A bill making its way through the Minnesota Legislature would be terribly damaging to Minnesota nonprofits. And, unfortunately, it looks like it has legs.

Senate File 4359 and House File 4682 were filed this week. They cap the salary of anyone working for a nonprofit that receives any type of state grant at the amount of the governor’s salary. The companion bills were drafted by Sen. Michelle Benson (R), Sen. Paul Utke (R), Sen. Rich Draheim (R) and Rep. Tony Albright (R). The bills were referred to committees overseeing government and state finances.

We’ve seen similar compensation cap bills in the past. This year looks different, according to Marie Ellis, director of public policy for the Minnesota Council of Nonprofit. Perhaps lawmakers are feeling even fiercer this year in the wake of the Feeding our Future scandal.

Here’s how terrible this bill would be for nonprofits in Minnesota:

  • It’s big and wide. It applies to any non-profit organization (any tax-exempt non-governmental entity) that receives a state grant from any source and in any amount. It is not clear from the bill what a “subsidy of state money from any source” means. It is written in such a way that it could include grants received through an intermediary or a regranting process. It applies to professional associations as well as charities.
  • It caps the salary of any nonprofit employee at the governor’s salary, which is $192,144 in 2022. It sounds like a lot of money, but it’s terrible public policy. The nonprofit sector must be able to pay competitively or there will be a massive exodus of talent from the sector. We certainly want our educational institutions, hospitals, research institutes, social service agencies, and other nonprofits to be able to compete with their peers for top talent.
  • It prohibits any state employee from serving on a nonprofit board of directors if the nonprofit receives a state grant. Depriving nonprofits of any board member who is a government employee is bad for nonprofits because it reduces the pool of talented and interested board members who have civic spirit. It serves no public purpose.
  • It requires background checks of all directors and officers of a nonprofit organization if the nonprofit organization has revenue over $750,000 or has received more than 25% of its revenue from government grants. ‘State.. This would be a very sad outcome for the sector. Nonprofits (and all businesses) benefit from including people with diverse lived experiences to serve on their boards and in leadership positions. This provision could prevent people from sharing their great lived experiences with non-profit organizations.
  • It includes another audit requirement. There is no need to require an audit for nonprofits receiving a grant greater than $500,000. The current state audit requirement of $750,000 for soliciting charities is well understood and already encompasses virtually all such entities. This is just another bureaucratic headache for nonprofits to follow.

Nonprofits should stay on top of this bill. The Minnesota Council of Nonprofits is a great place to get up-to-date information about the bill and what nonprofits can do to oppose it.