Downsizing of the federal government workforce and federal funding disruptions have a disproportionate impact on Washington, DC. Although total US employment rose slightly in 2025, the Washington, DC region (defined here by its metropolitan statistical area) experienced job losses, driven by declines in both federal and private-sector employment. Federal government jobs fell nationwide but dropped even more sharply in the DC area, leaving it with a 30-year low in federal workers as of January.

With a shrinking federal employment and funding base, the new DC mayor and council will be critical in shepherding DC through this period. As they set policy priorities to help DC flourish, it’s important that they recognize that a vibrant nonprofit sector is increasingly important to the overall vitality of the DC region.

Understanding the nonprofit sector’s role—and its challenges—is therefore critical as DC policymakers and future elected officials prepare for office. Here are three things the new mayor and council need to know.

1.  Nonprofits contribute to a vibrant region and have an outsize impact on the local economy

The city is home to more than 10,000 public charities that are key to the region’s economic strength and community vitality.

They provide affordable housing, food assistance, mental health care, and other programs and services that support the community’s most vulnerable populations, alongside government services. These services are particularly important in the DC region, where the shares of residents enrolled in Medicaid, receiving Supplemental Nutrition Assistance Program benefits, and living below the federal poverty level exceed national statistics (39.5 percent versus 26 percent in 2024; 20.3 percent versus 12.3 percent in 2025; and 17.3 percent versus 10.6 percent in 2024, respectively). And with the region’s unemployment rate exceeding national trends, the number of DC residents needing access to nonprofit services could rise.

In addition to providing essential services for those in need, nonprofits offer arts and cultural opportunities that enrich lives and bolster the local economy. They expose tourists and residents to an array of cultural experiences that broaden horizons and bring people to neighborhoods throughout the city to shop and eat.

Beyond contributing to a vibrant region, DC nonprofits are important drivers for the local economy. DC is especially nonprofit heavy, with the highest number of tax-exempt organizations per capita of any state. DC nonprofits are major private-sector employers, accounting for a quarter of DC’s private workforce (PDF). This concentration is much higher than the average for states (9.9 percent), and the metropolitan area is among the top three with the highest rate of locally focused nonprofits.

Nonprofit contributions to the local economy extend beyond employment. DC nonprofits and associations account for 21.7 percent of office space demand, second only to law offices, which account for nearly one-third. Filling office space is a great way to support the city’s real estate and surrounding businesses. They also spend on goods and services, with nonprofits nationwide contributing more than 5 percent to the country’s gross domestic product in 2024, equal to over $1.5 trillion.

But the nonprofit sector’s important contributions to the region’s strength and vitality are threatened by recent government funding losses.

2.  DC area nonprofits are experiencing workforce challenges

Nonprofits are best able to fulfill their missions and contribute to a flourishing region when they have a strong workforce. But government funding losses might be eroding the strength of the nonprofit workforce, which affects service delivery and the local economy.

Findings from the 2026 National Survey of Nonprofit Trends and Impacts showed that nonprofits in the DC area with at least one staff member were more likely than staffed nonprofits nationwide to decrease their number of employees in 2025 (29 percent versus 20 percent), and staffed DC area nonprofits are more likely to plan to lay off staff in 2026 than those throughout the country (10 percent versus 4 percent). Although this study excluded some types of nonprofits, such as foundations, hospitals, and universities, its findings are representative of service-providing nonprofits in the DC area and United States.

In addition, DC nonprofits appear to have adjusted their overall hiring plans in response to the uncertain funding and policy environment. The share of staffed DC area nonprofits planning to hire new staff in the next year fell from 61 percent in late 2024 to 38 percent at the beginning of 2026.

Our research shows the sector faces compounding challenges that undermine its strength. We see these challenges articulated in open-ended survey responses from DC area nonprofit leaders.

• “[I am concerned about] funding and the ability to continue to attract qualified staff.”
• “[I am concerned about] maintaining financial sustainability so that we can continue to pay equitable salaries to staff.”
• “I will likely need to lay off employees and/or reduce salaries in the next year and we do not have any redundancy in the organization for this work (we only have 10 employees). Our ability to provide our mission has been negatively impacted by these funding losses, and I have run out of things to cut. I am concerned for our long-term sustainability.”

3.  Workforce challenges can further weaken DC area nonprofits’ ability to meet demand

Nonprofit Trends and Impacts findings also showed that many DC area nonprofits are already struggling to keep up with the need for their services. More than 1 in 4 DC area nonprofits reported that they could not meet demand in 2025, and nearly 4 in 10 DC area nonprofits anticipate demand will increase over the next 12 months. Because the DC region’s unemployment rate is the highest in the nation, demand for services might continue to increase. With fewer staffed DC area nonprofits planning to hire, they might not be able to meet increasing demand.

When nonprofits cannot keep pace, it can mean longer waitlists for vital services or gaps in the availability of programs and services. For individuals and families relying on nonprofits for food assistance and counseling, these gaps can have serious and immediate consequences for their ability to feed their families and access critical mental health services. Inability to meet service demand can also mean fewer afterschool and summer enrichment programs for school-age children, which are essential for working parents, and fewer concerts, outdoor festivals, and theater performances that bolster local neighborhood economies.

Given the weakened local economy and job market, DC needs a strong nonprofit infrastructure at a time when demand is rising and residents have been especially hard hit by shifts in the federal government since the start of 2025.

The bottom line for DC policymakers

During this period of funding uncertainty and high unemployment, philanthropy has stepped up to offer bridge grants supporting nonprofits, but there is a role for government in supporting the strength and resiliency of the nonprofit sector so it can continue serving people in need and contributing to a thriving local economy.

City leaders have recognized similar pressures in other parts of DC’s workforce. Mayor Bowser’s $4 million Restaurant and Retail Stabilization Grant acknowledges small businesses’ important role in employment and the financial strain they faced in 2025. It offers grants of up to $50,000 to certain businesses that lost revenue in 2025 so they can continue to operate. This new small business grant program is an example of what DC government could do to stabilize nonprofits as employers and service providers alongside recent announcements of investments in physical security and preparedness for selected DC nonprofits.

Investing in the vitality of DC and its nonprofit sector will bolster employment opportunities and a thriving workforce, support residents in need, and contribute to making DC an appealing place to work, live, and learn.