House members hear updates as PROMISE Act funds top $100 million

With more than $100 million in state revenue circulating through the PROMISE Act and heightened scrutiny of potential fraud at the Capitol, a committee co-chair wanted an update on how the program is functioning.

“Money is still going out. We have got to get this right,” Rep. Dave Baker (R-Willmar) said during Wednesday’s meeting of the House Workforce, Labor, and Economic Development Finance and Policy Committee.

First approved in 2023, the PROMISE Act authorizes the Department of Employment and Economic Development to distribute grants and loans through legislatively named partner organizations. The goal is to support Minnesota businesses in communities that have been “adversely affected by structural racial discrimination, civil unrest, lack of access to capital, population loss or an aging population, or a lack of regional economic diversification,” according to state statute.

A version of the Providing Resources, Opportunity, and Maximizing Investments in Striving Entrepreneurs passed in the House in 2020 and was focused on rebuilding areas of the Twin Cities damaged in the wake of George Floyd’s murder.

Deputy Commissioner Kevin McKinnon said the program is modeled on earlier COVID-relief efforts to ensure small businesses could continue to pay their bills during periods of instability. Grantees’ revenue must be less than $750,000 as documented by the previous year’s tax return.

Appropriations across 2023, 2024 and 2025 totaled $103 million to partner organizations, including $2.7 million each to the six Minnesota Initiative Foundations serving Greater Minnesota and $86.4 million to the Neighborhood Development Center for work in the metro area.

As of March 2, a total of 1,235 applicants have been awarded grants totaling $22.3 million.

Partners reported application volumes, grants awarded, loans made and the fraud mitigation steps they are taking. Several noted they have already flagged applications with irregularities, such as identical tax forms or unusual document formatting, and have forwarded concerns to the department.

[MORE: Updates from DEED and partner organizations]

Southwest Initiative Foundation President Scott Marquardt appreciates the discretion allowed to foundations to act with kindness and decency — along with rigor — to prevent eligible applicants from falling through the cracks. Strict address rules, for example, could inadvertently disqualify legitimate home-based businesses such as day cares or plumbers.

Baker said partner organizations are doing a good job in dealing with a lot of dollars moving through their operations but urged more decisive state action.

“We need to know about outcomes, but we also have to find out why we’re not taking fraud more seriously. When information is handed to us on a silver platter, if we’re not getting it to law enforcement, what in the world are we doing?”