The Casa Familiar organization in San Ysidro has experienced financial uncertainty after the U.S. Environmental Protection Agency (EPA) recently announced it was terminating a $12.7 million federal grant intended for air quality improvements in the community.
Initially secured under the Community Change Grants program, this funding was set to help develop a low-cost, zero-emissions mobility project.
The cancellation came as no surprise to Casa Familiar, which had already lost another EPA grant worth $500,000 awarded last year for Environmental Justice Community Problem Solving.
With the Trump administration implementing substantial cuts across various federal programs, organizations such as Casa Familiar were braced for funding losses.
Lisa Cuestas, the executive director of Casa Familiar, noted that the organization had already allocated funds and resources towards community projects, including hiring staff and distributing nearly 200 air purifiers.
“That’s going to show up as a loss on our budget for this fiscal year,” she said.
As federal funding dries up, Casa Familiar and other local nonprofits are re-evaluating their budgets to ensure daily operations can continue.
Activities previously funded by the now-terminated grants have come to a halt, forcing many organizations to reduce staff, pay, and services.
Franco Garcia, executive director of the Environmental Health Coalition, expressed that his organization, which also lost a considerable $20 million EPA grant, is adjusting its strategies to continue serving the community despite fiscal challenges.
In late April, the EPA announced the cancellation of nearly 800 environmental justice grants across the country, including those funded by the Inflation Reduction Act’s Community Change Grants program.
The legality surrounding these terminations remains under scrutiny, as the funding was sanctioned by Congress under the 2022 legislation.
According to an EPA spokesperson, the agency is reviewing its grant programs to ensure they align with current administration priorities.
Comments from the spokesperson suggested that the Biden-Harris Administration’s focus on diversity, equity, and inclusion initiatives as well as environmental justice preferences is at odds with the traditional mission of protecting human health and the environment.
Similar terminations have occurred in other federal agencies, including the National Endowment for the Arts and the National Institutes of Health.
Many of these cuts have been legally contested, resulting in some grants being reinstated.
In the meantime, however, local nonprofits are grappling with uncertain futures.
Federal funds significantly support operations for many of the approximately 13,000 nonprofits in San Diego County.
A report from the San Diego Regional Policy & Innovation Center indicated that in 2023, roughly $940 million in federal funding was awarded or contracted to about 3,600 local nonprofits.
Since the beginning of the year, Casa Familiar has continually re-forecast its budget in response to shifts in federal grant availability.
The organization had invested approximately $20,000 of its $12.7 million grant into its low-emissions mobility project and was able to secure reimbursement for those costs, even amidst funding instability.
However, expectations to cover staff compensation and programmatic expenses with around $2 million in federal funding over the next three years have been dashed, leading to layoffs of eight employees specifically hired for environmental justice initiatives.
Similarly, the Environmental Health Coalition utilized between $150,000 to $200,000 for EPA-funded climate projects, which included plans for a linear park in Barrio Logan and strategies for making homes more resilient to climate-induced disasters.
These efforts were part of a broader initiative, “Rooted in Communidad, Cultivating Equity,” launched in partnership with the San Diego Foundation to promote climate justice across disadvantaged neighborhoods like Barrio Logan, Shelltown, and Mount Hope.
Garcia mentioned that the coalition has yet to receive reimbursements for all previously incurred project costs due to federal funding cessation, leading to a significant impact on staffing.
With a total of 15 staff members, roughly half of the workforce has been affected through layoffs, furloughs, or pay cuts.
Despite these setbacks, the San Diego Foundation has sought additional clarification from the EPA regarding reimbursement for remaining expenses but has yet to receive updated information.
Hampton Dohrman, who runs a nonprofit management consulting firm in San Diego, noted that federal grants typically operate on a reimbursement basis, which can pose financial challenges for nonprofits.
Projects can only move forward if nonprofits can initially finance these expenses.
Moreover, federal grants often allow for indirect cost rates to cover administrative costs, which many organizations depend on for day-to-day operations.
The Museum of Us, which has faced terminations from both the National Endowment for the Arts and the Institute of Museum and Library Services, was relying on such funding to manage operational expenses.
Although a federal judge ordered the reinstatement of IMLS funding, uncertainty still looms over the institution’s future.
James Hadden, the museum’s senior director of development and communications, described the cuts as a potential threat to ongoing and future projects.
In light of the turmoil, the museum’s leadership has begun identifying alternate budgeting and planning scenarios while committing to avoiding staff layoffs whenever possible.
Other nonprofits, like the Anza-Borrego Foundation, have either not yet tapped into their federal grants or have successfully obtained reimbursements for past expenses.
However, without anticipated federal funding, many organizations may soon lack the financial reserves necessary to weather their current challenges.
Early indicators suggest that the financial stability of local nonprofits has already been undermined in recent years, further compounded by the dwindling availability of COVID-19 relief funds.
During the pandemic, many nonprofits secured emergency funding, helping them maintain services and build financial reserves.
However, according to the 2024 State of San Diego Nonprofits report, the situation has worsened, with a quarter of organizations reporting less than three months of cash reserves last year, a drop from an average of eight months in 2023 to only six months currently.
Additionally, nearly 40% of nonprofits tapped into their reserves to manage operational expenses, a trend expected to amplify this year, even prior to federal funding cuts.
Tessa Tinkler, senior director of research and evaluation at the University of San Diego’s Nonprofit Institute, indicated that many organizations were already anticipating financial strain in 2023.
The loss of federal grants will likely exacerbate these challenges, driving nonprofits to increasingly utilize their cash reserves.
Nonprofit surpluses are often bolstered by reliable federal funding, which is no longer guaranteed.
A report from the San Diego Regional Policy & Innovation Center noted that over half of the local nonprofits surveyed had operational surpluses in 2023 due to federal grants; this figure plummeted to just 17% without federal support.
Researcher Alan Berube emphasized that the removal of these vital grants poses a significant financial blow to local nonprofits.
“It’s clear that taking those grants away is a huge fiscal blow to their finances, and something that they probably can’t weather for very long without significantly cutting services, cutting payroll and maybe ultimately having to close their doors,” he stated.
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