If your organization relies on federal grants for more than 50% of its revenue, you’re living dangerously. Why take on that level of risk? The federal grants landscape is going to significantly change over the next ten years. With mandatory federal expenses increasing (e.g., Medicare, Medicaid, Social Security and interest on the debt), discretionary spending—where grants come from—are going to slowly get squeezed out. It’s no longer a matter of if, but when. And, cutting Defense won’t help much. Right now, Defense is about 20% of the federal budget, non-defense discretionary spending is roughly another 20%. The rest, those mandatory expenses, are 60% of the budget.
If you’re overly reliant upon federal grants, gradually reduce your exposure over the next five years. Start focusing on state, county, private and corporate grants and private donations to replace your current federal funding. It’ll take some planning and time, but it’ll be worth it in the long run for your organization’s financial stability. You don’t need to get to zero federal funding. There will always be federal grants—they’ll just be fewer and more competitive. Don’t wait too long. The sooner you get started diversifying, the better.