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Crain's Detroit: Michigan food and service nonprofits scramble as federal funding delays threaten
March 07, 2025
Michigan food and service nonprofits scramble as federal funding delays threaten essential services
By Sherri Welch
Nonprofits have been getting pinched over the past weeks under federal funding freezes, delayed payments and at least one denial of a state reimbursement request for emergency food.
The funding issues are affecting providers of emergency food, health care, preschool, services for people with disabilities, domestic violence shelters and more. They are happening despite court orders and rulings meant to prevent the Trump administration from freezing billions of dollars in congressionally approved funding that is putting programs and services at risk.
On Thursday, a federal court judge granted a preliminary injunction aimed at all federal agencies that on Jan. 27 were directed by the Office of Management and Budget to do a comprehensive review of funding to ensure it comports with executive orders signed by President Donald Trump to pause funding while they did it.
The January pause, while technically short-lived, had “catastrophic consequences” for states that depend on such funding, Chief U.S. District Judge John McConnell of Rhode Island said in his ruling Thursday. The freeze is still rippling through the country, he said.
In Michigan, nonprofits operating with congressionally appropriated funding for programs such as the Emergency Food Assistance Program; the Commodity Supplemental Food Program, which provides food for low-income seniors; and Head Start have continued to experience funding issues in the wake of the initial Jan. 27 OMB memo.
The Michigan Department of Education received a notification of denial when it sought reimbursement for another federally funded program that enables food banks and rescues to purchase food from Michigan farmers. The state education department's Office of Nutrition Services submitted a $1.7 million reimbursement claim to the U.S. Department of Agriculture on Feb. 21 for the local food purchasing agreement funds that flow to groups including the Food Bank Council of Michigan and Kalamazoo Valley Food Hub, Director of Nutrition Services Deanne Kelleher said during a Senate Oversight Committee hearing Wednesday.
The response was a denial from the USDA for any reimbursement invoices dated after Jan. 19, she said.
The state’s funding from the grant is about $4 million per quarter. It provides food for children, older adults and others experiencing hunger, while also benefiting 500 local farmers, Kelleher said.
“The USDA has verbally asked us to be patient and await the USDA secretary’s review of all grants. The department has received very little information from the federal government, which is very disappointing, as these funds support our economy and the health and well-being of our Michigan citizens,” she said. “We have since been in contact with the Michigan Attorney General’s Office regarding this freeze in federal funds.”
The Food Bank Council of Michigan said it is advising food banks in Michigan to temporarily halt spending tied to the local food purchasing agreement program due to the uncertainty surrounding the $2.3 million budgeted for purchases through the remainder of 2025.
“This recommended temporary halt is meant to prevent additional financial strain on food banks that may not be reimbursed for post-deadline purchases from local farms, ensuring that available funds are used efficiently and sustainably,” the council said in a statement sent to Crain’s.
The demand for food and other resources has risen as the price of food has skyrocketed over the last few years, making federal funding uncertainties particularly troublesome for nonprofits.
Other food program impact
Other federally funded food programs are also being impacted.
More than half of current emergency food assistance orders are being held up after the USDA designated them for return status, a designation used when a food order can't be fulfilled due to lack of vendor bids or pricing issues, Food Bank Council of Michigan said. The orders valued at $3.7 million that include fresh meat, eggs and cheese are at high risk of being canceled.
"Without these shipments, Michigan food banks will lose an average of three to four truckloads of food per month," FBCM said.
Last year, the program provided a total of $34.8 million for emergency food distribution in Michigan, the council said.
Ann Arbor-based food rescue and food bank Food Gatherers sent an email last week asking donors to contact their congressional representatives and ask them to preserve funding for food assistance.
TEFAP or emergency food assistance from the USDA last year accounted for 15% or about 1.5 million pounds of the food Food Gatherers distributed last year, Executive Director Eileen Spring said in an email. The “highly desirable” mix of fresh foods cost the government $2.26 million.
The local food purchase agreement through the Food Bank Council and state provided another $50,000 to buy food from Michigan farmers last year, Spring told Crain’s.
“This is an unanticipated loss of food resources when we need it most,” she said in the email sent to supporters. “Congress is considering more drastic cuts to federal nutrition and social service programs during the upcoming budget reconciliation process which will only increase food insecurity in our community.”
The Food Bank Council said the state Department of Education has advised it to temporarily halt supplemental preauthorized spending on food for the Commodity Supplemental Food Program, a federal nutrition program that provides food assistance to low-income people age 60 and older due to uncertainty in USDA funding.
Current spending on the program “poses a financial risk to food banks if they continue spending without a guaranteed source of funding,” the council said.
The federal government is indicating those dollars may soon flow again. The USDA said during a call late Thursday that outstanding invoices will be paid within the next few weeks, Denise Donahue, the Food Bank Council's director of communications, said in an email to Crain’s.
Gleaners Community Food Bank of Southeastern Michigan was already projecting the amount of food it would receive through USDA-funded programs would be down this year as certain programs wound down. With current pauses in USDA-funded programs, it’s looking at even greater gaps in the amount of food it can distribute to those in need.
The Detroit-based food bank, which serves a five-county area, distributed 14.7 million pounds of USDA food last year of the more than 53 million total pounds of food it provided last year to more than 1 million people. With the ending of various programs, it was projecting it would be able to distribute 10 million pounds of USDA food this year. But the current federal funding issues are expected to cause a loss of another 2 million pounds, said Kristin Sokul, senior director of advancement communications, marketing and media/PR for Gleaners.
To fill the gap, Gleaners is tightening its operating costs, pulling $250,000 from its reserves and increasing fundraising, Sokul said.
Other service areas impacted
Nonprofits in other service areas are also scrambling to cover costs and insulate programs and services amid pauses in federal funding and reimbursement delays. The uncertainty around federal funding is also deterring job candidates and putting planned investments at risk, leaders said during the Senate Oversight Committee hearing Wednesday.
Honor Community Health Center, a federally qualified health center in Pontiac funded through Medicaid and Medicare reimbursement, state and federal grants, had to tap its reserves to make payroll after the January funding freeze, CEO Debbie Brinson said during the hearing. Its payment system is back up but said multiple levels of approval were needed when she sought to put in a payment request to make up for the missed payroll funding and to request the next payroll, she said.
The organization has not yet heard back on a $600,000 carryover that needs to go into this year’s budget. There’s no help desk at the federal agency, Brinson said, and reserves are dropping.
“I am seriously looking at consolidating sites; I don't have a choice … structurally, we have to figure out how this is going to change because we play a really important role in the delivery of care," she said.
Like other federally qualified health centers, Honor Community Health has a strong partnership with nearby hospitals. If it were to close, patients would end up in nearby emergency rooms or jail, she said.
Flowers Early Learning, a Head Start agency serving Berrien, Cass and Van Buren counties in Southwest Michigan, reeled when it was locked out of federal payment systems on Jan. 28, CEO Shanda Hillman said. But that was only the beginning of the issues. Its fiscal 2025-26 funding for the year beginning Feb. 1 was delayed.
“Federal regulations prevent us from spending prior year funds in the new grant year, leaving us in a precarious position as we waited for our next round of funding to arrive,” Hillman said. “As February began, we only had assurances that our fiscal year ‘25 funds were coming, but you can't pay staff with assurances.”
As bills piled up, Flowers Early Learning called vendors and asked for understanding. By Feb. 5, it had to make a hard decision, she said. “If our funds did not arrive by (that) Friday morning, we would have no choice but to shut down," she said.
The payment management services system went down again Feb. 6 along with the Head Start and Administration for Children and Families websites, Hillman said. Finally, around noon that day, it received its notice of award for the new fiscal year and federal funds were deposited into its account “just in the nick of time.”
“This is not how early childhood education should operate,” she said.
If federal funding — which makes up 94% of Flowers Early Learning’s annual budget — goes away, 583 children will lose their early education and 200 staff members will lose their jobs, “and entire communities will feel the ripple effect,” she said.
“This isn't just a funding issue, it's a workforce issue, a public health issue and a future of Michigan issue," Hillman said.
The Michigan Nonprofit Association “is deeply concerned by continued efforts to withhold federal funding committed to nonprofits — and businesses and government entities. The ongoing uncertainty caused by the federal administration’s broad and arbitrary freeze on funding erodes long-standing public/private collaborations," President and CEO Kelley Kuhn said during the hearing of the Senate Oversight Committee, which is chaired by former MNA president Sen. Sam Singh, D-East Lansing.
When news about the funding freeze came in late January, MNA immediately heard from Head Start programs, meal programs for seniors, services that support immigrants, homeless shelters, veterans programs that provide housing assistance and health care, domestic violence shelters, human trafficking survivors, farmland and farming projects, groups that protect natural resources and more, Kuhn said.
"During a time when more than 40% of households in Michigan struggle with the costs of the basics, the charitable sector’s role in driving job creation and economic growth is indispensable and unmatched."
The state's nonprofit sector employs nearly 11% of Michigan's workforce, Kuhn said.
Kuhn pointed to a recent report from the Urban Institute that found Michigan nonprofits received a total of $4.6 billion in government grants in 2023. The UI estimates 66% of nonprofits receiving funding from the federal government are at risk, she said.
Some 93% of Michigan's 41,000 nonprofits have annual revenue of less than $1 million, Kuhn said.
"Nonprofits operate on very tight budgets. Most do not have large amounts of operating capital, and we estimate that most cannot survive a 'freeze or a pause' for more than three to six months."
— Bloomberg contributed to this report.
A previous version of this story incorrectly said Gleaners Community Food Bank of Southeastern Michigan distributed 14.7 million pounds of food last year. That figure was the total amount U.S. Department of Agriculture food out of 53 million total pounds of food provided in 2024.
Original Article: https://www.crainsdetroit.com/nonprofits-philanthropy/michigan-nonprofits-struggle-amid-federal-fund