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Minnesota nonprofit organizations and some legislative leaders are outraged over a Ventura administration decision to temporarily freeze new state grants. State officials say the move gives state agencies more flexibility to deal with a looming budget shortfall. Critics say the action jeopardizes essential services for teens, the elderly and people with HIV.

Last week, Finance Commissioner Pam Wheelock instructed state agencies not to enter into any new grant agreements with nonprofit organizations and businesses. The move comes in anticipation of next week's revenue forecast, which many legislators think will show a budget shortfall around $1 billion.

Many nonprofits are scrambling to figure out whether some of their funding is on hold. Bob Tracy of the Minnesota AIDS Project says his organization was just awarded a state contract to provide HIV education in the workplace.

"We found out last week that that contract was approved for $175,000. We set up a time to meet with the contract manager, but on Monday, we learned about the commissioner's freeze on contracts and were told that this contract is frozen until the Department of Finance decides what they're going to do next," according to Tracy.

Tracy says it feels like nonprofits are bearing the brunt of the state's budget shortfall. The Minnesota Council on Nonprofits is asking the Ventura administration to rescind the temporary freeze. Public Policy Director Marcia Avner says state grants of around $200 million fund the delivery of food to the elderly, teen birth-control programs and the arts.

"The impact of this would be significant and immediate. Nonprofits do not have wide margins and reserves to rely upon," says Avner.

Avner says she's never seen an across-the-board decision affecting so many nonprofits in her 30 years lobbying at the Capitol.

Finance Commissioner Pam Wheelock defends her decision. She says it doesn't affect existing grants. She says halting new grants simply gives state agencies more options to address the shortfall. "This is not a decision not to ever expend those funds; we're just saying, 'Don't do something that you may regret next week by rushing into agreements right now that only limit your flexibility to deal with this in a calmer, more reasonable, broader thinking fashion,'" says Wheelock.

Wheelock has also told agencies to come up with ways they can cut up to 10 percent of their budgets. Gov. Ventura has said he wants to address the shortfall through spending cuts, not tax increases.

Legislative leaders have mixed reactions to the Ventura administration's recent actions. Some House Republicans have praised the governor's budget restraint, while some Senate Democrats question the temporary freeze.

Senate Assistant Majority Leader John Hottinger of Mankato calls it, "arbitrary, bumbling and unilateral." He says it may overstep the governor's authority. "In other states, many governors have called special sessions or have had broader public discussions of how to deal with shortfalls. While the obligation is the governor's to fix the problems that his budgets have created, it's also the obligation to consult with citizens, legislators and affected parties," Hottinger said.

Nonprofits say they weren't consulted, and were caught off guard by the Finance Department move. Commissioner Wheelock says every organization that depends on state funding should welcome the administration's attempt to give the state more flexibility to deal with its budget problem. The extent of the problem will be known next Tuesday, when the latest figures are released.