Lawmakers earmark nearly $1 billion for Minnesota nonprofits along with new oversight
Vanessa Young and teachers at a St. Paul summer literacy program on Tuesday morning encouraged a roomful of second and third graders to line up for play time outside.
The youngsters shuffled over from their tables and echoed a song from their teachers: “One, two, buckle my shoe, three, four, shut the door, five, six, Nike Kicks,” as they walked out the doors of the reclaimed bank building.
Young is the director of programs and policy at a nonprofit called 30,000 feet. The nonprofit offers after school support and arts programs centered in culture and African American empowerment. And its leaders have had to relocate over the last few years after issues with landlords or temporary spaces that didn’t accept students experiencing emotional meltdowns.
“We kind of hit our final straw of being yanked around, jerked around into so many different places,” Young said.
Create a More Connected Minnesota
MPR News is your trusted resource for the news you need. With your support, MPR News brings accessible, courageous journalism and authentic conversation to everyone - free of paywalls and barriers. Your gift makes a difference.
After years of going to the Capitol with a request to fund the design and construction of a Black Arts and Tech Center in St. Paul — a more permanent hub for its programs — the Legislature this year approved the nonprofit’s $3.5 million ask.
“Them seeing all of our children squished up in someone else's space made a really huge case. And I think they’ve also seen the work in action,” Young said. “For the state Legislature to get it, I think it's going to really help others kind of understand the significance and the importance of our work.”
Young and her organization aren’t alone.
The group is one of dozens of nonprofit organizations set to receive funding as part of Minnesota’s next two-year state budget. An MPR News analysis found that as part of those bills lawmakers approved more than $900 million for nonprofit organizations and entities funded through local economic development chambers — both in direct appropriations and competitive requests yet to be filled.
The Legislature approved the grant funding aimed largely at supporting communities that prior budgets had overlooked. And a little more than a year after the Feeding Our Future scandal that allegedly saw $250 million in federal nutrition aid stolen, lawmakers also increased transparency and accountability measures that officials say could stave off wrongdoing or alert them to problems sooner.
“We wanted to just kind of clarify and ensure that we are aware of what happened. And we want to ensure that that's something that doesn't have the opportunity to happen again,” said Rep. Cedrick Frazier, DFL-New Hope, a House co-chair of the People of Color and Indigenous Caucus.
The Legislature put more than $5 million into the Department of Administration’s grants administration unit. The oversight division is set to add staff for the top management role and the office will devise a roadmap for a new government-wide grants management system. Applications are due Wednesday to lead that division.
State employees who award grants will get more training. Nonprofit groups will face more scrutiny before they get money. And payments can be held back if the rules aren't followed.
“Admin will have the ability to kind of cancel a grant if there is some sort of issue happening,” said Stacie Christensen, the Minnesota Department of Administration’s temporary commissioner.
“Agencies really have to keep a closer eye on those grantees and kind of the financial information they're reporting,” she said. “And then if they do see issues, they're now given ability in statute to kind of flag those issues.”
A slice of the grant pool can be held back for oversight costs, which means that task won’t compete for resources within departments as it had before.
Rep. Jim Nash, R-Waconia, said the changes should bring more accountability to grants even if it’s still short of tracking every nickel.
“I would love for there to have been more teeth put into the bill,” Nash said. “But I think that based on what we had, this is a huge step forward. And we have to give it a little bit of time before we see any glaring holes.”
Senate Minority Leader Mark Johnson, R-East Grand Forks, said that with a growing pool of state funding going to nonprofit groups, the state should tighten reporting requirements even further.
“There clearly needs to be more oversight,” Johnson said. “If we're going to be spending nearly a billion dollars on nonprofits, we need to have on the other side, to balance that out, new structures to really hold these nonprofits accountable for their spending.”
The law changes were designed to keep better tabs on grants while not making it so cumbersome that smaller entities would have trouble applying. Cases of suspected fraud would still be handled by law enforcement and prosecutors.
Marie Ellis is the public policy director for the Minnesota Council of Nonprofits, which worked with lawmakers to balance that tension.
“Feeding our Future was a really serious outlier to the work that nonprofits are doing every day in communities across the state. And one of the ways that we hope we can increase the trust of those communities is by continuing to be a very transparent sector,” Ellis said. “We supported this increased financial oversight that the state proposed, because it's a way for us to show the great work that we're doing.”
Christensen said the new measures should help calm public fears of abuse around the more than half-billion dollars per year in state grants. It’s five times that amount when federal pass-through dollars are factored in.
“We're hopeful that these changes will catch those on the front end,” Christensen said of potential fraud.
Minnesota Legislative Auditor Judy Randall’s office has issued multiple reports critical of grants management policies in recent years, including one released in February.
“The big question is going to be: Are those quote-unquote bad actors identified? And does that list get built? I think let's start with that,” Randall said. “And then let's see if we need to go further.”
She said the prior audits and the Feeding Our Future scandal proved the need for tighter controls.
“Not just an interest to remedy the black eye, but just to make sure that doesn't happen again,” she said. “I think, just like everybody else, legislators want to make sure that the money they appropriated is used for the purposes intended.”
Randall said lawmakers made “concrete movement” toward closing oversight gaps.
Emphasis on equity
The new grant funds approved this year span education, health, public safety, economic development and capital investment. And DFL leaders say they’re largely geared at improving equity.
“The grants to nonprofits really address, you know, making sure that we get dollars out to those communities that have been traditionally under-invested in,” said House Capital Investment Committee Chair Fue Lee, DFL-Minneapolis.
The state’s capital investment bills included more than $200 million in direct funds for nonprofits — the most the state has approved in that area. And those dollars primarily target metro area organizations.
Some Republicans have taken issue with that.
“It really seemed to be more of an equity focus for if you were from the cities, or if you were from the metro area, then you had a leg up,” Johnson, the Senate minority leader, said.
Frazier, co-chair of the People of Color and Indigenous Caucus, said the nonprofits picked for state funding have been passed over in prior budgets. He also noted that more people live in the Twin Cities than in Greater Minnesota.
“What we saw here was an opportunity to not only increase the funding, but also bring some of those other organizations into the space and providing resources that they may not have had in the past,” he said.
Nonprofits for years have asked lawmakers to improve access to state grant dollars for small organizations — especially those in rural areas and those that serve certain community groups.
And this year, they took a step in the right direction, said Ellis with the Minnesota Council on Nonprofits.
“Because of the large budget surplus, there's certainly more funding going to different projects. And a lot of nonprofits are doing the work of those projects and programs,” Ellis said. “Nonprofits understand their communities deeply and can move a lot more nimbly than government.”
Young, with 30,000 feet in St. Paul, said that’s the case for her organization. While the former bank building offers a space for summer school, arts and tech programs, a designated hub would allow for students, families and community members to come together.
“I think it means the world to these young people to have a space that they can count on, that they can thrive in, that they can be pushed, or they can be supported,” Young said. “It's going to be a game changer for many of our young people.”