The Myth of “Downsizing Government” for Efficiency
And What it’s Really Costing Us
I’ll be blunt: 2025’s “efficiency” push is the new operating environment. The Trump administration’s creation of the Department of Government Efficiency (DOGE), the reinstatement of Schedule F-style personnel rules, the rollback of federal DEI programs, and the aggressive use of rescissions and “pocket rescissions” have real, immediate effects on awards, timelines, and cash flow. The rhetoric promises savings. The reality is stalled projects, uneven technical assistance, greater risk shifted to recipients and subrecipients, and enormous sunk costs.
Let’s get into what has changed, what harm it’s causing, and how nonprofits and municipalities can shift gears to compete and deliver under the new rules.
What changed, and why it matters
A New “Efficiency” Architecture in Agencies
Executive actions installed DOGE teams across departments with mandates to scrutinize, modify, or terminate awards and to publicly score “savings.” Internal and local reporting show DOGE actively cancelling or reworking contracts and grants, with claimed savings exceeding $200B (a political figure, not an audit). Expect tighter review of scopes touching climate, DEI, or international work.
Relatively recently, we have also heard stories, just anecdotes so far, that federal grant applicants suspect that AI is being used to pull information from submission portals and do eligibility checks, and there are indications it is making mistakes.
Organizations are having their applications retrieved without error, but then are receiving almost immediate rejection notices for not attaching documents or missing other eligibility checks that would have traditionally resulted in an error upon submission that would have been fixable.
Organizations then must appeal, and are often forced to retain legal counsel to push the appeal forward. More time spend by individual nonprofits and other federal applicants.
Efficient for whom?
Reclassifying Policy Roles (the Schedule F Reboot)
The White House revived and amended Schedule F as “Restoring Accountability to Policy-Influencing Positions,” and the Office of Personnel Management issued implementation guidance. Courts have already faulted some mass termination directives, even as remedies remain limited.
Translation for awardees: you are going to need to have more patience than ever for your program officers who will continue to be overworked. We are also likely to see high rates of turnover in these positions, resulting in slower approvals, more churn, and uneven help from program officers.
Efficient for whom?
Rollback of DEI-Linked Programming
A January 2025 executive order ended federal DEI programs and preferencing across agencies. Agencies are using that frame to cancel or redesign awards; reporting has documented environmental justice and health projects halted in majority-Black communities.
I shared recently on LinkedIn that I directly wrote or provided technical assistance for over $100,000,000 in federal grant applications last year. After cancellations, terminations, and recissions, the total entering communities is $200,000.
Endyna, the company that received the technical assistance contract, which I worked under, had obligated contracts totalling $41,000,000 for FY24, most of which (~$37.9M) came from the Environmental Protection Agency to roll out services related to grants that have now been cancelled, terminated, and rescinded (do we need a new word “recissioned”?).
Think about those sunk costs. $37.88 million to provide technical assistance to applicants for grants that will never be.
Efficient for whom?
Rescissions and “Pocket Rescissions”
Beyond cancellations, the administration is proposing to rescind already-appropriated funds and temporarily withhold dollars during Congress’s 45-day review window, sometimes so late in the fiscal year that funds expire before the clock runs out. Courts have allowed temporary withholding in at least one foreign-aid case, and Congress advanced a Rescissions Act (OBBB) targeting multiple accounts. For recipients, this means delayed NOFOs, paused increments, and shorter obligation windows.
The OBBB creates a precedent for how partisan budget bills might move in the future.
The original federal budget? That takes a 60% supermajority. In theory, that threshold forces compromise, resulting in a bipartisan process. But when it comes time to make cuts through a “rescission” bill like the OBBB? Suddenly, only a simple majority is needed.
This is potentially a historic shift: If passing a budget demands bipartisanship but undoing it can happen on a partisan vote, the scales tip toward manipulation. The message becomes: We’ll negotiate to get it passed—but we’ll gut it alone if we don’t like the outcome.
This is crazy-making for organizations attempting to leverage federal grants for community impact. Apply for grants programs that have been approved by congress only to have congress pull a “gotcha!”
Efficiency for whom?
The hidden costs of “efficiency”
Deferred risk and higher local costs. Canceled grants, whether for environmental justice or public health projects, leave communities holding the bag for flooding, mental health, education, and pollution problems that become more expensive the longer they wait.
Operational fragility. Agency churn and policy reversals mean longer approval queues, inconsistent guidance, and a higher error rate on routine actions (modifications, no-cost extensions, drawdowns). The Government Accountability Office has flagged human capital weaknesses as a long-standing, cross-government risk – now amplified.
Cash-flow shocks. Even “won” multi-year projects can be squeezed if increments are withheld during a rescission window or if agencies pause new obligations mid-year.
What to watch next
Rescissions: White House proposals and congressional packages will continue targeting unobligated balances; some withholding has been temporarily allowed by the courts. Track how this maps to your program lines.
Portfolio-specific posture: Programs focused on equity, diversity, and environmental justice remain volatile; infrastructure and mandatory lines tend to be steadier, but watch late-year obligation timing.
Workforce churn: Expect uneven service from program offices until litigation and attrition stabilize. Plan more lead time for approvals than you did in 2024.
Bottom line
“Downsizing government” in 2025 hasn’t reduced work; it has shifted risk and cost downstream. Winners in the next funding cycle will write to the law, plan for the cash-flow realities, and build portfolios that can flex when Washington changes course.
While the shake-up may be producing waves of uncertainty and pessimism, our role in the nonprofit sector is to stay engaged, professionally disciplined, and prepared for shifting priorities.
And if this blog post makes you want to throw in the towel, you may want to revisit a blog from June “Why We Can’t Afford to Sit Out.”
There’s no black-or-white, right-or-wrong answers here (well, there are a few I can think of), but I see my role as educator with a side of sass. Every nonprofit and small government is having to make very hard, very real decisions right now, and I want you to see as much of the picture as you can, even when it’s messy.