Agencies urge full operating adjustments and warn against removing grant-administration authority

Representatives of state agencies and state-funded institutions testified to the conference committee May 12 that operating adjustments recommended in the governor’s budget are needed to cover rising costs and to preserve core services, and several urged the committee not to eliminate statutory authority that allows agencies to use a portion of grant funds for administration and oversight.

Britta Rayton (Deputy Commissioner, Minnesota Management and Budget) told the committee she appreciated inclusion in the Senate position of the governor’s full operating adjustment and cautioned that adding functions — such as a Healthy Aging subcabinet — without full funding would create challenges. Rayton asked for "further conversation to ensure the scope of the activities required can be accomplished within the amount appropriated."

Brandon Hirsch, director of government relations for Minnesota IT Services (MNIT), said adopting the governor’s recommended operating adjustment as reflected in the Senate position would sustain statewide initiatives including cybersecurity, school and local partnerships, and cloud modernization.

Tamara Grunval, commissioner of the Minnesota Department of Administration, identified several concerns: she supported the Senate’s operating adjustment for Administration, urged the committee to include a state building renewable energy storage and electric vehicle account provision in the Senate bill, and cautioned strongly against repeal of the authority allowing agencies to use a portion of grant funds for administration and oversight. Grunval told the committee the statute allows agencies to use up to 5% of legislatively named grants and up to 10% for competitive grants for administration when an appropriation is not provided, and she said effective grant administration is necessary to protect federal funds and ensure compliance.

Paul Marquardt, commissioner of the Department of Revenue, said the governor’s budget proposal included $4.2 million in fiscal 2026 and $8.5 million in fiscal 2027 "to cover existing employees and new technology, but no new FTEs," and warned that reductions from the governor’s levels could harm service levels, refund response times and fraud prevention.

Kent Whitworth, director and CEO of the Minnesota Historical Society, requested that the committee maintain the governor’s recommended operating adjustment for MNHS and reiterated concerns about the Senate provision that would repeal the statute permitting agencies to recover grant administration costs; Whitworth said administering grant programs requires resources and asked the committee to continue the conversation so agencies can properly administer public funds.

Why it matters: Agencies said reduced operating adjustments would impair their ability to deliver services, oversee grants, and maintain technology and security; removing grant-administration authority could force agencies to operate without a funding mechanism for essential oversight tasks.

Clarifying details and figures mentioned in testimony

- Department of Revenue funding request: $4,200,000 in FY 2026 and $8,500,000 in FY 2027 (as stated by Commissioner Paul Marquardt).

- Grant administration rule: testimony cited statutory authority allowing agencies to use up to 5% of a legislatively named grant and up to 10% for competitive grants for administration when appropriations are not provided.

- Minnesota Historical Society and others said that administering state grant programs requires staff time and resources to ensure compliance and to protect federal funds.

Provenance

Topic introduction (agency concerns): "Good morning Chair Cleburne, Chair Nash and Chair Zhang and committee members for the record my name is Britta Rayton. I am Deputy Commissioner at Minnesota Management and Budget. Thank you for the opportunity to provide some comments on the Omnibus State Government Bill."

Topic finish (final agency testimony): "Chair Clevehorn, Chair Nash, Chair Zong, members of the state government finance, our state government's conference committee. My name is Kent Whitworth and I serve as the director and CEO of the Minnesota Historical Society. ... We'd appreciate the opportunity to continue the conversation to ensure that we have the proper resources to administer public funds wisely and to serve our state's history community that has accomplished so much with these funds."