Cutting Support, Cutting Services: The Risks of Shrinking Government Funding

October 20, 2025

Time to read: 4 minutes

For numerous charities, government funding is foundational, but it is a revenue source that is both precarious and unpredictable. Data from the Charity Insights Canada Project (CICP) emphasizes the extent to which charities rely on public funding and the potential implications of losing this support.

In the CICP’s July 2025 survey on government funding, 75% of responding organizations reported receiving some form of government support. Of these, 74% received funding from provincial or territorial governments, 57% from the federal government, and 57% from municipal sources. For most charities, this funding is far from supplementary, it’s essential. Nearly 70% of respondents said that government funding helps cover core operating expenses such as salaries, rent, and insurance.

The consequences of losing this essential support are stark. If government funding was significantly reduced or eliminated, 72% of organizations said they would have to downsize their workforce, 63% would struggle to cover core costs, 61% would have to cut programming, and 42% fear they might have to close entirely. One respondent put it plainly:

“It is tough to think that government funding has such a significant value to our organization, but because we are new, this is our main point of funding. Before our core costs were covered by the government… we were not able to operate full-time. We are growing rapidly, so it would be a surprise and a big blow to the organization for [government] funding to stop.

Although government funding is essential to many charities, it often comes with a level of uncertainty. For the last two years, CICP surveys on long-term sustainability have found that charities indentify government funding dependence as a major concern, second only to rising operational costs. Even though the number of charities citing government funding dependence as problematic has dropped to 46% of charities in 2025 from 60% of charities in 2024, concerns are still widespread, with many citing political volatility and shifting government priorities as key risks.

The tariff dispute with the US and economic uncertainty have brought charities’ worries to the forefront. The federal government has announced cost-cutting measures that will hit areas critical to charitable and non-profit funding. The Liberals aim to reduce the federal budget by $25 billion by 2028-2029, a full 15% cut to most departmental budgets. Even though Prime Minister Carney has promised that provincial and territorial transfers for health and social services will not be cut, the question still remains how this austerity budget will affect the grants and funding contracts that many nonprofits, including charities, receive from various federal departments. The Canadian Center for Policy Alternatives estimates that over half of the cuts will include federal transfers to other governments, businesses, and nonprofits.

Notably, the Department of Women and Gender Equality Canada is facing a funding decline of 80% which would affect programs that address gender-based violence and inequalities. This funding loss could roll back decades of progress on gender equity, and support that many charities depend on to provide programs and services to women, 2SLGBTQIA+ clients, and other equity-seeking communities.

The majority of the charitable sector was also excluded from a new round of economic support aimed at offsetting the economic impact of tariffs. While billions were allocated to industry and infrastructure nonprofits, charities that serve those most affected by economic downturns, were left out. This omission reflects a broader trend indicated by economist Armine Yalnizyan at the CICP Data Summit: the current federal government prefers to invest in things, not people. As one survey respondent lamented:

‘They pay us pennies to do the work that would take them millions, but they don’t want to pay the people doing that work … or pay for anything that keeps the organization running.”

As more Canadians turn to charities for help, the resources to support them aren’t keeping up. Many nonprofits, including charities, are already under pressure from the lasting impacts of the pandemic and significant rising costs of operation.

To keep Canada’s charities running and able to do their important work, CICP panellists would like their governments to see themselves not just as a source of funding, but as a true partner. This means:

Protecting and expanding funding, especially for core operational costs
Reforming grant processes to reduce administrative burden and increase accessibility.
Including charities in economic recovery plans, recognizing their vital role in the economy.

“The benefits that a strong and healthy nonprofit sector provides will far outweigh the costs to governments.” – CICP Panellist

As the effects of US tariffs are felt across Canada, now is the time to support the work of nonprofits and charities that provide essential services and support to our local communities.

Author

McWhinney, Tara

Postdoctoral Fellow
Email Tara

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