Measuring Nonprofit Capacity Amid Funding Uncertainty

Recent changes in government policy have affected how nonprofit organizations are funded, how they operate, and the level of demand for their services. In response, the Community Foundation for Southern Arizona (CFSA) surveyed local nonprofit organizations to better understand the impact of recent funding reductions and policy changes on the nonprofit community. The survey was conducted in September 2025. This article highlights key findings from that survey and places them in the broader regional context, using data available on the MAP Dashboard, to illustrate the essential role nonprofits play in supporting Southern Arizona communities.

The survey provides a snapshot of the nonprofit landscape in Southern Arizona. Nearly all responding nonprofits identified as 501(c)(3) organizations. A 501(c)(3) organization is a nonprofit recognized by the IRS as tax-exempt because it serves the public. More than half of survey respondents indicated they have been in operation for over 20 years, while 23% have been in existence for less than 10 years. Most survey responses came from nonprofits located in Pima County, though organizations in Cochise, Graham, Pinal, Santa Cruz, and Yuma counties were also represented (Figure 1).  

Figure 1: Survey Respondents by County

When asked about the primary area of focus for their organizations, the top responses were basic human needs and children and youth services, which tied as the most commonly identified focus area. Other prevalent focus areas included arts and culture, education/early childhood education, and advocacy (Figure 2). Education and early childhood education, along with vocational/volunteer placements and workforce development, were often cited as secondary focus areas.

Several of these service areas align closely with indicators tracked on the MAP Dashboard. For example, food insecurity, a measure of unmet basic needs, is a key indicator used to assess community well-being and economic stability across Southern Arizona.

Figure 2: Survey Respondents by Primary Focus Area

Nonprofit budgets in Southern Arizona vary widely, ranging from under $100,000 to more than $2 million. Approximately one-third of respondents reported annual budgets between $500,000 and $1,999,999, making this the most common budget category at 32.1%. The remaining budget categories each accounted for between 15% and 19.3% of respondents (Figure 3).

Figure 3: Survey Respondents by Budget Size

Arizona is home to more than 30,000 registered 501(c)(3) nonprofits, with nearly 16% located in Pima County, according to the Internal Revenue Service's Exempt Organization Business Master File as of November 15, 2025. However, the number of active nonprofits in Arizona, defined as 501(c)(3) organizations that file regular tax returns and report at least $25,000 in annual earnings or assets, is considerably smaller at 7,516. These organizations are unevenly distributed across the state, with larger concentrations in more populous regions. Nearly two-thirds (61.9%) of active nonprofits are located in Maricopa County, while 17.1% are in Pima County. Nonprofit organizations exist to serve people rather than places, so population size is an important consideration when assessing a region's nonprofit capacity. Relying solely on the total number of nonprofits located in an area can be misleading when assessing access to services across regions. A per capita measure can provide a clearer overview of the nonprofit services available in a region. Figure 4 illustrates both the total number of active nonprofits and the number of nonprofits per capita across Arizona counties.

Figure 4: 501(c)(3) Nonprofits by County

Figure 5: Total Nonprofits with Revenue or Income Greater than $25,000 per Capita

Funding Challenges

Nonprofits in Southern Arizona rely on a mix of funding sources, though survey responses indicate that private donations and fundraising represent the largest share. These private sources include individual contributions, grants from private foundations, and fundraising campaigns. On average, private donations make up 47.3% of total funding among survey respondents.

Government grants from local, state, and federal entities collectively accounted for 27.5% of nonprofit funding. Service fees, earned income, and miscellaneous sources provide more than 21% of funding, while endowments and investment income contribute 3.8%. Though relatively modest overall, endowment and investment income represent an important revenue source for some organizations. A detailed breakdown of funding sources is illustrated in Figure 6.

This funding profile closely aligns with national trends. According to a recent Urban Institute analysis, nonprofits nationwide receive 50% of their revenue from private funding from individual donors and philanthropic institutions, 28% from government sources, 18% from earned income, and 4% from other revenue streams.

Figure 6: Nonprofit Funding by Source in Southern Arizona

Staffing and Operational Impacts

Since government funding represents the second-largest source of income for local nonprofit organizations, changes in federal funding can have significant operational implications. Survey responses indicate that financial uncertainty related to federal funding is a concern. More than 40% of respondents reported that changes in federal funding since January 2025 have already impacted their organization.

Approximately 15-20% of surveyed organizations reported layoffs since January. While a majority of respondents (60-65%) indicated they have not laid off staff, many of these organizations reported implementing other workforce-related actions, including leaving open positions unfilled, reducing staff hours, or implementing hiring freezes. Together, these responses suggest ongoing pressure on nonprofit employment even in the absence of widespread layoffs.

Nonprofit employment represents a meaningful share of the regional economy. As highlighted in a recent MAP Dashboard article, nonprofit establishments account for approximately 10% of total private sector employment in the Tucson Metropolitan Statistical Area (MSA). Although both nonprofit and for-profit employment declined during the pandemic, nonprofit employment has been slower to recover, increasing the potential impact of current funding uncertainty.

The effects of funding reductions extend beyond staffing. Nonprofit organizations are interconnected, and constraints on funding or workforce capacity can limit the scope and availability of services. Survey respondents were asked to identify specific impacts their organizations have experienced, with multiple responses permitted. These impacts are summarized and ranked by total mentions in Figure 7. 

Figure 7: Specific Impacts Reported by Southern Arizona Nonprofits, Ranked by Number of Mentions

Rising Demand & Populations Served

While funding uncertainty has led many nonprofits to reduce staffing, programs, and services, demand for those services has not diminished and, in many cases, has increased. Survey responses indicate that some organizations are experiencing service demand growth of 30-50%, highlighting a widening gap between available resources and community needs.  

Several MAP Dashboard indicators provide context on why there may be rising demand for services. The poverty rate and housing cost burden are indicators that reflect the financial strain on households. They often illustrate a household’s ability to meet basic needs. Tucson’s poverty rate is among the highest of all MAP peer MSAs at 14.4%, with only Albuquerque and El Paso reporting higher rates. In addition, the percentage of households in the Tucson MSA that are housing cost burdened, those spending 30% or more of their income on housing expenditures, was 31.8% in 2023, just above the national rate of 31.7%. While this is relatively low compared to some peer MSAs, there are notable differences between low-income households in Tucson relative to their national peers, suggesting that the Southern Arizona region struggles to provide affordable options for low-income earners.

Behavioral health indicators further underscore areas of need. The average number of poor mental health days per month in the Tucson MSA, at 5.9, is tied with El Paso as the highest rate among peer MSAs. Collectively, these indicators point to a demonstrated need for nonprofit services in Southern Arizona. Figure 8 highlights services currently in high demand, based on survey responses.

Figure 8: Services in High Demand in Southern Arizona

Sector-Wide Implications

The survey results reflect rising demand for services across multiple areas, combined with funding and workforce concerns. When asked to identify their top support needs moving forward, nearly half of the responding organizations (47.6%) cited general operating support. Preserving existing funded programs also ranked among the most frequently identified needs. Together, these responses point to broad-based funding and operational challenges.

Overall survey sentiment suggests that many nonprofit organizations are operating under sustained strain. While responders reported high levels of fatigue and uncertainty, they also indicated a continued commitment to maintaining services despite these challenges.

Given the essential role nonprofits play in meeting community needs, the findings underscore the importance of coordinated responses among funders, policymakers, and community partners. Strategic collaboration, stable funding, and targeted support may help mitigate operational pressures and allow nonprofits to meet growing demand across Southern Arizona.