Nonprofit priorities in the Governor’s budget proposal; inclusion of nonprofit perspectives crucial to equitable implementation

We are encouraged to see that the Governor’s proposed budget includes some of MCN’s top advocacy items related to equity in state grantmaking (a priority identified by MN nonprofits for MCN), including improving grant administration and outreach driven by innovation and collaboration with the nonprofit sector, increased technical assistance for community-based and culturally-specific nonprofits seeking state grants, standardizing and streamlining grant administration processes (including the development of a singular grants management platform that would be used by all granting state agencies), and investment in nonprofit capital infrastructure (e.g., buildings). 

Budget Proposal: Improving Equitable Grant Administration & Outreach

Why this is good for nonprofits: Minnesota’s state government invests $1.5 billion in the nonprofit sector every year, relying on the expertise and community knowledge of charitable organizations to ensure all Minnesotans have basic needs met and opportunities to thrive. We know from our nonprofit members and research we conducted with The Humphrey School of Public Affairs, however, that the state’s grantmaking enterprise is not equitable. Rural-based, small, and/or BIPOC-serving nonprofits receive disproportionately less state funding than larger, established, and/or Twin Cities-based nonprofits.  

Even nonprofits who successfully receive state funding report immense barriers and challenges including: allowable uses of funding and evaluation metrics often aren’t aligned with nonprofit programming and community need; application, tracking, and reporting processes are inefficient and time-intensive; reimbursement payment methods exclude smaller nonprofits who can’t front costs, and more. As the Governor’s budget proposal names (page 38): often models for grantmaking and grant administration require “communities to ‘fit in’ to systems that are rigid, inflexible, and in some instances, replicate harm and exacerbate existing opportunity gaps.” 

The details: The Governor’s budget proposal includes funding for three additional staff at a new Office of Equity in Grants, who would be dedicated to working across state agencies and sectors to reduce systemic barriers, improve grant processes through innovation and collaboration, and help centralize and standardize grantmaking processes through an equity framework. This new office would be housed in the Department of Administration’s Office of Grants Management. 

We support more staff at the Office of Grants Management, and appreciate that one of the new roles would be to build capacity of potential grant applicants. This state-provided assistance will need to be supplemented with capacity building initiatives from within the nonprofit community, as we are most familiar with our own challenges and operations.

What we’re keeping a close eye on: 

  • The inclusion of nonprofit perspectives will be crucial to an effective implementation of an equity framework in state grantmaking; MCN knows people who are most impacted by systemic inequities have the best insights and solutions, and a top priority for MCN will be to ensure nonprofit perspectives are included in this work.

  • One of the state’s goals of this investment would be implementing a policy framework of equity in grantmaking, or a DEI framework. Who is defining what equity in grants administration looks like? 

  • Stated measurements of success would include the number of trainings provided for community and culturally-specific organizations on the state grantmaking process, and the percentage of agencies who establish equity in grantmaking outcome measures for state grant programs. We would like to see measures of success that include whether more dollars are getting to community-based and culturally-specific nonprofits, the degree to which nonprofits are reporting that accessibility to state dollars and partnership is increasing, and the quality of equity outcome measures that are established. (Yes, we want to measure the outcomes of this proposal in part by how good the outcome measures are, it’s very meta.) 

See the proposal on pages 37-39 Governor’s proposed budget for the Department of Administration.

Budget Proposal: Standardizing and Streamlining Grant Administration Processes Across State Agencies 

Why this is good for nonprofits: Currently, Minnesota’s grant management is largely decentralized, with the granting agencies (like the Department of Human Services, Department of Employment and Economic Development) having significant discretion in policy implementation (which results in dozens of different ways of having nonprofits request and report on grant funds and utilizes a wide array of supporting technology). We know from our nonprofit members that the time and energy required to apply for and report on state grants is a major pain point and have advocated for a more streamlined way of grant administration and a central technology platform that would be used by all granting agencies.

The details: The state currently has a one-person Office of Grants Management in the Department of Administration, which provides the grantmaking agencies with policies intended to achieve their goal of standardizing parts of the state’s grantmaking system with policies addressing topics such as conflict of interest disclosures, rating criteria for competitive grant review, and grant payment methods. However, a large part of grantmaking practices that impact nonprofit applicants remains non-standardized across state agencies.

The Governor’s budget proposal includes funding for three additional staff at the Office of Grants Management, who would be dedicated to working on improving grants administration oversight. (These positions are separate from the three new positions at the Equity in Grants Office mentioned above.)

This proposal would hopefully address a key challenge among state agencies that was identified in MCN’s research: limited capacity to invest in grants administration overall, particularly in an intentionally equitable way. Addressing this challenges includes providing technical assistance to applicants and grantees, outreach to recruit applicants, and ability to compensate community reviewers.

The Governor’s proposal also recommends onetime funding to study the feasibility of creating and implementing a grants management system that would be used by all state granting agencies. (Note that the state refers to this as “enterprise-wide,” meaning all the state agencies.) Additionally, the proposal would allow grant applicants to receive a grantee number or identifier (we’ll be asking the state to use nonprofits’ existing EIN, no need for yet another unique identifier!), which would be transferrable as they apply for grants from different agencies.

What we’re keeping a close eye on:

  • Similarly to the previous proposal, the inclusion of nonprofit perspectives will be crucial to standardizing and streamlining in a way that works for both the granting agencies and potential grantees. It is a top priority for MCN to ensure nonprofit perspectives are included in this proposal. 

See the proposal on pages55-57 and 58-59 in the Governor’s proposed budget for the Department of Administration. 

Budget Proposal: Investment in Nonprofit Capital Infrastructure 

Why this is good for nonprofits: Nonprofit infrastructure (think buildings: community centers, community clinics, food shelfs, and food banks…) is key to thriving communities. By revising how the state provides funds for nonprofit infrastructure and significantly increasing the amount available for such projects, the Governor’s proposal would provide better access to state dollars for nonprofit capital projects. 

The details: The Governor’s proposal includes $200M to support capital projects from “community-based organizations that are led by and serve communities of color and American Indians.” In the recent past, the Governor has advocated for $100M, in “equity articles,” part of capital investment or tax bills.

This $200M would come from the state’s General Fund, not General Obligation bond proceeds, which is where most capital funding comes from. Using General Fund dollars means that the funding is more flexible and works for nonprofits who otherwise would not be eligible for capital grants. For example, all projects funded by General Obligation bond dollars must go to a government entity, usually a county or city. In the past that has been the only avenue for nonprofits to receive capital dollars from the state – a municipality has had to sponsor the project. It’s a big headache for the municipality and the nonprofit. The Equity in Bonding articles of the last few years, which come from the General Fund, have allowed the funds to go directly to these nonprofit projects.

What we’re keeping a close eye on:  

  • In the short history of Equity in Bonding dollars, some of the dollars have gone to projects named in legislation, and some have gone to a state agency (DEED so far) to be administered. The Governor did not name any projects in his proposal and we are watching the legislative committees to see their preferences. There are pros and cons to each approach and MCN advocates for a balance of the two approaches. 

  • The very nature of state capital investment is akin to a secret handshake. There is movement, in part energized by MCN’s advocacy, to shine a light on the processes. We will continue finding ways to support the sector in understanding what state dollars could be available for capital projects.

See page 33 of the Governor’s Capital Budget Recommendations, “Equity in Bonding.” 


Related readings on government oversight of nonprofits and state grantmaking: