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Bill would tighten state grant rules for nonprofits after Feeding Our Future controversy
Summary
House File 2786 would narrow which nonprofits can receive state education grants by requiring tax-exempt status, limiting administrative overhead to 25% of revenue and capping employee pay at 110% of the governor’s salary; sponsors cited Feeding Our Future as an example where the IRS revoked tax-exempt status yet payments continued.
Representative Bennett presented House File 2786, a bill that would place additional conditions on state grants and payments to nonprofit organizations that receive funds through the Minnesota Department of Education.
What the bill would require: Bennett described several provisions: MDE would be prohibited from issuing or would be required to terminate grants if a nonprofit fails to maintain tax-exempt status or fails to comply with reporting requirements (including financial filings required by the Minnesota Attorney General’s office). The bill also would bar payments to nonprofits whose administrative costs exceed 25% of revenue and would exclude nonprofits if an employee’s compensation exceeds 110% of the governor’s compensation (the committee cited a cap of $164,505 based on the current governor salary baseline). The bill would also require termination of payments if a recipient is the subject of an investigation or allegation of fraud, waste or abuse. (Representative Bennett)
Sponsor rationale and example: Bennett cited the Feeding Our Future case, saying the IRS revoked Feeding Our Future’s tax-exempt status in 2020 after three years of missing required filings but MDE nonetheless continued payments, which the sponsor used to argue for firmer standards.
Discussion and amendments: The chair offered an A1 amendment as a vehicle for discussion about reallocation of funds; members asked questions about which nonprofits or programs might be affected (several named programs that focus on recruiting teachers of color and other diversity efforts were raised in committee discussion). The chair subsequently withdrew the A1 amendment. Representative Bennett said the bill itself does not cut any specified nonprofit but sets standards for all nonprofit recipients of taxpayer funds.
Disposition: House File 2786 was laid over for possible inclusion in an omnibus bill. Committee members asked for follow-up discussion and emphasized the need to balance oversight with program continuity for initiatives that recruit and retain diverse educators.
