Senator Draheim advances proposal limiting state grants to nonprofits with high executive compensation; nonprofit sector opposes

Senate File 240 would restrict grant eligibility for nonprofit organizations if executive compensation exceeds a cap tied to the governor’s salary (the bill proposes a percentage‑based limit and defines compensation broadly to include salary, benefits and retirement contributions).

Senator Draheim, the bill’s author, said the measure is intended to ensure taxpayer funds support programmatic work rather than disproportionately high executive pay. She noted board‑approved executive compensation is publicly disclosed on IRS Form 990 and framed the bill to apply to nonprofits that request state funding from the jobs committee.

Testimony from the Minnesota Council of Nonprofits (Marie Ellis) opposed the bill, saying nonprofit boards already use market data and IRS 990 disclosures to determine compensation and arguing that further restrictions would hamper nonprofits’ ability to attract and retain experienced leaders. Jonathan Murray and disability‑sector testimony highlighted that people with disabilities can face higher costs and that pay caps could hinder hiring staff with lived experience; Murray urged caution and further study.

Committee members debated fairness and scope. Some senators said nonprofits asking for state funds should adhere to tighter limits; others said the proposal raises questions about applying different rules to nonprofits than to for‑profit entities that also receive state contracts or grants. Senator Draheim said she is open to drafting revisions and acknowledged the bill will need further work. The measure was laid on the table for possible inclusion.