The 2025 Minnesota legislative session was just last month but in the wake of profound tragedy, feels eons away. The assassination of House Speaker Emerita Melissa Hortman and her husband Mark, and the attempted assassination of Senator John Hoffman and his wife Yvette, have left a deep sense of grief and loss in the Capitol and across Minnesota. Violence has no place in our communities. Every elected official deserves to serve their community without fear for their safety or their lives.
It feels strange—almost hollow—to write a summary of the legislative session after such an unthinkable tragedy. The loss of Speaker Hortman and her husband is still being felt in every corner of the Capitol, and by so many across the state who knew her as a leader, a colleague, and a friend. And yet, it’s precisely because of her deep commitment to public service and to the work of government that we believe it’s important to reflect on what did and didn’t happen this session. Even in grief, the impact of legislative decisions will continue to shape the lives of Minnesotans.
Session Summary
This year’s state legislative session wrapped up without any harmful changes to laws directly affecting nonprofits—and in this case, no news is good news.
Several concerning proposals were introduced that could have negatively impacted our sector, but thanks to strong advocacy by MCN, our partners, and most of all, YOU, none of them made it into law.
Additionally, MCN was able to shape multiple pieces of legislation in positive ways, including changing language around administrative costs, protecting vulnerable staff’s privacy, injecting common sense into new fraud statutes, requiring the state to create a practical guide to lobbying activity and reporting, and ensuring that applying for local government grants is not considered lobbying activity.
2025 Session Highlights
The start of the legislative session was dominated by drawn-out negotiations over a power-sharing agreement due to the tied House coming out of the 2024 election. When the dust settled, part of the agreement included the creation of the new Fraud Prevention and State Agency Oversight Committee, chaired by Representative Kristin Robbins (R-Maple Grove), with a Republican majority serving on the committee. The committee’s leadership used this as a venue to scrutinize government funding to nonprofits, as the Feeding Our Future scandal and other examples of misuse of public dollars continued to make headlines. The committee heard testimony from the Office of the Legislative Auditor (OLA) and others who highlighted oversight lapses, as well as state agency leaders defending current practices. At times, testimony seemed less focused on actually improving oversight, and instead appeared to prioritize advancing pre-existing political agendas by highlighting selective or misleading examples that don’t reflect the full complexity of this issue.
MCN had hoped to bring a package of grantmaking reform proposals to the Legislature this year, including setting a minimum allowance for administrative costs; establishing a preference for advance payment, rather than reimbursement; increasing the audit threshold; and requiring a simple cover page for Requests for Proposals. Unfortunately, we encountered cynicism and distrust of the state’s grantmaking, and so made the decision to hold off on those proposals until there is a more welcoming climate at the Capitol. Instead, we needed to defend the sector against proposals that would have been harmful to nonprofits across the state.
The 2025 Minnesota legislative session also began in turmoil due to an unprecedented deadlock in both chambers. A 67-67 tie in the House was disrupted when a DFL member was disqualified over residency concerns, temporarily giving Republicans a one-seat edge. House Democrats boycotted the opening day to block a Republican-led Speaker election, which proceeded anyway but was later overturned by the Minnesota Supreme Court due to lack of quorum. The standoff left the House paralyzed for three weeks until a power-sharing agreement was reached. Meanwhile, the Senate was evenly split 33-33 after the death of DFL Senator Kari Dziedzic. This also led to a brief power-sharing arrangement until DFL candidate Doron Clark won the special election in January, restoring the party’s narrow majority and full control of the Senate.
The Issues: What Didn’t Pass (hooray!)
MCN agrees that accountability for state dollars is essential—this is a shared value. Yet, many well-meaning proposals introduced this year, though framed as common sense, would have created new burdens or barriers for nonprofits doing vital work. Oversight must be balanced with practicality.
The narrow partisan divide in the Legislature meant that progress required bipartisan cooperation, leaving little room for either party to advance major pieces of their agenda. At the same time, the state’s budget landscape was challenging, with a small surplus projected for the upcoming budget cycle (FY 2026-27) but a substantial shortfall in the following two years. Many legislators continued to focus on nonprofit oversight, especially in how the state manages grants and contracts.
A lot of these proposals seem reasonable at first glance, so a big part of our work is letting legislators know the impacts a proposal would have. The following bills did NOT become law:
- Legislative proposal (SF240 (Draheim) and HF 2537(Mueller/SF981(Nelson)): Would prohibit grants and contracts to nonprofits (or a specific subset of nonprofits) receiving funds if any employee is paid more than 125% (or 100%) of the governor’s salary.
- Why MCN opposed the proposal: Nonprofits play a vital role in our economy and, like any other sector, need to have experienced leaders and staff. To attract and retain those leaders, nonprofits need to have the ability to compensate appropriately in the labor market.
- Legislative proposal (HF2537 (Mueller, R-Austin)/SF981 (Nelson, R-Austin): Would prohibit state agency employees or elected officials (local, state, or federal) from being voting members of a nonprofit board.
- Why MCN opposed the proposal: State agency employees are some of the most engaged and civically minded people in our state, and there is a mutual benefit of them serving on nonprofit boards. Some nonprofits are required by law to have election officials on their boards.
- Legislative proposal (HF2891 (Robbins)/SF 3340 (Duckworth): Would require state agencies to do at least one in-person, unannounced monitoring visit for every grant over $50,000, with no exceptions allowed
- Why MCN opposed the proposal: Monitoring visits are labor-intensive for the grantee/contractor and state staff, and a waste of state dollars if the grantee is not able to prepare or ensure the appropriate staff are available and on site for the visit. Not allowing for any exceptions does not take into account the thousands of contracts between the state and nonprofits.
- Legislative proposal (HF2537 (Mueller)/SF981 (Nelson)): Would require external financial audits for grantees that received more than 50% of their revenue from state funds in the previous year.
- Why MCN opposed the proposal: This would only impact smaller nonprofits (nonprofits with more than $750,000 in annual revenue are already required to do such an audit), creating a very expensive and high staff-time imposition. Audits are around $10,000-$15,000 (or more) for a small organization, and there is currently a shortage of available auditors. The state would lose partners that provide critical support to communities, because the cost of a financial audit would keep them from applying for state funds.
- Legislative proposal (HF1 (Anderson)): Would use 1% of all grant/contract funds to fund a proposed Office of Inspector General.
- Why MCN opposed the proposal: This would reduce the funding available to both the state agency for oversight of grants and contracts, and the nonprofit partner for their contract obligations. (Note that creation of an Office of Inspector General also did not become law this session.)
Finally, one provision that MCN supported was a last-minute proposal for a task force on state grantmaking (SF3045 3rd engrossment, Article 2, Section 46). We worked with Senator Marty, the author of the proposal, to expand its scope of issues and ensure meaningful nonprofit representation on the task force. While the task force did not make it into final legislation, leaders in both the House and Senate have indicated desire to learn more about state grants during the interim. We are following up with those members now to find the best ways to share nonprofits’ experiences with and knowledge of state grants and contracts.
The Issues: What Did Pass
In a legislative session with many concerning proposals related to the nonprofit sector, MCN found opportunities to weigh in with common sense changes and secured positive results.
- Better language about administrative costs. For years, MCN has been hearing from nonprofits that state grants rarely allow grant funds to be sufficiently used for administrative costs associated with the grant. As stated above, we had hoped to introduce legislation creating a minimum 15% of grant funds be allowed for administrative costs but had to put it on hold. In working with the Minnesota Council on Foundations and the state’s Department of Administration, we were able to change statute in a way that may help ease the path of a 15% minimum in a future session. Current statute requires state grantees and contractors to “minimize” administrative costs. The new language requires administrative costs to be “necessary and reasonable.” This change highlights that administrative costs are an essential part of delivering high-quality, accountable services. This will apply to grants signed on or after July 1, 2025.
- Protecting vulnerable staff’s privacy. A new requirement for state grantees and contracting partners is that for contracts signed on or after July 1, 2025, the organization will need to post on its website the names of, and contact information for, the organization’s leadership as well as the employee or other person who directly manages and oversees the grant for the grantee. MCN was able to work with the bill author and committee leadership to add a caveat that this requirement is “as determined by the commissioner [of the Department of Administration],” meaning if the organization is concerned about staff information being on the website, they can ask the state agency to request an exemption from the Department of Administration.
- Common sense edits to new fraud statutes. State law now more clearly allows state agencies to withhold funds to an entity (including nonprofit and for-profit organizations) due to credible evidence of fraud. Both “evidence” and “fraud” are defined in the legislation – see Minnesota Session Law Chapter 39 (the State Government Finance omnibus bill) Article 2, Section 22.
- The original proposal allowed for indefinite withholding of funds with no appeals process, no recourse for entities falsely accused of fraud, and no consideration of the possible impact on individuals who receive public funds through such an entity.
- While we hope these changes are moot because no entities are falsely accused of fraud, MCN was able to work with legislators to 1) limit the withholding of payments to 60 days; 2) require that the agency notify the entity, stating the reasons for withholding payments; 3) include the ability for entities to appeal the decision to withhold payment; and 4) require state agencies to notify individuals who are not implicated in suspected fraud of their rights to continue receiving eligible public funds or services.
- Improved resources for nonprofit lobbyists. In response to MCN’s testimony about the lack of practical guidance for how to report lobbying activity under state law, Senator Westlin introduced legislation that would require the state agency that oversees lobbying rules and reporting to create a practical handbook for lobbyists in plain language. MCN testified strongly in favor of this bill, which was included in final legislation. See Minnesota Session Law Chapter 39 (the State Government Finance omnibus bill), Article 7, Section 11. The new law stipulates that the state must consult individuals from nonprofit organizations in creating this resource, and MCN will take full advantage of this opportunity.
- Grant applications are not lobbying activity. A proposed new law would have required all nonprofits applying for any local government grant to count that activity as lobbying and report it to the state under current reporting rules. MCN was successful in adding a clause to the new law stating that the mere act of submitting a grant to local government or responding to a local government Request for Proposals is not lobbying activity.
What’s Next?
The conversation around fraudulent use of state dollars—and the inaccurate assumption that nonprofits are frequently to blame—isn’t going away any time soon. We expect this narrative to continue at the Capitol in future years. The best way to push back is simple: connect directly with your legislators. Don’t underestimate the power of a conversation! Take time to share your organization’s impact with your legislators. It truly makes a difference. When lawmakers have real relationships with nonprofits, it’s much harder to buy into damaging generalizations.
Finally, although the 2025 legislative session has officially ended, a special session later this summer or fall remains a possibility. If Congress moves forward with proposed drastic cuts to Medicaid and SNAP, the ripple effect on Minnesota’s budget will be substantial. Lawmakers may need to return to the Capitol to determine how the state will respond—and what it means for services Minnesotans rely on. Whatever is in store, MCN will continue to work alongside and on behalf of nonprofits and the communities they serve to make Minnesota a place where all can thrive.
Related: Our hearts ache; assassination of MN lawmaker (MCN)