Why higher ed funding could be a major sticking point in budget negotiations at the state Capitol

Steven Rosenstone has spent years testifying at the Minnesota Capitol in St. Paul, and in one of his final appearances, he had a warning for legislators. 

Rosenstone, the outgoing chancellor of Minnesota State, the network of 30 colleges and 7 universities with 54 campuses across the state, led the system for the last six years. With only two sources of funding — tuition and state support — the system has struggled to balance revenues with expenses, which has led to faculty layoffs, closed programs and delayed replacement of aging technology and equipment.

In response, Rosenstone and other officials requested $178 million in new state funding for the next two years. So he was surprised when he saw the House and Senate higher education budgets. The House proposed $93 million in new spending, while the Senate’s bill included $53 million over the next two years. But that wasn’t all: the budgets also require Minnesota State to freeze tuition for students, which will mean the system has no option but to make more cuts, Rosenstone said.

“Ours is not a nice-to-do request,” Rosenstone told legislators in a hearing this week. “Ours is a must-do request.”

Rosenstone was just one in a series of those who testified Tuesday arguing the legislative budget bills don’t go far enough for Minnesota’s network of colleges and universities, especially at a time when the state has a $1.65 billion budget surplus. School officials say colleges and universities were hit hard during the recession, and state funding hasn’t rebounded to keep up with inflation. 

“This is a lose-lose proposition,” said DFL Rep. Gene Pelowski, the former chair of the House higher education committee. “There are going to be large cuts, and we have a $1.6 billion surplus. The students are the ones who are going to pay.”

Republicans say there’s a reason for their position — that state government growth and administrative bloat is out of control, and that smaller increases in funding well help keep that in check. Meanwhile, tuition freezes will keep the cost of college down, they say.

But that position — plus a handful of controversial changes to higher education policy — is the major source of tension between Republicans in control of the Legislature and Gov. Mark Dayton as they try to negotiate a two-year budget plan and finish the 2017 session on time. “We increase funding for higher education, but we still have to be reasonable,” said Republican Rep. Bud Nornes, chair of the House higher education finance committee. “The state budget is growing so much automatically and we have to try and rein that in a bit.” 

Budget woes and tuition freezes

Minnesota’s higher education budget isn’t all that complicated. The state currently spends about $3 billion over two years on higher education, with most of that money going to Minnesota’s two main higher education systems: Minnesota State and the University of Minnesota. Those two institutions together get about $2.5 billion in state support, with most of the remaining funds going to the Office of Higher Education, which administers a state program that delivers grants to students across Minnesota.

For decades, lawmakers here had a reputation for spending more on higher education that most other states, leading former Gov. Rudy Perpich to nickname Minnesota the “Brainpower state.” That funding hit its peak in 2008 at about $3.5 billion for the biennium. But then the recession came, and funding for higher education took at hit. By 2013, funding had gone down to about $2.5 billion over the two year budget period. 

That year, lawmakers said the economy was on the mend and they wanted to bring those investments back up. Dayton and a DFL controlled Legislature agreed to put $250 million more into higher education in the next two-year budget. Two years later, under a divided Legislature, Republicans and Democrats agreed to put $166 million more into higher education.

None of the proposed higher education budgets this year would bring Minnesota back to that 2008 peak, but they all would increase funding. On Friday, Senate and House Republicans proposed a joint spending target of $113 million more for higher education over the next two years, somewhere between the $100 million Senate bill and the $150 million House proposal. That’s still much lower than Dayton’s spending target for higher ed: $318 million in new funding for 2018 and 2019.  

The University of Minnesota is hit the hardest in the House and Senate bills, receiving $22 million more over two years in the House bill, and about $34 million from the Senate over that same time period. Those are small increases, at least compared to the university’s budget request: $147.2 million. Even Dayton comes in far lower than the university’s request, proposing $68 million for the school compared to $125 million for Minnesota State.

Sen. Michelle Fischbach, the Republican chair of the chamber’s higher education committee, said Republicans, much like Dayton, came in lower for the university because the institution has more options than Minnesota State to find revenue.

But University of Minnesota Rochester Chancellor Stephen Lehmkuhle warned that the most likely way to make up the gap is a 5 percent increase in tuition for students on all campuses. The University of Minnesota is older than the state itself and has constitutional autonomy, so legislators can only suggest that officials cap tuition, not actually force them to do so. “We’ve worked really hard to keep the lid on tuition and we did so in direct response to your concerns, and because it’s the right thing to do,” Lehmkuhle said. 

Pelowski said recent scandals within the U of M athletics department have looked bad for the for the school and its administration, but he also believes the proposed cuts are politically motivated. “This is the first time I’ve ever seen the base funding request for the U basically being ignored,” He said. “The main University of Minnesota campus is in primarily Democratic districts in Minneapolis.”

For their part, Republicans acknowledge a focus on rural Minnesota campuses. The Senate bill includes a loan forgiveness program for veterinarians practicing in rural areas; $3 million in supplemental aid to two-year campuses in Greater Minnesota; and funding to address a shortage of teachers in certain geographic regions. “Being from rural Minnesota, I see see that these programs are a vital part of the community in a lot of those areas,” Fischbach said. “Those two-year colleges are doing a lot with worker development right in their own communities.”

Republicans said they also wanted to focus more funding on the state grant program, which helps students from low and moderate-income families pay for Minnesota colleges or universities. Republicans in the Senate want to put $10 million more into that program, with the House pitching more than $30 million in new state grants. 

But if Dayton’s going to sign any budget bill, the overall higher education budget number will ultimately have to move up, said Larry Pogemiller, Dayton’s commissioner of the Office of Higher Education. “If we don’t invest near the governor’s level,” he said, “tuition will go up and quality will deteriorate.”

Stuck on policy

Funding isn’t the only hiccup in the higher education budget bills — they also include a handful of policy provisions that Dayton opposes.

The University of Minnesota angered Republican legislators in 2015 after a senior spokesperson mistakenly told a reporter the school did not use human fetal tissue in research on campus. But word spread that wasn’t the case: Most research involved human subjects requires approval from a special board, but fetal tissue studies didn’t involve living subjects, so researchers had discretion to use it without extra oversight.

House Republican’s higher education budget would require any research involving human fetal tissue to get approval first from an institutional review board. That research would be subject to legislative audits.

The House bill also requires state colleges and universities to automatically admit Minnesota residents who recently graduated in the top 10 percent of their high school class. It’s a model used in states like Texas, but Dayton and higher education officials oppose the approach. “That keeps us from doing a holistic review of all students,” Lehmkuhle said. “Many high schools don’t track class rank because it’s a disincentive for people to take challenging courses.”

Students are also pushing back against a provision that would prohibit Minnesota State from charging new student fees to pay for certain programs or activities. Several student groups have testified and written to legislators opposing the move, because they are the ones who ultimately decide how those fees are used on campus.

There are a few policy ideas Democrats could possibly get behind, like asking the university develop an outreach and recruitment program for students in greater Minnesota, and the creation of a campus sexual violence prevention and response coordinator position. But Dayton wants policy provisions to be discussed and passed in a separate higher education policy bill. “This would provide more transparency and accountability for decisions,” Pogemiller said. “Policy decisions, unrelated to specific investments, could impede budget negotiations.”

Nornes said it’s fairly common for higher education budget and policy measures to travel in one bill, but he’s open to moving them into separate bills if it gets in the way of a final deal. Republicans in the House and Senate plan to finalize their differences by Monday. 

“The policy language, it’s quite limited,” he said. “How much of it continues to be in the bill, we’ll have to see.”