Partial Government Shutdown:
Information and Action Steps for Nonprofits

July 11, 2005
Budget deal puts end to shutdown; Nonprofits continue to advocate
A partial government shutdown has ended with a budget resolution. As legislators negotiate the details of the spending plan, nonprofits will continue to push for fewer cuts to those who can least afford them. MCN is tracking these negotiations, especially surrounding discussions of the Health and Human Services bill and will keep nonprofits updated about the key components of the agreement as details evolve.

MCN urges retroactivity of payments to nonprofits
The delay in passing some of the omnibus finance bills has created a serious financial problem for many nonprofit organizations that the state contracts with to provide services in Minnesota communities. MCN has worked with legislative leaders to craft an amendment that would authorize state agencies to pay nonprofit organizations retroactively to July 1, 2005 for services performed under an approved grant or contract. A letter was delivered this morning to House Majority Leader Erik Paulsen, detailing MCN’s rationale and request to the Legislature.
Click here to read MCN's letter to Majority Leader Paulsen


July 1, 2005
A partial government shutdown commenced at 12:01 on July 1st, after the legislature was unable to agree on a budget for certain core functions for the fiscal year that begins today. MCN has been following the situation closely and has taken action in the following ways:
   1. We have petitioned Honorable Judge Johnson on behalf of all nonprofits providing    state-contracted services that the court allow subsequent petitions (after filing    deadline, June 23) from individual organizations that believe that their state funded    services are core or critical to the State of Minnesota.
   MCN Letter of request to Honorable Judge Johnson
   2. We have submitted a letter to the Governor’s office calling on the administration to    immediately provide grantees and contractees with accurate and timely information    about the status of their funding as it relates to the shutdown.
   MCN Letter to the Pawlenty Administration
   3. We are continuing to work within the legislative process to minimize interruptions to    current contracts, as well as a seamless restarting of contracts in the event of a    resolution, and to ensure retroactive payment of all contracted state and federal funds.

We will continue to update our website with new information as it becomes available. Please continue to share with us information you receive from state agency contract managers and let us know what actions you are taking to deal with impacts of the shutdown. This may be done by completing our short survey online at: http://www.surveymonkey.com/s.asp?u=542371147121, or by emailing jeannie@mncn.org.


Resources for Nonprofits
LegalCORPS has announced that it is available to help small nonprofits with budgets under $200,000 who are having problems related to the shutdown such as contract and employee relations. For assistance call 612-752-6678, toll-free 888-454-5267.
Nonprofits Assistance Fund (MNAF) is making available both bridge loans and credit lines to help nonprofits manage cash flow in the event of a shutdown of state agencies.


Ramsey County Judge Appoints Justice Ed Stringer as Special Master
On Thursday, June 23, Chief Judge Gregg Johnson ordered that the state must continue to fund essential government services even in the event of a partial government shutdown on July 1. Chief Judge Johnson appointed former Supreme Court Justice Ed Stringer to serve as the court's Special Master, who will decide which state-funded services must continue in the event of a shutdown. On Monday, June 27, Justice Stringer began meeting with organizations who have submitted letters.

June 22, 2005	RealPlayer streaming >>	Commissioner Cal Ludeman
		Deputy Attorney General Ken Peterson
		Executive Director of MNCN Jon Pratt

Letter of request from the Minnesoa Council of Nonprofits to Honorable Judge Johnson that the court allow subsequent petitions (after filing deadline, June 23) from individual organizations that believe that their state funded services are core or critical to the State of Minnesota.

The Minnesota Council of Nonprofits held a briefing and strategy discussion on Wednesday, June 22 with Commissioner of Employee Relations Cal Ludeman and Deputy Attorney General Ken Peterson, who provided insights and information about a potential shutdown of programs and services and what happens next.

• On Thursday, June 23, Chief Judge Gregg Johnson of the Ramsey County District Court heard the petitions filed by the Attorney General’s office and the Governor’s office asking the Court to order the provision and payment for certain “core” or “critical” state services in the event of a government shutdown.
• In addition to submitting their own interpretation of what constitute core services, both the Attorney General and the Governor have asked the Court to appoint a “Special Master” who will hear disputes on what services should be considered core or critical and advise the judge.
• If the Court does order funding for core services to continue beyond the end of the current biennium, which ends June 30, it is likely to be for a limited amount of time – perhaps three or four weeks. This essentially sets a new deadline for state lawmakers to come up with a budget or face another government shutdown crisis. Further Court action would be needed to continue funding beyond this date.

There are two methods for you to determine if your organization may be impacted by a potential partial government shutdown. First, contact your state agency grant or contract manager to determine whether or not your service is considered a “core” service. Second, review the documents filed by the Governor’s Office and the Attorney General to determine whether or not they have petitioned the Court to consider your service a “core” service. Click here to view these documents on the respective websites. However, be aware that you may not get a clear answer and that the ultimate determination of what is a “core” service will be made by the Court.

Notice from the Department of Human Services, June 15, 2005:

DEPARTMENTS MAY TERMINATE GRANT CONTRACTS. The Department of Human Services (DHS) is expected to send a letter as early as today to organizations that have grants or contracts with the agency. Other agencies are expected to take similar actions. The agency understands that in the absence of legislation appropriating funds for the continuing operations of the Department of Human Services, they will have only very limited authority to expend or release funds to pay for critical services after June 30, 2005. State staff has told MCN that both state and federal funds could be held up in the event of a partial government shutdown.

Standard contract language includes the following cancellation clause which would be invoked in the event of a shutdown:

VI. CANCELLATION.

B. Insufficient Funds. The STATE may immediately terminate this grant contract if it does not obtain funding from the Minnesota Legislature, or other funding source; or if funding cannot be continued at a level sufficient to allow for the payment of the services covered here. Termination will be by written or fax notice to the GRANTEE. The STATE is not obligated to pay for any services that are provided after notice and effective date of termination. However, the GRANTEE will be entitled to payment, determined on a pro rata basis, for services satisfactorily performed to the extent that funds are available. The STATE will not be assessed any penalty if the grant contract is terminated because of the decision of the Minnesota Legislature, or other funding source, not to appropriate funds. The STATE must provide the GRANTEE notice of the lack of funding within a reasonable time of the STATE’s receiving that notice.

COURTS WILL DEFINE ESSENTIAL SERVICES THAT CANNOT BE SHUT DOWN. The only services that a department can provide if their department’s budget is not passed by the legislature and signed into law by July 1st are those deemed to be “essential” services. Bills that have passed fund portions of public safety, some state agencies, and higher education. Everything else is still part of the negotiation and subject to shutdown.