Minnesota Charities Go to Mat Over Cuts to State-Financed Programs

Minnesota nonprofit groups last month won the latest round of a budget battle that put them head to

head with the state’s flamboyant governor, former pro wrestler Jesse Ventura. Though their effort helped stop a plan that would have caused organizations around the state to lose $200-million this year, the state’s projected $5.5-billion revenue shortfalls through 2005 means that nonprofit groups can expect many more skirmishes in their fight to preserve government support.

The problems for Minnesota charities began in November. In anticipation of a $2-billion budget deficit, the commissioner of finance ordered state agencies to halt payments on contracts to all vendors, many of which are nonprofit groups. Many groups had to survive without state money for a month before the payments were released.

A Public Fight

The freeze prompted nonprofit leaders to begin a public fight with Governor Ventura to save their contracts. The scrapping continued after Mr. Ventura, an independent, released his budget proposal, which included plans to balance the budget over the next four fiscal years, in part by raising sales taxes and by making spending cuts, including $700-million for the current fiscal year.

Those cuts, the Minnesota Council of Nonprofits estimated, would cause charities to lose $200-million, mostly for state contracts to deliver social services and health care. Jon Pratt, the council’s executive director, speculates that charities were hit hard because the governor viewed them as “the lowest-hanging fruit,” noting that it seemed easier to cut funds that flow to them than to lay off state workers. Mr. Pratt says that “we tried to rebalance the equation, so that nonprofits are valued the same as local governments.”

Governor Ventura was not trying to make nonprofit groups a main target of the state cuts, says his spokesman, John Wodele. He said the governor tried to ensure that all types of organizations would bear a share of the cuts, not just charities, and that the freeze was not intended to harm charities but to help the state get through a difficult time when money was scarce.

Visiting Lawmakers

Still, charities decided to take their case to lawmakers. Emmett Carson, president of the Minneapolis Foundation, says he and his colleagues were particularly bothered that cuts proposed by the governor would hurt early-childhood development and training and employment programs, services that the “people at the bottom” need most when an economy is in recession.

To protest the governor’s proposed spending cuts, 52 organizations, including the American Cancer Society and the YWCA of Minneapolis, described in detail on the Minnesota Council of Nonprofits’ Web site how the governor’s proposal hurt them and the people they serve.

The council also produced posters and newspaper advertisements with the tag line, “Think Twice Before You Cut.” Each showed a person who depends on charity services. In one, a little girl holds a sign that says, “If we cut funding for nonprofits, will you let me come to your house after school?” Another shows a woman with two kids holding a sign that says, “If we cut funding for nonprofits, will you help me get a job to support my family?” The Minnesota Council of Nonprofits organized lobbying efforts and events at the capitol, all based on the same theme.

During the first round of deliberations over the governor’s proposal, the state Senate and House joined together and after two tries last month came up with a budget that survived a veto by the governor. That budget cut $100-million in spending on human-services programs, but most of it will come from trims in administrative spending, not in money that goes to charities that provide services. Lawmakers say nonprofit groups made a big difference in their deliberations.

“Nonprofit involvement has been very successful — look back to what the governor would have done and what we ended up doing this year,” says the state’s Republican speaker of the house, Steve Sviggum.

Byron Laher, director of public policy at the Greater Twin Cities United Way, served on a committee at the state nonprofit council that oversaw development of the “Think Twice” campaign. He says the group came up with a few points that it emphasized over and over in its appeals to legislators.

One was on matching grants. “We said, ‘You need to know that some $1 cuts mean $5 leaving the economy,’” Mr. Laher says, referring to the fact that, because many state grants and contracts constitute the matching funds required by some private donations and federal programs, cuts could put the entire package in jeopardy. The committee also emphasized that “food and shelter programs are needed more in tough times.” And finally, the committee told those lawmakers who wanted to cut spending to protect the state’s bond rating that “there’s also a quality-of-life rating — you don’t want those cuts to destroy it.” Mr. Laher says spending cuts, which some lawmakers say are needed so the state can borrow money at lower rates, could end up hurting Minnesota in the long run.

The Republican House leadership agreed with the logic. Mr. Sviggum says that while “we looked at reducing state government services and personnel, we hoped that nonprofits would be there to fill some of the void.”

Years of Effort to Build Lobbying Skills

Nonprofit groups are happy about their victory last month, though they are careful not to gloat. Marcia Avner, a lobbyist at the Minnesota Council of Nonprofits, says, “we saw almost no direct damage to nonprofit programs that grant or contract with the state.” Except for one children’s health program and a pilot housing program, all of the governor’s proposed cuts in social services were rejected.

Ms. Avner says the council’s ability to lobby effectively has been deliberately cultivated over many years. The 1996 federal welfare legislation helped spur groups to action, she says, adding, “We built our capacity to do this around welfare reform.” After the federal law was passed, the group began building its lists of groups and legislators, analyzing state budgets, and writing reports. In so doing, there emerged “a pattern of people expecting us to brief them on issues,” Ms. Avner says.

The recent good news for nonprofit groups in Minnesota does not mean their fight is over. In fact, just as the Legislature was resolving a final budget for this fiscal year, the state released a forecast that said the revenue shortfall would actually be $439-million higher than the one that lawmakers had expected when they came up with their plan. In other words, what Marcia Avner calls “Phase Two” of the budget battle is about to begin.

Charities Forced to Trim Programs

Even before Phase Two, the lingering effects of the November freeze on payments and the other budget woes are taking their toll on some groups. While payments on existing state contracts have resumed, charities that have state contracts that were to begin in January remain delayed until lawmakers balance the budget, which is expected to happen by the end of this month.

In the meantime, some nonprofit groups have had to suspend programs. For example, Zanna Majerle runs two youth programs at the Walker Community United Methodist Church, in Minneapolis. For four years, the two programs have shared a state grant. One is an after-school program that receives its entire $16,500 budget from the state. The other, paid for by state money and private donations, is a program for first-time juvenile offenders in which the offenders meet their victims to make amends.

Because the state froze the church’s contract in late November and has not sent a new one for this calendar year, Ms. Majerle has been forced to shut down the after-school program, which served 100 youngsters throughout the school year. The justice program is now running with a budget of $54,000, down $16,500 because of the freeze on state money. Ms. Majerle is hopeful that the state money will eventually be restored, but she says the program has already been severely damaged. “When it ended, we lost momentum,” she says. “It will be difficult to sustain relationships with the kids.”

Cuts Averted

Other charity leaders, however, are more upbeat.

One of them is Scott Beaty, executive director of the Minnesota Youth Intervention Program Association, who lobbies the state on behalf of 52 programs that provide services to troubled youths — services that would have lost all their state support under the governor’s proposal. The budget passed by legislators preserved $1.7-million in state grants for the programs. “The governor was shortsighted and the Legislature understood that,” Mr. Beaty says.

Governor Ventura’s spokesman, Mr. Wodele, disagrees with Mr. Beaty’s view. He says while it was difficult to propose a cut in youth programs, it was necessary for the state’s overall fiscal health.

Darrell Thompson, who runs Bolder Options, a mentor program for about 100 young people a year who have been referred by social workers, says he is mindful of how uncertain future state money might be. During January and February, he worked overtime asking foundations and other groups that support Bolder Options to give money to make up for state support that had been slated for elimination.

Mr. Thompson, who was a running back for the Green Bay Packers from 1990 to 1995 and for the University of Minnesota before that, says that Minnesota’s budget imbroglio only added to his money headaches. He has had to cut the budget for the program two years in a row now: by 10 percent from 2000 to 2001, and by 11 percent last year. Its current budget is $306,000. “We have been cutting back everywhere we can,” he says. He even reduced the fees, from $50 to $25, paid to each motivational speaker the group brings in to help inspire the young participants.

The program serves as an alternative to the juvenile-justice system for first-time offenders. Mentors take the kids on semiweekly jogs or bike rides, sometimes as part of a group.

Mr. Thompson estimates that he spends half his time fund raising these days and regrets that he cannot work more with the kids. He worries about being able to keep up the pace. “I have a wife and four kids,” he says. Recruiters who call offering to double his salary if he takes a job selling cars or insurance are sounding more tempting these days, he says.

Still, Mr. Thompson is determined to keep the program going strong. He developed his budget for the year without planning on any state money. Now that his group is expecting to get $32,000 from the state’s Department of Economic Security, his immediate budget worries have subsided.

The financial problems of the past year have persuaded him to use the extra money to build a nest egg to draw on if money from grant makers and individuals slows — or if state cuts need to be made again. “The way it happened, so quickly,” he says, “it could be reversed just as quickly.”