county of San Francisco, which lost federal grants initially worth around $50 million, according to data provided by the Council on Criminal Justice. Some were multiyear contracts and it's not clear how much funding remained.
As of April 22, Impact Justice of Oakland had lost three DOJ grants with $8.5 million remaining. It tries to prevent incarceration, improve prison conditions and help those who have been released. It had received $280,000 in grants from Chan Zuckerberg in 2020.
Youth Alive, another Oakland nonprofit, had received only $60,000 of the $2 million grant it was awarded under the Biden administration for its Caught in the Crossfire violence prevention program before it received an email in April canceling the remaining grant.
The email said the Justice Department had changed its grant funding priorities to focus more directly on 'supporting certain law enforcement operations, combatting violent crime, protecting American children, and supporting American victims of trafficking and sexual assault, and better coordinating law enforcement efforts at all levels of government.'
The canceled funding made up 5% of Youth Alive's total budget but 20% to 25% of Crossfire funding, said Executive Director Joe Griffin. He has managed to avoid layoffs by shifting staff and freezing open positions.
Nonprofits are also concerned about language in the House Ways and Means Committee's reconciliation bill, dubbed 'The One Big Beautiful Bill,' which is now moving toward a vote in the House. Although private foundations are exempt from income taxes, they must pay an excise tax of 1.39% annually on net investment income.The bill would raise this tax on foundations with at least $50 million in assets to between 2.78% and 10% depending on asset size.
It also would let the Treasury Department revoke a nonprofit's tax exempt status if it was deemed to be a 'terrorist supporting organization.'
'This authority could enable any administration of any political party to target charitable organizations based on ideological grounds,' the National Council on Nonprofits said.
On another front, some nonprofits are facing pressure and lawsuits from other groups opposed to DEI.
On April 1, The American Alliance for Equal Rights, led by conservative activist attorney Ed Blum, formally asked the Internal Revenue Service to 'open investigations into the racially discriminatory practices' of the tax-exempt Gates Foundation for offering college scholarships to low-income minority students. Less than two weeks later, the nation's largest private foundation said it would open its signature Gates Scholarship to all low-income students. It said it had been considering the move since last fall.
Weathering the storm
Even amid the funding and legal threats, many organizations expressed confidence in their ability to weather the storm. In Oakland, the Rising Sun Center for Opportunity said it receives no federal funding and has not felt pressure from donors to backtrack on DEI. Its President and CEO Julie Hatton said its mission is 'building career pathways for economic equity and climate resilience in the Bay Area and Central California.'
Hatton said one funder did let them know that its legal department would be 'reviewing proposals for 'discriminatory' language, i.e., naming specific racial demographics. That was new.' But 'they were not saying that applications that mentioned racial equity or DEI would be considered discriminatory.'
She has also seen 'some federal grants disappear that we planned to apply for, such as the U.S. DOE's Good Jobs in Clean Energy Prize.'
While some foundations and donors are pulling back from DEI, many have posted statements supporting it, including Richard Tate, CEO of the California Wellness Foundation, Richard Besser, president and CEO of the Robert Wood Johnson Foundation, and Bob Friedman, chairman of the San Francisco Foundation.
'Most DEI-related activity is legal,' said Phil Buchanan, president of the Center for Effective Philanthropy. 'There is no reason to back away from a commitment to diversity, equity and inclusion just because the executive branch doesn't like it, unless you are depending on federal funding in which case you are in a truly difficult position.'
'It's unfortunate when we have major donors who actually have more freedom to stand up for their values who are running scared,' he said, 'because of some executive branch pronouncement that, in many cases, is not consistent with the law.'