Sponsor proposes limits on executive pay for nonprofits receiving state grants; nonprofits oppose

Sen. (author) on Wednesday proposed Senate File 240, which would prohibit state grants under certain economic development and workforce programs from going to nonprofit organizations if their executive compensation exceeds a cap tied to the governor’s salary and defined total compensation.

The sponsor said the measure would ensure taxpayer funds are used for programmatic purposes by limiting grants to nonprofits whose compensation packages for executives exceed the cap. The bill text, as described by the sponsor, refers to the governor’s salary as the benchmark and would count salary, bonuses, employer retirement contributions and other forms of total compensation in the cap calculation.

Marie Ellis, representing the Minnesota Council of Nonprofits, opposed the bill and told the committee nonprofit boards already follow IRS rules and use market data when setting compensation. She said transparency exists through IRS Form 990 public disclosures and that capping pay harms nonprofits’ ability to recruit and retain experienced leaders.

A second opponent, Jonathan Murray, said a fixed cap could harm efforts to hire individuals with disabilities or others with higher medical costs, because nonprofit employers may need to offer higher pay to offset individuals’ extraordinary expenses.

Several senators said the topic warranted further discussion. Committee members expressed openness to refining the proposal but noted the policy raises broader questions about pay, comparisons across sectors and existing oversight mechanisms. The bill was laid over for possible inclusion.