Minn. Shutdown Causes Layoffs and Other Troubles at Scores of Nonprofits

“Closed!” appears in big block letters in a black box on the Minnesota Historical Society’s Web site this week.

The group closed its 26 buildings and historic sites last Friday and laid off 600 workers, the same day the state government of Minnesota shut down after a budget impasse.

The society, which receives more than half of its money from the state, says it needed to start saving money on expenses right away in case the shutdown lasts beyond a month, as some experts have predicted.

The Minnesota AIDS Project, which gets nearly 30 percent of its money from the state, has also laid off or reduced the hours of 41 of its 57 employees.

“It is interrupting client services,” says Kathleen Corley, interim executive director. “We’re trying to shift our remaining people around so they can answer the AIDS line calls.”

Uncertainty and Anxiety

The problems facing nonprofits in Minnesota are perhaps more severe than those in other states, but they are all part of the same struggle as lawmakers and executive officials seek to close bulging budget deficits.

The uncertainty of the length of the shutdown, coupled with concern about which programs might face deep cuts in the new fiscal year, are causing anxiety at most groups that get state aid, says Jon Pratt, executive director of the Minnesota Council of Nonprofits.

“Minnesota’s budget deadlock reflects a national deadlock over the role of government and how it should be funded,” Mr. Pratt says. ”Nonprofits are hurt by the lack of compromise.”

Preparation Pays Off

While the strain on nonprofits is growing clearer every day, few groups will collapse because of the shutdown unless it goes on beyond a few weeks, says Mr. Pratt.

“Most groups have enough to get through this week or even July,” he says. But “only about a quarter of our charities have deep enough reserves to get through more than a month or six weeks without a problem,” he says.

Even so, Mr. Pratt says he keeps hearing about groups facing short-term problems.

On Thursday, he heard of a domestic-violence shelter in western Minnesota that is sending its clients across the line to North Dakota for help. On Wednesday, the Minneapolis Urban League laid off 42 people, about half of its work force. .

After the legislature failed to pass a budget in late May, the Minnesota Council of Nonprofits anticipated that the government might shut down and swung into action. The council held emergency meetings in several communities across the state to help nonprofits plan for possible scenarios.

Now those plans are being carried out.

In the Minneapolis-St. Paul metropolitan area, the local United Way is advancing money to 26 groups, and several Minnesota foundations are considering accelerating their usual process for making grants so they can get money quickly to local nonprofits.

In addition, the Nonprofits Assistance Fund has approved 35 lines of credit to nonprofits to help them meet payroll needs for up to three weeks.

Normally the organization makes 100 loans annually, but it received 40 applications in June in anticipation of the state shutdown.

Janet Ogden-Brackett, the fund’s associate director, says some groups are so frail from past cutbacks that they might well go under because of the loss of state aid.

Other groups are stronger but still in precarious situations. The Minnesota AIDS Project is one of the groups that received a line of credit from the assistance fund. Eighty percent of the AIDS Project’s money comes from government contracts, a third of that from the state. The concern is that federal contracts administered by the state won’t be paid, so the charity isn’t going to perform the services those funds cover until the state confirms that the money is coming.

“We don’t know how long we can last,” Ms. Corley says, but she believes the line of credit will help keep the group afloat for a while.

She learned Tuesday that some money she thought the group would not get in the shutdown is in fact coming, so she is bringing four people back to work who were laid off last Friday.

“We are beginning to feel like a ping-pong ball going back and forth,” she says.

Leadership Challenges

At the Minnesota Historical Society, it is not just the length of a shutdown that is causing so much anxiety but the fact that it came just as summer tourists typically visit historic sites in big numbers.

“June, July, and August are our high season,” he says. “We will lose a lot of revenue that will not be coming back.”

David Kelliher, the society’s director of public policy, says he hopes the group’s quick shutdown will allow it to save money until lawmakers present a clearer picture of how long the state’s budget woes will continue.

For many nonprofit leaders, the shutdown has made the past few days among the toughest of their careers, they say.

Gwendolyn Velez, executive director of the African American AIDS Task Force, in Minneapolis, says her organization was already operating on a $400,000 budget, compared with $500,000 before the recession.

“We are putting together contingency plans on what we are going to do, even though we have no knowledge of how long it is going to last. We are putting together plans for two weeks out, 30 days, two months. If the government is still closed in two months, we will have to close our doors, at least temporarily.”

Others, however, have gotten a small reprieve. Julie Manworren, executive director of Simpson Housing Services, in Minneapolis, was preparing to inform 200 landlords that they would not receive rental subsidies for August or September when the Minnesota Housing Finance Agency called to say it would provide money through September.

She was relieved, she says, mainly for the 3,000 people her charity serves by providing housing in homes or shelters.

“Our clients have a long history of chaos, of not being able to trust. For many, we are the first relationship in their lives that is all about their best interests,” she says. ”All of this angst in the environment is affecting them.”