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Key: (1) language to be deleted (2) new language

                              CHAPTER 1-S.F.No. 11 
                  An act relating to education; appropriating money for 
                  education and related purposes to the higher education 
                  services office, board of trustees of the Minnesota 
                  state colleges and universities, board of regents of 
                  the University of Minnesota, and the Mayo Medical 
                  Foundation, with certain conditions; establishing an 
                  account in the state enterprise fund; authorizing 
                  appropriations from the medical education endowment 
                  fund; modifying state appropriations for certain 
                  enrollments; extending expiration deadline for certain 
                  advisory groups; adjusting assigned family 
                  responsibility; modifying grant provisions; 
                  establishing a grant program; authorizing acquisition 
                  of certain facilities by the board of trustees; 
                  providing for refund of tuition for certain students; 
                  making various clarifying and technical changes; 
                  deleting obsolete references; establishing a 
                  developmental education demonstration project; 
                  establishing a commission on University of Minnesota 
                  excellence; requiring reports; amending Minnesota 
                  Statutes 2000, sections 13.322, subdivision 3; 16A.87; 
                  62J.694, subdivisions 1, 2, by adding a subdivision; 
                  135A.031, subdivision 2; 136A.031, by adding a 
                  subdivision; 136A.101, subdivisions 5a, 8; 136A.121, 
                  subdivisions 6, 9; 136A.125, subdivisions 2, 4; 
                  136A.241; 136A.242; 136A.243, subdivisions 1, 2, 3, 4, 
                  9, by adding a subdivision; 136A.244, subdivisions 1, 
                  4; 136A.245, subdivisions 2, 4, by adding 
                  subdivisions; 136F.13, subdivision 1; 136F.60, 
                  subdivision 2; 137.10; 169.966; 299A.45, subdivisions 
                  1, 4; 354.094, subdivision 2; 354.69; 356.24, 
                  subdivision 1; Laws 1986, chapter 398, article 1, 
                  section 18, as amended; proposing coding for new law 
                  in Minnesota Statutes, chapters 16A; 136A; 136F; 
                  repealing Minnesota Statutes 2000, sections 135A.06, 
                  subdivision 1; 136F.13, subdivision 2; Laws 1994, 
                  chapter 643, section 66. 
        BE IT ENACTED BY THE LEGISLATURE OF THE STATE OF MINNESOTA: 

                                   ARTICLE 1 
                                 APPROPRIATIONS 
        Section 1.  [HIGHER EDUCATION APPROPRIATIONS.] 
           The sums in the columns marked "APPROPRIATIONS" are 
        appropriated from the general fund, or other named fund, to the 
        agencies and for the purposes specified in this article.  The 
        listing of an amount under the figure "2002" or "2003" in this 
        article indicates that the amount is appropriated to be 
        available for the fiscal year ending June 30, 2002, or June 30, 
        2003, respectively.  "The first year" is fiscal year 2002.  "The 
        second year" is fiscal year 2003.  "The biennium" is fiscal 
        years 2002 and 2003. 
                                SUMMARY BY FUND 
                                  2002          2003           TOTAL
        General            $1,380,039,000 $1,464,114,000 $2,844,153,000
        Health Care
        Access                  2,537,000      2,537,000      5,074,000
                         SUMMARY BY AGENCY - ALL FUNDS
                                  2002          2003           TOTAL
        Higher Education Services Office
                              148,699,000    157,650,000    306,349,000
        Board of Trustees of the Minnesota
        State Colleges and Universities
                              601,583,000    639,984,000  1,241,567,000
        Board of Regents of the University
        of Minnesota
                              630,657,000    667,380,000  1,298,037,000
        Mayo Medical Foundation
                                1,637,000      1,637,000      3,274,000
                                                  APPROPRIATIONS 
                                               Available for the Year 
                                                   Ending June 30 
                                                  2002         2003 
        Sec. 2.  HIGHER EDUCATION
        SERVICES OFFICE
        Subdivision 1. Total
        Appropriation                     $  148,699,000 $  157,650,000 
        The amounts that may be spent from this 
        appropriation for each purpose are 
        specified in the following subdivisions.
        Notwithstanding Minnesota Statutes, 
        section 136A.1211, savings in the state 
        grant program in fiscal years 2002 and 
        2003 resulting from any increases in 
        the maximum federal grant from $3,300 
        up to $3,750 must be used as provided 
        in this section. 
        Subd. 2.  State Grants               113,668,000    122,598,000 
        If the appropriation in this 
        subdivision for either year is 
        insufficient, the appropriation for the 
        other year is available for it.  
        The legislature intends that the higher 
        education services office make full 
        grant awards in each year of the 
        biennium.  
        For the biennium, the private 
        institution tuition maximum shall be 
        $8,764 in the first year and $8,983 in 
        the second year for four-year 
        institutions and $6,744 in the first 
        year and $6,913 in the second year for 
        two-year institutions. 
        This appropriation contains money to 
        set the living and miscellaneous 
        expense allowance at $5,405 in each 
        year. 
        This appropriation contains money to 
        match scholarship grants made under the 
        President's Student Service Scholarship 
        program of the Corporation for National 
        Service to students attending Minnesota 
        high schools and who will attend a 
        Minnesota post-secondary institution.  
        Not more than one matching grant of 
        $500 may be made for each high school 
        per year.  
        Notwithstanding Minnesota Statutes, 
        section 136A.1211, savings in the state 
        grant program in fiscal years 2002 and 
        2003 resulting from any increase in the 
        maximum federal grant over $3,750 or 
        from any other source must be used to 
        provide additional decreases in the 
        family responsibility for independent 
        students up to an additional ten 
        percent from the decrease in this bill 
        and to increase funding for work study 
        programs. 
        Subd. 3.  Interstate Tuition
        Reciprocity                            5,250,000      5,250,000 
        If the appropriation in this 
        subdivision for either year is 
        insufficient, the appropriation for the 
        other year is available to meet 
        reciprocity contract obligations. 
        The higher education services office 
        must negotiate the reciprocity 
        agreements for remission of nonresident 
        tuition under Minnesota Statutes, 
        section 136A.08.  The agreements must 
        be negotiated under this subdivision 
        with the goal of reducing and 
        minimizing the obligation of 
        participating states to make general 
        fund transfers for the tuition 
        reciprocity program while maintaining 
        access for Minnesota students.  
        Negotiations must include consideration 
        of new methods of collaboration with 
        education institutions in reciprocity 
        states to improve student access at 
        lower costs, including on-line 
        learning.  The chancellor of the 
        Minnesota state colleges and 
        universities and the president of the 
        University of Minnesota or their 
        designees may participate in any 
        negotiations on the tuition reciprocity 
        agreement.  The higher education 
        services office must present progress 
        on negotiations under this subdivision 
        to the higher education finance 
        committees of the 2002 legislature. 
        Subd. 4.  State Work Study
            12,444,000     12,444,000
        Subd. 5.  Minitex and MnLINK
             5,868,000      5,868,000
        Subd. 6.  Learning Network of Minnesota
             6,079,000      6,079,000
        Subd. 7.  Income Contingent Loans
        The higher education services office 
        shall administer an income-contingent 
        loan repayment program to assist 
        graduates of Minnesota schools in 
        medicine, dentistry, pharmacy, 
        chiropractic medicine, public health, 
        and veterinary medicine, and Minnesota 
        residents graduating from optometry and 
        osteopathy programs.  Applicant data 
        collected by the office for this 
        program may be disclosed to a consumer 
        credit reporting agency under the same 
        conditions as those that apply to the 
        supplemental loan program under 
        Minnesota Statutes, section 136A.162.  
        No new applicants may be accepted after 
        June 30, 1995.  
        Subd. 8.  Minnesota College Savings Plan
             1,520,000      1,520,000 
        Subd. 9.  Agency Administration
             3,870,000      3,891,000 
        This appropriation includes base 
        funding to foster post-secondary 
        attendance by providing outreach 
        services to historically underserved 
        groups of Minnesota elementary and 
        secondary students.  The office may 
        retain the entire appropriation or 
        contract with other agencies or 
        nonprofit organizations for specific 
        services in this effort. 
        This appropriation contains money for 
        grants to increase campus-community 
        collaboration and service learning 
        statewide.  For every $1 in state 
        funding, grant recipients must 
        contribute $2 in campus or 
        community-based support.  Up to five 
        percent of the allocation for this 
        program may be used to develop and 
        implement a performance-based 
        accountability system to assess program 
        outcomes. 
        This appropriation includes an increase 
        in the dues for the Midwest Higher 
        Education Compact. 
        Any appropriations remaining after 
        final benefits are paid to youthworks 
        grantees may be used for college early 
        intervention programs.  
        Subd. 10.  Balances Forward 
        A balance in the first year under this 
        section does not cancel, but is 
        available for the second year. 
        Subd. 11.  Transfers 
        The higher education services office 
        may transfer unencumbered balances from 
        the appropriations in this section to 
        the state grant appropriation, the 
        interstate tuition reciprocity 
        appropriation, the child care 
        appropriation, and the state work study 
        appropriation. 
        Subd. 12.  Reporting
        The higher education services office 
        shall collect data monthly from 
        institutions disbursing state financial 
        aid.  The data collected shall include, 
        but is not limited to, expenditures by 
        type to date and unexpended balances. 
        The higher education services office 
        shall evaluate and report on state 
        financial aid expenditures and 
        unexpended balances to the chairs of 
        the higher education finance committees 
        of the senate and house of 
        representatives and the commissioner of 
        finance on February 1, May 1, September 
        1, and December 1 each year. 
        Sec. 3.  BOARD OF TRUSTEES OF THE
        MINNESOTA STATE COLLEGES AND UNIVERSITIES
        Subdivision 1.  Total
        Appropriation                        601,583,000    639,984,000 
        The amounts that may be spent from this 
        appropriation for each purpose are 
        specified in the following subdivisions.
        The legislature intends that state 
        appropriations be used to strengthen 
        and support education of students.  To 
        this end, all money appropriated in 
        this section, except that in direct 
        support of system office activities, 
        shall be allocated by the board 
        directly to the colleges and 
        universities. 
        Subd. 2.  Estimated Expenditures and Appropriations 
        The legislature estimates that 
        instructional expenditures will be 
        $795,927,000 in the first year and 
        $847,873,000 in the second year. 
        The legislature estimates that 
        noninstructional expenditures will be 
        $70,964,000 in the first year and 
        $74,736,000 in the second year. 
        The Northeast Higher Education District 
        shall be the fiscal agent for the 
        Arrowhead University Center. 
        This appropriation includes money for a 
        grant to Minnesota state university, 
        Mankato, for the Talented Youth 
        Mathematics Program and to expand the 
        program in the second year to an 
        additional region. 
        During the biennium, neither the board 
        nor campuses shall plan or develop 
        doctoral level programs or degrees 
        until after they have received the 
        recommendation of the house and senate 
        committees on education, finance, and 
        ways and means. 
        By January 1, 2002, the board must 
        implement the Minnesota transfer 
        curriculum at all state colleges and 
        universities.  
        Once a course has met the criteria 
        necessary for inclusion in the 
        Minnesota transfer curriculum in any 
        area of emphasis, the course must be 
        accepted for full credit in that area 
        of emphasis at all Minnesota state 
        colleges and universities. 
        By July 1, 2002, the board must publish 
        an internet-based student manual that 
        identifies and describes how general 
        education courses at two-year MnSCU 
        institutions transfer to state 
        universities within the Minnesota state 
        colleges and universities system. 
        In each year, the board of trustees 
        shall increase the percentage of the 
        total general fund expenditures for 
        direct instruction and academic 
        support, as reported in the federal 
        Integrated Postsecondary Education Data 
        System (IPEDS).  By February 15 of each 
        year, the board of trustees shall 
        report to the higher education finance 
        committees of the legislature the 
        percentage of total general fund 
        expenditures spent on direct 
        instruction and on academic support 
        during the previous fiscal year by 
        institution and for the system as a 
        whole. 
        During the biennium, technical and 
        consolidated colleges shall make use of 
        instructional advisory committees 
        consisting of employers, students, and 
        instructors.  The instructional 
        advisory committee shall be consulted 
        when a technical program is proposed to 
        be created, modified, or eliminated.  
        If a decision is made to eliminate a 
        program, a college shall adequately 
        notify students and make plans to 
        assist students affected by the closure.
        The board may waive tuition for 
        eligible Southwest Asia veterans, as 
        provided in Minnesota Statutes, section 
        136F.28. 
        Subd. 3.  Accountability 
        (a) By February 1 of each even-numbered 
        year, the board must submit a report to 
        the chairs of the appropriate education 
        committees of the legislature 
        describing the following:  
        (1) how it allocated the state 
        appropriations made to the system in 
        the omnibus higher education funding 
        bill in the odd-numbered year; 
        (2) the tuition rates and fees set by 
        the board; and 
        (3) the amount of state money used to 
        leverage money from other funding 
        sources and the level of support from 
        those sources. 
        (b) By February 15, 2002, and each 
        odd-numbered year thereafter, the board 
        of trustees of the Minnesota state 
        colleges and universities must submit a 
        report to the commissioner of finance 
        and the chairs of the higher education 
        finance committees delineating: 
        (1) the five undergraduate degree 
        programs determined to be of highest 
        priority to the system, and the revenue 
        necessary to advance each program to be 
        a center of excellence; 
        (2) the reallocation of money and 
        curricular and staffing changes, by 
        campus and program, made to advance the 
        system's priorities; 
        (3) baseline data, and the methodology 
        used to measure the number of first 
        generation students admitted 
        systemwide, together with a plan to 
        increase both the recruitment and 
        retention through graduation of these 
        students; 
        (4) progress towards increasing the 
        percentage of students at four-year 
        institutions graduating within four, 
        five, and six years and the percentage 
        of students at two-year institutions 
        completing a program or transferring to 
        a four-year institution, as reported in 
        IPEDS.  Data should be provided for 
        each institution by race, ethnicity, 
        and gender.  Data provided should 
        include information on successful 
        retention strategies and the money 
        allocated to enhance student retention; 
        and 
        (5) progress towards increasing the 
        revenue generated from contracts with 
        employers for customized training. 
        Subd. 4.  Base Appropriations  
        For fiscal years 2002 and 2003, there 
        is a one-time reduction of $13,500,000 
        in the base appropriation for the 
        Minnesota state colleges and 
        universities. 
        Subd. 5.  Reserves 
        The board must distribute $5,000,000 of 
        the balance held in central office 
        reserves at the end of fiscal year 2001 
        to campuses in fiscal year 2002 through 
        a leveraged equipment purchase 
        program.  Participating campuses must 
        match the money distributed through the 
        leveraged equipment purchase program at 
        least dollar for dollar with nonstate 
        funds. 
        By December 1, 2002, the board of 
        trustees must adopt policies to clarify 
        the purposes of the central reserve and 
        under what general conditions it will 
        be used. 
        Subd. 6.  Central Office Services 
        The board of trustees of the Minnesota 
        state colleges and universities, in 
        cooperation with the council of 
        presidents, must develop a plan to 
        increase autonomy for campuses and 
        accountability at the system level.  
        The plan must include the provision of 
        central office services in ways that 
        better reflect campus needs.  The plan 
        must consider the following: 
        (1) core central office services funded 
        through a nominal fee paid by all 
        campuses; 
        (2) an option for campuses to contract 
        for services from the central office; 
        (3) the streamlined delivery of 
        services to eliminate duplication at 
        the campus and central office; 
        (4) the impact of alternative service 
        delivery methods on various types of 
        campuses; and 
        (5) making central office services more 
        market-sensitive. 
        The board must present a plan to 
        restructure central office services to 
        the chairs of the higher education 
        finance committees of the legislature 
        by February 15, 2003. 
        Sec. 4.  BOARD OF REGENTS OF THE 
        UNIVERSITY OF MINNESOTA 
        Subdivision 1.  Total
        Appropriation                        630,657,000    667,380,000 
        The amounts that may be spent from this 
        appropriation for each purpose are 
        specified in the following subdivisions.
        Subd. 2.  Operations and
        Maintenance                          554,211,000    590,934,000 
        Estimated Expenditures 
        and Appropriations 
        The legislature estimates that 
        instructional expenditures will be 
        $485,793,000 in the first year and 
        $522,184,000 in the second year. 
        The legislature estimates that 
        noninstructional expenditures will be 
        $230,349,000 in the first year and 
        $242,812,000 in the second year.  
        Subd. 3.  Health Care Access Fund       2,537,000     2,537,000
        This appropriation is from the health 
        care access fund for primary care 
        education initiatives. 
        Subd. 4.  Special
        Appropriation                         73,909,000     73,909,000
        The amounts expended for each program 
        in the four categories of special 
        appropriations shall be stated in the 
        2003 biennial budget document. 
        (a) Agriculture and Extension Service 
            58,838,000     58,838,000
        This appropriation is for the 
        Agricultural Experiment Station, 
        Minnesota Extension Service. 
        The university must continue to provide 
        support for the rapid agricultural 
        response fund, and sustainable and 
        organic agriculture initiatives 
        including, but not limited to, the 
        alternative swine systems program. 
        Any salary increases granted by the 
        University to personnel paid from the 
        Minnesota Extension appropriation must 
        not result in a reduction of the county 
        responsibility for the salary payments. 
        During the biennium, the University 
        shall maintain an advisory council 
        system for each experiment station.  
        The advisory councils must be broadly 
        representative of the range in size and 
        income distribution of farms and 
        agribusinesses and must not 
        disproportionately represent those from 
        the upper half of the size and income 
        distributions.  
        The board of regents of the University 
        of Minnesota is requested to review and 
        analyze the programmatic mission, 
        scope, and cost-effectiveness of the 
        Minnesota Extension Service with the 
        goal of assuring that the Minnesota 
        Extension Service offers programs and 
        services effectively and efficiently 
        and within the scope of its current 
        defined mission.  The board is 
        requested to report, by February 15, 
        2002, to the governor and the chairs of 
        the higher education finance committees 
        of the legislature with recommendations 
        for priorities in the extension service.
        (b) Health Sciences 
             5,846,000      5,846,000
        This appropriation is for the rural 
        physicians associates program, the 
        Veterinary Diagnostic Laboratory, 
        health sciences research, dental care, 
        and the Biomedical Engineering Center. 
        (c) Institute of Technology  
             1,645,000      1,645,000
        This appropriation is for the 
        Geological Survey and the Talented 
        Youth Mathematics Program. 
        (d) System Specials 
             7,580,000      7,580,000
        This appropriation is for general 
        research, student loans matching money, 
        industrial relations education, Natural 
        Resources Research Institute, Center 
        for Urban and Regional Affairs, Bell 
        Museum of Natural History, and the 
        Humphrey exhibit. 
        This appropriation contains money for 
        an increase in each year for the 
        Natural Resources Research Institute. 
        Subd. 5.  Accountability 
        (a) By February 1 of each even-numbered 
        year, the board must submit a report to 
        the chairs of the appropriate education 
        committees of the legislature 
        describing the following:  
        (1) how it allocated the state 
        appropriations made to the system in 
        the omnibus higher education funding 
        bill in the odd-numbered year; 
        (2) the tuition rates and fees set by 
        the board; and 
        (3) the amount of state money used to 
        leverage money from other funding 
        sources and the level of support from 
        those sources. 
        (b) By February 15, 2002, and each 
        odd-numbered year thereafter, the board 
        of regents of the University of 
        Minnesota must submit a report to the 
        commissioner of finance and the chairs 
        of the higher education finance 
        committees delineating: 
        (1) the five undergraduate degree 
        programs determined to be of highest 
        priority to the system, and the revenue 
        necessary to advance each program to be 
        a center of excellence; 
        (2) the reallocation of money and 
        curricular and staffing changes, by 
        campus and program, made to advance the 
        system's priorities; 
        (3) baseline data, and the methodology 
        used to measure, the number of first 
        generation students admitted 
        systemwide, together with a plan to 
        increase both the recruitment and 
        retention through graduation of these 
        students; 
        (4) progress towards increasing the 
        percentage of students graduating 
        within four, five, and six years as 
        reported in IPEDS.  Data should be 
        provided for each institution by race, 
        ethnicity, and gender.  Data provided 
        should include information on 
        successful retention strategies and the 
        money allocated to enhance student 
        retention; 
        (5) progress towards increasing the 
        revenue received, from all sources, to 
        support research activities.  Data 
        provided should include information on 
        the increase in funding from each 
        source; and 
        (6) progress of the academic health 
        center in meeting the goals and 
        outcomes in paragraph (c) including how 
        money appropriated from the medical 
        endowment fund contributed to meeting 
        specific workforce training and health 
        education goals for the academic health 
        center. 
        (c) The Academic Health Center, in 
        cooperation with the department of 
        health, shall: 
        (1) develop new strategies for health 
        care delivery and professional training 
        in this state that takes into account 
        the changing racial and ethnic 
        composition of this state; 
        (2) develop new strategies to meet the 
        health care workforce needs in the 
        state; and 
        (3) base these strategies on analysis 
        of the population's health status and 
        opportunities for its improvement. 
        Sec. 5.  MAYO MEDICAL FOUNDATION 
        Subdivision 1.  Total
        Appropriation                           1,637,000       1,637,000
        The amounts that may be spent from this 
        appropriation for each purpose are 
        specified in the following subdivisions.
        Subd. 2.  Medical School
               605,000        605,000
        The state of Minnesota must pay a 
        capitation of $14,405 each year for 
        each student who is a resident of 
        Minnesota.  The appropriation may be 
        transferred between years of the 
        biennium to accommodate enrollment 
        fluctuations. 
        The legislature intends that during the 
        biennium the Mayo foundation use the 
        capitation money to increase the number 
        of doctors practicing in rural areas in 
        need of doctors.  
        Subd. 3.  Family Practice and
        Graduate Residency Program
               625,000        625,000
        The state of Minnesota must pay a 
        capitation of $22,313 for 26 residents 
        each year and $44,627 for one resident 
        each year. 
        Subd. 4.  St. Cloud Hospital-Mayo 
        Family Practice Residency Program 
               407,000        407,000
        This appropriation is to the Mayo 
        foundation to support 12 resident 
        physicians each year in the St. Cloud 
        Hospital-Mayo Family Practice Residency 
        program.  The program shall prepare 
        doctors to practice primary care 
        medicine in the rural areas of the 
        state.  It is intended that this 
        program will improve health care in 
        rural communities, provide affordable 
        access to appropriate medical care, and 
        manage the treatment of patients in a 
        more cost-effective manner. 
        Sec. 6.  POST-SECONDARY SYSTEMS 
        Subdivision 1.  Post-Secondary Planning Report
        By February 15 of each year the board 
        of trustees of the Minnesota state 
        colleges and universities must and the 
        board of regents of the University of 
        Minnesota is requested to report to the 
        legislature on progress under the 
        master academic plan for the 
        metropolitan area.  The report must 
        include a discussion of coordination 
        and duplication of program offerings, 
        developmental and remedial education, 
        credit transfers within and between the 
        post-secondary systems, and planning 
        and delivery of coordinated programs.  
        In order to better achieve the goal of 
        a more integrated, effective, and 
        seamless post-secondary education 
        system in Minnesota, the report must 
        also identify statewide efforts at 
        integration and cooperation between the 
        post-secondary systems. 

                                   ARTICLE 2 
                               RELATED PROVISIONS 
           Section 1.  [16A.532] [MINNESOTA STATE COLLEGES AND 
        UNIVERSITIES ENTERPRISE ACCOUNT.] 
           There is created in the state enterprise fund a Minnesota 
        state colleges and universities account.  The commissioner must 
        report to committees of the legislature having jurisdiction over 
        the account on activity in this account at the same time fund 
        balance statements are issued for the general fund.  The amounts 
        in this account earn investment income as provided in section 
        136F.71, subdivision 3. 
           Sec. 2.  Minnesota Statutes 2000, section 16A.87, is 
        amended to read: 
           16A.87 [TOBACCO SETTLEMENT FUND.] 
           Subdivision 1.  [ESTABLISHMENT; PURPOSE.] The tobacco 
        settlement fund is established as a clearing account in the 
        state treasury.  
           Subd. 2.  [DEPOSIT OF MONEY.] The commissioner shall credit 
        to the tobacco settlement fund the tobacco settlement payments 
        received by the state on September 5, 1998, January 4, 1999, 
        January 3, 2000, and January 2, 2001, January 2, 2002, and 
        January 2, 2003, as a result of the settlement of the lawsuit 
        styled as State v. Philip Morris Inc., No. C1-94-8565 (Minnesota 
        District Court, Second Judicial District). 
           Subd. 3.  [APPROPRIATION.] (a) Of the amounts credited to 
        the fund prior to January 2, 2002, 61 percent is appropriated 
        for transfer to the tobacco use prevention and local public 
        health endowment fund created in section 144.395 and 39 percent 
        is appropriated for transfer to the medical education endowment 
        fund created in section 62J.694. 
           (b) The entire amount credited to the fund from the payment 
        made on January 2, 2002, and January 2, 2003, is appropriated 
        for transfer to the academic health center account under section 
        62J.694, subdivision 1, paragraph (b), in the medical education 
        endowment fund created under section 62J.694, subdivision 1. 
           Subd. 4.  [SUNSET.] The tobacco settlement fund expires 
        June 30, 2015 2004. 
           Sec. 3.  Minnesota Statutes 2000, section 62J.694, 
        subdivision 1, is amended to read: 
           Subdivision 1.  [CREATION.] (a) The medical education 
        endowment fund is created in the state treasury.  The state 
        board of investment shall invest the fund under section 11A.24.  
        All earnings of the fund must be credited to the fund.  The 
        principal of the fund must be maintained inviolate, except that 
        the principal may be used to make expenditures from the fund for 
        the purposes specified in this section when the market value of 
        the fund falls below 105 percent of the cumulative total of the 
        tobacco settlement payments received by the state and credited 
        to the tobacco settlement fund under section 16A.87, subdivision 
        2.  For purposes of this section, "principal" means an amount 
        equal to the cumulative total of the tobacco settlement payments 
        received by the state and credited to the tobacco settlement 
        fund under section 16A.87, subdivision 2.  
           (b) The academic health center account is created as a 
        separate account in the medical education endowment fund.  The 
        account is invested under paragraph (a).  All earnings of the 
        account must be credited to the account.  The principal of the 
        account must be maintained inviolate, except that the principal 
        may be used to make expenditures from the account for the 
        purposes specified in subdivision 2a when the value of the 
        account falls below an amount equal to deposits made to the 
        account under section 16A.87, subdivision 3, paragraph (b). 
           Sec. 4.  Minnesota Statutes 2000, section 62J.694, 
        subdivision 2, is amended to read: 
           Subd. 2.  [EXPENDITURES.] (a) Up to five percent of the 
        fair market value of the fund excluding the value of the 
        academic health center account, is annually appropriated for 
        medical education activities in the state of Minnesota.  The 
        appropriations are to be transferred quarterly for the purposes 
        identified in the following paragraphs.  
           (b) For fiscal year 2000, 70 percent of the appropriation 
        in paragraph (a) is for transfer to the board of regents for the 
        instructional costs of health professional programs at the 
        academic health center and affiliated teaching institutions, and 
        30 percent of the appropriation is for transfer to the 
        commissioner of health to be distributed for medical education 
        under section 62J.692.  
           (c) For fiscal year 2001, 49 percent of the appropriation 
        in paragraph (a) is for transfer to the board of regents for the 
        instructional costs of health professional programs at the 
        academic health center and affiliated teaching institutions, and 
        51 percent is for transfer to the commissioner of health to be 
        distributed for medical education under section 62J.692. 
           (d) For fiscal year 2002, and each year thereafter, 42 
        percent of the appropriation in paragraph (a) may be is 
        appropriated by another law for the instructional costs of 
        health professional programs at publicly funded the University 
        of Minnesota academic health centers and affiliated teaching 
        institutions center, and 58 percent is for transfer to the 
        commissioner of health to be distributed for medical education 
        under section 62J.692. 
           (e) A maximum of $150,000 of each annual appropriation to 
        the commissioner of health in paragraph (d) may be used by the 
        commissioner for administrative expenses associated with 
        implementing section 62J.692. 
           Sec. 5.  Minnesota Statutes 2000, section 62J.694, is 
        amended by adding a subdivision to read: 
           Subd. 2a.  [EXPENDITURE; ACADEMIC HEALTH CENTER 
        ACCOUNT.] Beginning in January 2002, up to five percent of the 
        fair market value of the academic health center account is 
        annually appropriated to the board of regents for the costs of 
        the academic health center.  Appropriations are to be 
        transferred quarterly and may only be used for instructional 
        costs of health professional programs at the academic health 
        center and for interdisciplinary academic initiatives within the 
        academic health center. 
           Sec. 6.  Minnesota Statutes 2000, section 135A.031, 
        subdivision 2, is amended to read: 
           Subd. 2.  [APPROPRIATIONS FOR CERTAIN ENROLLMENTS.] The 
        state share of the estimated expenditures for instruction shall 
        vary for some categories of students, as designated in this 
        subdivision. 
           (a) The state must provide at least 67 percent of the 
        estimated expenditures for: 
           (1) students who resided in the state for at least one 
        calendar year prior to applying for admission or dependent 
        students whose parent or legal guardian resides in Minnesota at 
        the time the student applies; 
           (2) Minnesota residents who can demonstrate that they were 
        temporarily absent from the state without establishing residency 
        elsewhere; 
           (3) residents of other states or provinces who are 
        attending a Minnesota institution under a tuition reciprocity 
        agreement; and 
           (4) students who have been in Minnesota as migrant 
        farmworkers, as defined in the Code of Federal Regulations, 
        title 20, section 633.104, over a period of at least two years 
        immediately before admission or readmission to a Minnesota 
        public post-secondary institution, or students who are 
        dependents of such migrant farmworkers; and 
           (5) persons who:  (i) were employed full time and were 
        relocated to the state by the person's current employer, or (ii) 
        moved to the state for employment purposes and, before moving 
        and before applying for admission to a public post-secondary 
        institution, accepted a job in the state, or students who are 
        spouses or dependents of such persons. 
           (b) The definition of full year equivalent for purposes of 
        the formula calculations in this chapter is twice the normal 
        value for the following enrollments: 
           (1) students who are concurrently enrolled in a public 
        secondary school and for whom the institution is receiving any 
        compensation under the Post-Secondary Enrollment Options Act; 
        and 
           (2) students enrolled under the student exchange program of 
        the Midwest Compact. 
           (c) The state may not provide any of the estimated 
        expenditures for undergraduate students (1) who do not meet the 
        residency criteria under paragraph (a), or (2) who have 
        completed, without receiving a baccalaureate degree, 48 or more 
        quarter credits or the equivalent, applicable toward the degree, 
        beyond the number required for a baccalaureate in their major. 
        Credits for courses in which a student received a grade of "F" 
        or "W" shall be counted toward this maximum, as if the credits 
        had been earned. 
           Sec. 7.  Minnesota Statutes 2000, section 136A.031, is 
        amended by adding a subdivision to read: 
           Subd. 5.  [EXPIRATION.] Notwithstanding section 15.059, 
        subdivision 5a, the advisory groups established in this section 
        expire on June 30, 2003. 
           Sec. 8.  Minnesota Statutes 2000, section 136A.101, 
        subdivision 5a, is amended to read: 
           Subd. 5a.  [ASSIGNED FAMILY RESPONSIBILITY.] "Assigned 
        family responsibility" means the amount of a family contribution 
        to a student's cost of attendance, as determined by a federal 
        need analysis, except that, beginning for the 1998-1999 academic 
        year, up to $25,000 in savings and other assets shall be 
        subtracted from the federal calculation of net worth before 
        determining the contribution.  For dependent students, the 
        assigned family responsibility is the parental contribution.  
        For independent students with dependents other than a spouse, 
        the assigned family responsibility is the student contribution. 
        For independent students without dependents other than a spouse, 
        the assigned family responsibility is 80 percent of the student 
        contribution.  Beginning in fiscal year 2002, the assigned 
        family responsibility for all independent students is reduced an 
        additional ten percent.  
           Sec. 9.  Minnesota Statutes 2000, section 136A.101, 
        subdivision 8, is amended to read: 
           Subd. 8.  [RESIDENT STUDENT.] "Resident student" means a 
        student who meets one of the following conditions:  
           (1) an independent a student who has resided in Minnesota 
        for purposes other than post-secondary education for at least 12 
        months without being enrolled at a post-secondary educational 
        institution for more than five credits in any term; 
           (2) a dependent student whose parent or legal guardian 
        resides in Minnesota at the time the student applies; 
           (3) a student who graduated from a Minnesota high school, 
        if the student was a resident of Minnesota during the student's 
        period of attendance at the Minnesota high school; or 
           (4) a student who, after residing in the state for a 
        minimum of one year, earned a high school equivalency 
        certificate in Minnesota. 
           Sec. 10.  Minnesota Statutes 2000, section 136A.121, 
        subdivision 6, is amended to read: 
           Subd. 6.  [COST OF ATTENDANCE.] (a) The recognized cost of 
        attendance consists of allowances specified in law for room and 
        board living and miscellaneous expenses, and 
           (1) for public institutions, the actual tuition and fees 
        charged by the institution; or 
           (2) for private institutions, an allowance for tuition and 
        fees equal to the lesser of the actual tuition and fees charged 
        by the institution, or the private institution tuition and fee 
        maximums established in law. 
           (b) For the purpose of paragraph (a), clause (2), the 
        private institution tuition and fee maximum for two- and 
        four-year, private, residential, liberal arts, degree-granting 
        colleges and universities must be the same. 
           (c) For a student attending registering for less than full 
        time, the office shall prorate the recognized cost of attendance 
        living and miscellaneous expense allowance to the actual number 
        of credits for which the student is enrolled. 
           The recognized cost of attendance for a student who is 
        confined to a Minnesota correctional institution shall consist 
        of the tuition and fee component in paragraph (a), clause (1) or 
        (2), with no allowance for living and miscellaneous expenses. 
           Sec. 11.  Minnesota Statutes 2000, section 136A.121, 
        subdivision 9, is amended to read: 
           Subd. 9.  [AWARDS.] An undergraduate student who meets the 
        office's requirements is eligible to apply for and receive a 
        grant in any year of undergraduate study unless the student has 
        obtained a baccalaureate degree or previously has been enrolled 
        full time or the equivalent for eight ten semesters or 12 
        quarters the equivalent, excluding courses taken from a 
        Minnesota school or post-secondary institution which is not 
        participating in the state grant program and from which a 
        student transferred no credit. 
           Sec. 12.  [136A.124] [ADVANCED PLACEMENT AND INTERNATIONAL 
        BACCALAUREATE GRANT.] 
           Subdivision 1.  [ESTABLISHMENT.] Appropriations for this 
        section must be used by the office for grants to encourage 
        Minnesota students participating in advanced placement and 
        international baccalaureate programs to attend a college or 
        university in Minnesota.  For enrollment beginning in the fall 
        of 2002, the grants must be awarded to students who apply for 
        the grant, are eligible under subdivision 2, and who enroll in 
        an eligible institution as defined in subdivision 2 during the 
        year following high school graduation.  An institution, on 
        behalf of the student, must request payment of the grant from 
        the higher education services office.  The grant may be used 
        only for the costs of the actual tuition, required fees, and 
        books in nonsectarian courses or programs.  A grant under this 
        section may be made for a maximum of two years.  
           Subd. 2.  [ELIGIBILITY.] A grant must be awarded to a 
        student scoring an average of three or higher on five or more 
        advanced placement examinations on full-year courses or an 
        average of four or higher on five or more international 
        baccalaureate examinations on full-year courses.  The annual 
        amount of each grant must be based on the student's scores on 
        the examinations and the funds available under this section. 
           A grant under this subdivision must not affect a 
        recipient's eligibility for a state grant under section 136A.121.
           Subd. 3.  [ALLOCATION OF FUNDS.] The office, in 
        consultation with representatives of the advanced placement and 
        international baccalaureate programs selected by the advanced 
        placement advisory council, international baccalaureate of 
        Minnesota (IBMN), and the department of children, families, and 
        learning must allocate the available funds fairly between the 
        advanced placement and international baccalaureate programs. 
           Subd. 4.  [ELIGIBLE INSTITUTION.] An "eligible institution" 
        under this section is a public or private four-year 
        degree-granting college or university or a two-year public 
        college in Minnesota that has a credit and placement policy for 
        either advanced placement or international baccalaureate 
        scholarship recipients, or both.  Each eligible institution must 
        annually certify its policies to the office.  The office must 
        provide each Minnesota secondary school with a copy of the 
        post-secondary advanced placement and international 
        baccalaureate policies of eligible institutions. 
           Sec. 13.  Minnesota Statutes 2000, section 136A.125, 
        subdivision 2, is amended to read: 
           Subd. 2.  [ELIGIBLE STUDENTS.] An applicant is eligible for 
        a child care grant if the applicant: 
           (1) is a resident of the state of Minnesota; 
           (2) has a child 12 years of age or younger, or 14 years of 
        age or younger who is handicapped as defined in section 125A.02, 
        and who is receiving or will receive care on a regular basis 
        from a licensed or legal, nonlicensed caregiver; 
           (3) is income eligible as determined by the office's 
        policies and rules, but is not a recipient of assistance from 
        the Minnesota family investment program; 
           (4) has not earned a baccalaureate degree and has been 
        enrolled full time less than eight ten semesters, 12 quarters, 
        or the equivalent; 
           (5) is pursuing a nonsectarian program or course of study 
        that applies to an undergraduate degree, diploma, or 
        certificate; 
           (6) is enrolled at least half time in an eligible 
        institution; and 
           (7) is in good academic standing and making satisfactory 
        academic progress. 
           Sec. 14.  Minnesota Statutes 2000, section 136A.125, 
        subdivision 4, is amended to read: 
           Subd. 4.  [AMOUNT AND LENGTH OF GRANTS.] The amount of a 
        child care grant must be based on: 
           (1) the income of the applicant and the applicant's spouse, 
        if any; 
           (2) the number in the applicant's family, as defined by the 
        office; and 
           (3) the number of eligible children in the applicant's 
        family.  
           The maximum award to the applicant shall be $2,000 $2,600 
        for each eligible child per academic year, except that the 
        campus financial aid officer may apply to the office for 
        approval to increase grants by up to ten percent to compensate 
        for higher market charges for infant care in a community.  The 
        office shall develop policies to determine community market 
        costs and review institutional requests for compensatory grant 
        increases to ensure need and equal treatment.  The office shall 
        prepare a chart to show the amount of a grant that will be 
        awarded per child based on the factors in this subdivision.  The 
        chart shall include a range of income and family size. 
           Sec. 15.  Minnesota Statutes 2000, section 136F.13, 
        subdivision 1, is amended to read: 
           Subdivision 1.  [OPERATION.] The state university board 
        shall operate an educational program for a state university 
        center as organized in the seven county metropolitan area.  The 
        center may operate in facilities acquired through the 
        commissioner of administration by gift or lease.  The faculty 
        and staff of the state university system shall provide 
        assistance in developing curricular and educational programs for 
        the university. 
           Sec. 16.  Minnesota Statutes 2000, section 136F.60, 
        subdivision 2, is amended to read: 
           Subd. 2.  [METHODS OF ACQUISITION AND REAL PROPERTY 
        TRANSACTIONS.] (a) If money has been appropriated to the board 
        to acquire lands or sites for public buildings or real estate, 
        the acquisition may be by gift, purchase, or condemnation 
        proceedings.  Condemnation proceedings must be under chapter 117.
           (b) The board may accept gifts to improve or acquire 
        facilities as provided in this paragraph: 
           (1) for remodeling existing facilities if the remodeling 
        does not materially increase the square footage of the facility; 
           (2) for the acquisition, construction, or remodeling costs 
        of facilities for which state capital appropriations have been 
        made and whose use will not be substantially changed; or 
           (3) for capital projects not authorized by the legislature 
        if the board first certifies that project revenues, other gifts 
        or grants, or other sources of capital funds are available for 
        project costs and that no tuition revenues or state or federal 
        appropriations are used for the capital or operating costs, 
        including all program costs, salaries, and benefits, of the 
        facility. 
           (c) The board may convey or lease real property under the 
        board's control, with or without monetary consideration, to 
        provide a facility for the primary benefit of a state college or 
        university or its students if the board certifies that project 
        revenues, other gifts or grants, or other sources of funds are 
        available for project costs and that no tuition revenues or 
        state or federal appropriations are used for the capital cost of 
        the facility.  Agreements under this paragraph must demonstrate 
        to the board's satisfaction the financial viability of the 
        proposed project, including all proposed financial and 
        contractual obligations, and operating costs, including all 
        program costs, salaries and benefits, and other costs reasonably 
        expected to be incurred or binding upon the college or 
        university.  Siting and design of the facility must be 
        consistent with the campus master plan and Minnesota state 
        colleges and universities building standards.  Agreements under 
        this paragraph to convey, or to lease for a term not to exceed 
        30 years, subject to section 16A.695, may be made following 
        requests for proposal or by direct negotiation.  Conveyances by 
        the board under this paragraph must be by quitclaim deed in a 
        form approved by the attorney general.  Land conveyed by the 
        board must revert to the state if it is no longer used for the 
        primary benefit of a state college or university or its students.
           (d) For purposes of this subdivision, "facility" includes 
        student unions, recreational centers and athletic centers, or 
        facilities for which state capital appropriations have been made 
        and the use of which will not be substantially changed.  
        "Facility" also includes self-supporting student housing. 
           (e) The board must report in a timely manner to the chairs 
        of the house and senate committees with jurisdiction over higher 
        education finance, capital investment, and ways and means any 
        capital project under paragraphs (b) or (c) with a cost of 
        $3,000,000 or more.  
           Sec. 17.  [136F.701] [REFUND OF TUITION.] 
           (a) Any student who is a resident of the state, has 
        enrolled in the state colleges and universities and paid tuition 
        for the course, and who, prior to the termination of the school 
        year for which the tuition was paid, enlisted or has been 
        inducted into the military service of the United States, either 
        voluntarily or pursuant to the present selective service law, is 
        entitled to the refund of all tuition paid for which credit 
        cannot properly be given.  
           (b) The administrative officers of the state colleges and 
        universities shall refund to the students any tuition so paid.  
        Any student making application for refund of any paid tuition 
        must furnish to the administrative officers of the state 
        colleges and universities a certificate from the proper officers 
        reciting the fact of the enlistment or the induction of the 
        student into the military service of the United States. 
           Sec. 18.  Minnesota Statutes 2000, section 137.10, is 
        amended to read: 
           137.10 [REFUND OF TUITION TO STUDENTS IN CERTAIN CASES.] 
           Any student who, being a resident of the state, has 
        enrolled to pursue any course in the University of Minnesota or 
        any state university and paid tuition for the course, and who, 
        prior to the termination of the school year for which the 
        tuition was paid, enlisted or has been inducted into the 
        military services of the United States, either voluntarily or 
        pursuant to the present selective service law, is entitled to 
        the refund of all tuition paid for which credit cannot properly 
        be given.  
           The administrative officers of the University of Minnesota 
        and of the universities or institutions shall refund to the 
        students any tuition so paid.  Any student making application 
        for refund of any paid tuition shall furnish to the 
        administrative officers of the University of Minnesota or of the 
        universities a certificate from the proper officers reciting the 
        fact of the enlistment or the induction of the student into the 
        military service of the United States. 
           Sec. 19.  Minnesota Statutes 2000, section 169.966, is 
        amended to read: 
           169.966 [STATE UNIVERSITY BOARD TO REGULATE TRAFFIC.] 
           Subdivision 1.  [AUTHORITY.] The state university board of 
        trustees of the Minnesota state colleges and universities may 
        from time to time make, adopt, and enforce such rules or 
        ordinances not inconsistent with this chapter, as it may find 
        expedient or necessary relating to the regulation of traffic and 
        parking upon parking facilities and private roads and roadways 
        situated on property owned, leased, occupied or operated by 
        state universities. 
           Subd. 1a.  [PARKING FACILITIES.] The state university board 
        of trustees may establish rents, charges or fees for the use of 
        parking facilities owned, leased, occupied, or operated by the 
        state university board.  The money collected by the board as 
        rents, charges or fees in accordance with this subdivision shall 
        be deposited in the university activity fund and is annually 
        appropriated to the state university board of trustees for state 
        university purposes and to maintain and operate parking lots and 
        parking facilities. 
           Subd. 2.  [PETTY MISDEMEANOR.] Any person violating such 
        rule or ordinance shall be guilty of a petty misdemeanor and 
        subject to the provisions of sections 169.891 and 169.90, 
        subdivision 1. 
           Subd. 3.  [PROSECUTION.] The prosecution may be before a 
        district court having jurisdiction over the place where the 
        violation occurs. 
           Subd. 4.  [ENFORCEMENT.] Every sheriff, constable, police 
        officer, or other peace officer shall see that all rules and 
        ordinances are obeyed and shall arrest and prosecute offenders. 
           Subd. 5.  [ENFORCEMENT POWERS.] The state university 
        board of trustees may appoint and employ, and fix the 
        compensation to be paid out of funds which may be available for 
        such purposes, persons who shall have and may exercise on 
        property owned, leased, or occupied by the state universities 
        the same powers of arrest for violation of rules or ordinances 
        adopted by the board as possessed by a sheriff, constable, 
        police officer, or peace officer. 
           Subd. 6.  [JUDICIAL NOTICE.] All persons shall take notice 
        of such rules and ordinances without pleading and proof of the 
        same. 
           Subd. 7.  [NOTICE, HEARING, FILING, AND EFFECT.] (a) 
        The state university board of trustees shall fix a date for a 
        public hearing on the adoption of any such proposed rule or 
        ordinance.  Notice of such hearing shall be published in a legal 
        newspaper in the county in which the property affected by the 
        rule or ordinance is located.  The publication shall be at least 
        15 days and not more than 45 days before the date of the hearing.
           (b) If, after the public hearing, the proposed rule or 
        ordinance shall be adopted by a majority of the members of the 
        board, the same shall be considered to have been enacted by the 
        board.  A copy of the same shall be signed by the president and 
        filed with the county recorder of each county where the rule or 
        ordinance shall be in effect, together with proof of 
        publication.  Upon such filing, the rule or ordinance, as the 
        case may be, shall thenceforth be in full force and effect. 
           Subd. 8.  [DELEGATION.] The state university board of 
        trustees may delegate its responsibilities under this section to 
        a state university president.  Actions of the president shall be 
        presumed to be those of the board.  The university president 
        shall file with the board president the results of any public 
        hearings and the subsequent adoption of any proposed rule or 
        ordinance enacted pursuant thereto.  
           Sec. 20.  Minnesota Statutes 2000, section 299A.45, 
        subdivision 1, is amended to read: 
           Subdivision 1.  [ELIGIBILITY.] Following certification 
        under section 299A.44 and compliance with this section and rules 
        of the commissioner of public safety and the higher education 
        services office, dependent children less than 23 years of age 
        and the surviving spouse of a public safety officer killed in 
        the line of duty on or after January 1, 1973, are eligible to 
        receive educational benefits under this section.  To qualify for 
        an award, they must be enrolled in undergraduate degree or 
        certificate programs after June 30, 1990, at an eligible 
        Minnesota institution as provided in section 136A.101, 
        subdivision 4.  Persons who have received a baccalaureate degree 
        or have been enrolled full time or the equivalent of eight ten 
        semesters or 12 quarters the equivalent, whichever occurs first, 
        are no longer eligible. 
           Sec. 21.  Minnesota Statutes 2000, section 299A.45, 
        subdivision 4, is amended to read: 
           Subd. 4.  [RENEWAL.] Each award must be given for one 
        academic year and is renewable for a maximum of six eight 
        semesters or nine quarters or their the equivalent.  An award 
        must not be given to a dependent child who is 23 years of age or 
        older on the first day of the academic year. 
           Sec. 22.  Minnesota Statutes 2000, section 354.094, 
        subdivision 2, is amended to read: 
           Subd. 2.  [MEMBERSHIP; RETENTION.] Notwithstanding section 
        354.49, subdivision 4, clause (3), a member on extended leave 
        whose employee and employer contributions are paid into the fund 
        pursuant to subdivision 1 shall retain membership in the 
        association for as long as the contributions are paid, under the 
        same terms and conditions as if the member had continued to 
        teach in the district, the community college system, or the 
        Minnesota state university colleges and universities system. 
           Sec. 23.  Minnesota Statutes 2000, section 354.69, is 
        amended to read: 
           354.69 [INFORMATION SUPPLIED BY DISTRICT.] 
           Each school district covered by the provisions of this 
        chapter and the community college Minnesota state colleges and 
        state university systems universities system shall furnish to 
        the teachers retirement association all information and reports 
        deemed necessary by the executive director to administer the 
        provisions of section 354.66. 
           Sec. 24.  Minnesota Statutes 2000, section 356.24, 
        subdivision 1, is amended to read: 
           Subdivision 1.  [RESTRICTION; EXCEPTIONS.] It is unlawful 
        for a school district or other governmental subdivision or state 
        agency to levy taxes for, or contribute public funds to a 
        supplemental pension or deferred compensation plan that is 
        established, maintained, and operated in addition to a primary 
        pension program for the benefit of the governmental subdivision 
        employees other than: 
           (1) to a supplemental pension plan that was established, 
        maintained, and operated before May 6, 1971; 
           (2) to a plan that provides solely for group health, 
        hospital, disability, or death benefits; 
           (3) to the individual retirement account plan established 
        by chapter 354B; 
           (4) to a plan that provides solely for severance pay under 
        section 465.72 to a retiring or terminating employee; 
           (5) for employees other than personnel employed by the 
        state university board or the community college board and 
        covered by the board of trustees of the Minnesota state colleges 
        and universities and covered under the higher education 
        supplemental retirement plan under chapter 354C, if provided for 
        in a personnel policy of the public employer or in the 
        collective bargaining agreement between the public employer and 
        the exclusive representative of public employees in an 
        appropriate unit, in an amount matching employee contributions 
        on a dollar for dollar basis, but not to exceed an employer 
        contribution of $2,000 a year per employee; 
           (i) to the state of Minnesota deferred compensation plan 
        under section 352.96; or 
           (ii) in payment of the applicable portion of the 
        contribution made to any investment eligible under section 
        403(b) of the Internal Revenue Code, if the employing unit has 
        complied with any applicable pension plan provisions of the 
        Internal Revenue Code with respect to the tax-sheltered annuity 
        program during the preceding calendar year; or 
           (6) for personnel employed by the state university board or 
        the community college board of trustees of the Minnesota state 
        colleges and universities and not covered by clause (5), to the 
        supplemental retirement plan under chapter 354C, if provided for 
        in a personnel policy or in the collective bargaining agreement 
        of the public employer with the exclusive representative of the 
        covered employees in an appropriate unit, in an amount matching 
        employee contributions on a dollar for dollar basis, but not to 
        exceed an employer contribution of $2,700 a year for each 
        employee. 
           Sec. 25.  Laws 1986, chapter 398, article 1, section 18, as 
        amended by Laws 1987, chapter 292, section 37; Laws 1989, 
        chapter 350, article 16, section 8; Laws 1990, chapter 525, 
        section 1; Laws 1991, chapter 208, section 2; Laws 1993, First 
        Special Session chapter 2, article 6, section 2; Laws 1995, 
        chapter 212, article 2, section 11; Laws 1997, chapter 183, 
        article 3, section 29; Laws 1998, chapter 395, section 7; Laws 
        1998, chapter 402, section 6; and Laws 1999, chapter 214, 
        article 2, section 19, is amended to read: 
           Sec. 18.  [REPEALER.] 
           Sections 1 to 17 and Minnesota Statutes, section 336.9-501, 
        subsections (6) and (7), and sections 583.284, 583.285, 583.286, 
        and 583.305, are repealed on July 1 June 30, 2001 2005. 
           Sec. 26.  [DEVELOPMENTAL EDUCATION DEMONSTRATION PROJECT.] 
           Subdivision 1.  [COLLEGE AND UNIVERSITY READINESS.] Prior 
        to July 1, 2001, the chancellor, in consultation with the 
        commissioner of children, families, and learning and selected 
        school boards, must designate at least one state college or 
        university and a minimum of four school districts to implement a 
        comprehensive demonstration project designed to increase the 
        number of high school graduates who are academically prepared to 
        enroll in college level courses. 
           Subd. 2.  [IMPLEMENTATION.] Beginning in the 2001-2002 
        academic year, the designated institution must administer 
        college readiness assessment tests in math, reading, and writing 
        to all students in the designated school districts, in the first 
        quarter of the student's junior year of high school.  The school 
        district must inform each student of any academic areas in which 
        the student needs additional preparation during high school to 
        ensure college readiness. 
           Subd. 3.  [STUDENT FOLLOW-UP.] The designated college or 
        university must monitor and report on the college enrollment and 
        college placement of all graduating students participating in 
        the demonstration project.  The report must identify any changes 
        in college readiness between initial and final assessment of 
        students involved in the demonstration project. 
           Subd. 4.  [REPORT AND RECOMMENDATIONS.] By December 15, 
        2003, the designated college or university must report to the 
        board of trustees, the commissioner of children, families, and 
        learning and the committees of the legislature having 
        jurisdiction over higher education on the effectiveness of the 
        college readiness demonstration project, including the estimated 
        cost of the demonstration project and recommendations for future 
        remediation efforts. 
           Sec. 27.  [LAWRENCE HALL REMODELING.] 
           The board of trustees of Minnesota state colleges and 
        universities may use funds from nonstate sources to remodel the 
        top floor of Lawrence Hall for student housing. 
           Sec. 28.  [COMMISSION ON UNIVERSITY OF MINNESOTA 
        EXCELLENCE.] 
           Subdivision 1.  [ESTABLISHMENT.] The commission on 
        University of Minnesota excellence is established to: 
           (1) review the university's current nationally ranked areas 
        of excellence; 
           (2) review major investment efforts in interdisciplinary 
        initiatives identified by the university in 1998, including 
        digital technology, design, new media, molecular and cellular 
        biology, medical science, and agriculture; 
           (3) evaluate and make recommendations on how the university 
        can develop additional centers of excellence that will achieve a 
        national ranking in the top ten within the next ten years and 
        identify centers of excellence which are best positioned and 
        have the best potential to achieve this goal; 
           (4) examine the university's mission, scope, and financing 
        of programs and propose possible ways in which the university 
        can refocus or refine its mission and offerings; and 
           (5) identify undergraduate degree programs in which quality 
        and productivity improvements could be achieved through 
        increased collaboration with public and private post-secondary 
        institutions in and outside of Minnesota.  
           Subd. 2.  [MEMBERSHIP; STAFF.] (a) The commission on 
        University of Minnesota excellence consists of 15 members.  Four 
        members must be appointed by the governor, including the chair 
        of the commission.  Four members must be appointed by the 
        speaker of the house of representatives.  Up to two members of 
        the house of representatives may be appointed.  Four members 
        must be appointed by the subcommittee on committees of the 
        senate committee on rules and administration.  Up to two 
        senators may be appointed.  Three members must be appointed by 
        the chair of the University of Minnesota board of regents and 
        may include current members of the board.  Appointments must be 
        made by September 1, 2001.  Members appointed to the commission 
        must be selected for their expertise in complex organizational 
        structure and should include leaders of business, industry, or 
        post-secondary institutions.  The president of the University of 
        Minnesota or the president's designee is an ex officio, 
        nonvoting member of the commission. 
           (b) Members of the commission serve without compensation or 
        expenses under Minnesota Statutes, section 15.0575, subdivision 
        3. 
           (c) The board of regents of the University of Minnesota is 
        requested to make University of Minnesota staff available to the 
        commission.  
           Subd. 3.  [CENTERS OF EXCELLENCE.] The commission must, at 
        a minimum, identify five additional centers of excellence at the 
        University of Minnesota in which to focus resources and policy 
        initiatives.  The goal for these centers is to have them develop 
        national stature and achieve a national ranking in the top ten 
        within ten years.  The additional centers of excellence must be 
        chosen from a group of potential centers of excellence that 
        includes the programs and departments in which the university is 
        currently considered a national or regional leader and from 
        existing or potential interdisciplinary initiatives at the 
        university. 
           Subd. 4.  [REPORT.] The commission must report to the 
        legislature by July 1, 2002, on areas of excellence, mission, 
        and focus of the University of Minnesota.  In preparing its 
        report on areas of excellence, the task force is encouraged to 
        consider operation and capital financing needs, Minnesota 
        economic needs, federal research priorities, and opportunities 
        for private financial support.  
           Subd. 5.  [EXPIRATION.] The commission on University of 
        Minnesota excellence expires on December 31, 2002. 
           Sec. 29.  [REPEALER.] 
           (a) Minnesota Statutes 2000, sections 135A.06, subdivision 
        1; and 136F.13, subdivision 2, are repealed. 
           (b) Laws 1994, chapter 643, section 66, is repealed. 
           Sec. 30.  [EFFECTIVE DATES.] 
           (a) Section 10 is effective July 1, 2002. 
           (b) Section 25 is effective the day following final 
        enactment. 

                                   ARTICLE 3 
                         MINNESOTA COLLEGE SAVINGS PLAN 
           Section 1.  Minnesota Statutes 2000, section 13.322, 
        subdivision 3, is amended to read: 
           Subd. 3.  [HIGHER EDUCATION SERVICES OFFICE.] (a) 
        [GENERAL.] Data sharing involving the higher education services 
        office and other institutions is governed by section 136A.05. 
           (b) [STUDENT FINANCIAL AID.] Data collected and used by the 
        higher education services office on applicants for financial 
        assistance are classified under section 136A.162.  
           (c) [MINNESOTA COLLEGE SAVINGS PLAN DATA.] Account owner 
        data, account data, and data on beneficiaries of accounts under 
        the Minnesota college savings plan are classified under section 
        136A.243, subdivision 10. 
           (d) [SCHOOL FINANCIAL RECORDS.] Financial records submitted 
        by schools registering with the higher education services office 
        are classified under section 136A.64.  
           Sec. 2.  Minnesota Statutes 2000, section 136A.241, is 
        amended to read: 
           136A.241 [EDVEST PROGRAM MINNESOTA COLLEGE SAVINGS PLAN 
        ESTABLISHED.] 
           An Edvest savings program A college savings plan known as 
        the Minnesota college savings plan is established.  In 
        establishing this program plan, the legislature seeks to 
        encourage individuals to save for post-secondary education by: 
           (1) providing a qualified state tuition program plan under 
        federal tax law; 
           (2) providing matching grants for contributions to the 
        program by low- and middle-income families; and 
           (3) by encouraging individuals, foundations, and businesses 
        to provide additional grants to participating students. 
           Sec. 3.  Minnesota Statutes 2000, section 136A.242, is 
        amended to read: 
           136A.242 [DEFINITIONS.] 
           Subdivision 1.  [GENERAL.] For purposes of sections 
        136A.241 to 136A.245 136A.246, the following terms have the 
        meanings given. 
           Subd. 1a.  [ACCOUNT.] "Account" means the formal record of 
        transactions relating to a Minnesota college savings plan 
        beneficiary. 
           Subd. 1b.  [ACCOUNT OWNER.] "Account owner" means a person 
        who enters into a participation agreement and is entitled to 
        select or change the beneficiary of an account or to receive 
        distributions from the account for other than payment of 
        qualified higher education expenses. 
           Subd. 2.  [ADJUSTED GROSS INCOME.] "Adjusted gross income" 
        means adjusted gross income as defined in section 62 of the 
        Internal Revenue Code. 
           Subd. 3.  [BENEFICIARY.] "Beneficiary" means the designated 
        beneficiary for the account, as defined in section 529(e)(1) of 
        the Internal Revenue Code. 
           Subd. 4.  [BOARD.] "Board" means the state board of 
        investment. 
           Subd. 4a.  [CONTINGENT ACCOUNT OWNER.] "Contingent account 
        owner" means the individual designated as the account owner, 
        either in the participation agreement or pursuant to a separate 
        Minnesota college savings plan form, in the event of the death 
        of the account owner. 
           Subd. 4b.  [CONTRIBUTION.] "Contribution" means a payment 
        directly allocated to an account for the benefit of a 
        beneficiary.  For a rollover distribution, only the portion of 
        the rollover amount that constitutes investment in the account 
        is treated as a contribution to the account. 
           Subd. 5.  [DIRECTOR.] "Director" means the director of the 
        higher education services office. 
           Subd. 5a.  [DISTRIBUTION.] "Distribution" means a 
        disbursement from an account to the account owner, the 
        beneficiary, or the beneficiary's estate or to an eligible 
        educational institution.  Distribution does not include a change 
        of beneficiary to a member of the family of the prior 
        beneficiary or a rollover distribution. 
           Subd. 5b.  [DORMANT ACCOUNT.] "Dormant account" means an 
        account that has not received contributions for at least three 
        consecutive years and the account statements mailed to the 
        account owner have been returned as undeliverable. 
           Subd. 5c.  [EARNINGS.] "Earnings" means the total account 
        balance minus the investment in the account. 
           Subd. 5d.  [ELIGIBLE EDUCATIONAL INSTITUTION.] "Eligible 
        educational institution" means an institution as defined in 
        section 529(e)(5) of the Internal Revenue Code. 
           Subd. 5e.  [INACTIVE ACCOUNT WITH A MATCHING GRANT 
        ACCOUNT.] "Inactive account with a matching grant account" means 
        an account in which the beneficiary: 
           (1) is not the account owner, the beneficiary has reached 
        28 years of age, and the beneficiary has not informed the plan 
        administrator that the beneficiary is enrolled in an eligible 
        educational institution; 
           (2) is the account owner, the beneficiary was over the age 
        of 18 when the account was opened, and the beneficiary has not 
        informed the program administrator that the beneficiary is 
        enrolled in an eligible educational institution within ten years 
        of the date of opening the account; or 
           (3) is the account owner, the beneficiary was a minor when 
        the account was opened, the account becomes inactive when the 
        beneficiary turns 28 years of age, and the beneficiary has not 
        informed the program administrator that the beneficiary is 
        enrolled in an eligible educational institution. 
           Subd. 6.  [EXECUTIVE DIRECTOR.] "Executive director" means 
        the executive director of the state board of investment. 
           Subd. 7.  [INTERNAL REVENUE CODE.] "Internal Revenue Code" 
        means the Internal Revenue Code of 1986, as amended. 
           Subd. 7a.  [INVESTMENT IN THE ACCOUNT.] "Investment in the 
        account" means the sum of all contributions made to an account 
        by a particular date minus the aggregate amount of contributions 
        included in distributions or rollover distributions, if any, 
        made from the account as of that date. 
           Subd. 7b.  [MATCHING GRANT.] "Matching grant" means an 
        amount added to a matching grant account under section 136A.245. 
           Subd. 7c.  [MATCHING GRANT ACCOUNT.] "Matching grant 
        account" means an account owned by the state that contains 
        matching grants and earnings. 
           Subd. 7d.  [MAXIMUM ACCOUNT BALANCE LIMIT.] "Maximum 
        account balance limit" means the amount established by the 
        office under section 136.2441, subdivision 8, paragraph (d).  
           Subd. 7e.  [MEMBER OF THE FAMILY.] "Member of the family" 
        means an individual who is related to the beneficiary as defined 
        in section 529(e)(2) of the Internal Revenue Code. 
           Subd. 7f.  [NONQUALIFIED DISTRIBUTION.] "Nonqualified 
        distribution" means a distribution made from an account other 
        than (1) a qualified distribution; or (2) a distribution due to 
        the death or disability of, or scholarship to, a beneficiary. 
           Subd. 8.  [OFFICE.] "Office" means the higher education 
        services office. 
           Subd. 8a.  [PARTICIPATION AGREEMENT.] "Participation 
        agreement" means an agreement to participate in the Minnesota 
        college savings plan between an account owner and the state, 
        through its agencies, the office, and the board. 
           Subd. 8b.  [PENALTY.] "Penalty" means the amount 
        established by the office that is applied against the earnings 
        portion of a nonqualified distribution.  The amount established 
        by the office must be the minimum required to be de minimis 
        under section 529 of the Internal Revenue Code.  The office must 
        impose, collect, and apply penalties consistent with section 529 
        of the Internal Revenue Code.  
           Subd. 8c.  [PERSON.] "Person" means an individual, trust, 
        estate, partnership, association, company, corporation, or the 
        state.  
           Subd. 9.  [PROGRAM PLAN.] "Program" or "Edvest Plan" 
        refers to the program plan established under sections 136A.241 
        to 136A.245 136A.246. 
           Subd. 10.  [PLAN ADMINISTRATOR.] "Plan administrator" means 
        the person selected by the office and the board to administer 
        the daily operations of the Minnesota college savings plan and 
        to provide marketing, recordkeeping, investment management, and 
        other services for the program. 
           Subd. 11.  [QUALIFIED DISTRIBUTION.] "Qualified 
        distribution" means a distribution made from an account for 
        qualified higher education expenses of the beneficiary. 
           Subd. 12.  [QUALIFIED HIGHER EDUCATION 
        EXPENSES.] "Qualified higher education expenses" means expenses 
        as defined in section 529(e)(3) of the Internal Revenue Code. 
           Subd. 13.  [ROLLOVER DISTRIBUTION.] "Rollover distribution" 
        means a transfer of funds made: 
           (1) from one account to another account within 60 days of a 
        distribution; 
           (2) from another qualified state tuition program to an 
        account within 60 days of the distribution; or 
           (3) to another qualified state tuition program from an 
        account within 60 days of a distribution. 
           Each transfer of funds must be made for the benefit of a 
        new beneficiary who is a member of the family of the prior 
        beneficiary. 
           Subd. 14.  [SCHOLARSHIP.] "Scholarship" means a 
        scholarship, allowance, or payment under section 529(b)(3)(C) of 
        the Internal Revenue Code. 
           Subd. 15.  [STATE.] "State" means the state of Minnesota 
        and any Minnesota agency or political subdivision of Minnesota. 
           Subd. 16.  [TOTAL ACCOUNT BALANCE.] "Total account balance" 
        means the amount in an account on a particular date or the fair 
        market value of an account on a particular date. 
           Sec. 4.  Minnesota Statutes 2000, section 136A.243, 
        subdivision 1, is amended to read: 
           Subdivision 1.  [RESPONSIBILITIES.] (a) The director shall 
        establish the rules, terms, and conditions for the program plan, 
        subject to the requirements of sections 136A.241 to 
        136A.245 136A.246. 
           (b) The director shall prescribe the application forms, 
        procedures, and other requirements that apply to the program 
        plan. 
           Sec. 5.  Minnesota Statutes 2000, section 136A.243, 
        subdivision 2, is amended to read: 
           Subd. 2.  [ACCOUNTS-TYPE PROGRAM PLAN.] The office must 
        establish the program plan and the program plan must be operated 
        as an accounts-type program plan that permits individuals 
        persons to save for qualified higher education costs expenses 
        incurred at any eligible educational institution, regardless of 
        whether it is private or public or whether it is located within 
        or outside of this the state.  A separate account must be 
        maintained for each beneficiary for whom contributions are made. 
           Sec. 6.  Minnesota Statutes 2000, section 136A.243, 
        subdivision 3, is amended to read: 
           Subd. 3.  [CONSULTATION WITH STATE BOARD OF INVESTMENT.] In 
        designing and establishing the program's plan's requirements and 
        in negotiating or entering into contracts with third parties 
        under subdivision 8, the director shall consult with the 
        executive director.  The director and the executive director 
        shall establish an annual fee, equal to a percentage of the 
        average daily net assets of the plan, to be imposed on 
        participants to recover the costs of administration, 
        recordkeeping, and investment management as provided in 
        subdivision 9 and section 136A.244, subdivision 4. 
           Sec. 7.  Minnesota Statutes 2000, section 136A.243, 
        subdivision 4, is amended to read: 
           Subd. 4.  [PROGRAM PLAN TO COMPLY WITH FEDERAL LAW.] The 
        director shall take steps to ensure that the program plan meets 
        the requirements for a qualified state tuition program under 
        section 529(b)(1)(A)(ii) of the Internal Revenue Code.  The 
        director may request a private letter ruling or rulings from the 
        Internal Revenue Service or take any other steps to ensure that 
        the program plan qualifies under section 529 of the Internal 
        Revenue Code or other relevant provisions of federal law. 
           Sec. 8.  Minnesota Statutes 2000, section 136A.243, 
        subdivision 9, is amended to read: 
           Subd. 9.  [AUTHORITY TO IMPOSE FEES.] The office may impose 
        annual fees, as provided in subdivision 3, on participants in 
        the program plan to recover the costs of administration.  The 
        office must use its best efforts to keep these fees as low as 
        possible, consistent with efficient administration, so that the 
        returns on savings invested in the program plan will be as high 
        as possible. 
           Sec. 9.  Minnesota Statutes 2000, section 136A.243, is 
        amended by adding a subdivision to read: 
           Subd. 10.  [DATA.] Account owner data, account data, and 
        data on beneficiaries of accounts are private data on 
        individuals as defined in section 13.02, except that the names 
        and addresses of the beneficiaries of accounts that receive 
        matching grants are public. 
           Sec. 10.  Minnesota Statutes 2000, section 136A.244, 
        subdivision 1, is amended to read: 
           Subdivision 1.  [STATE BOARD TO INVEST.] The state board of 
        investment shall invest the money deposited in accounts in the 
        program plan and all investments are directed by the board.  
        Neither persons making contributions to an account nor 
        beneficiaries may direct the investment of contributions to the 
        plan or plan earnings.  
           Sec. 11.  Minnesota Statutes 2000, section 136A.244, 
        subdivision 4, is amended to read: 
           Subd. 4.  [FEES.] The board may impose annual fees, as 
        provided in section 136A.243, subdivision 3, on participants in 
        the program plan to recover the cost of investment management 
        and related tasks for the program plan.  The board must use its 
        best efforts to keep these fees as low as possible, consistent 
        with high quality investment management, so that the returns on 
        savings invested in the program plan will be as high as possible.
           Sec. 12.  [136A.2441] [MINNESOTA COLLEGE SAVINGS PLAN 
        ACCOUNTS; GENERALLY.] 
           Subdivision 1.  [CONTRIBUTIONS TO AN ACCOUNT.] A person may 
        make contributions to an account on behalf of a beneficiary.  
        Contributions to an account made by persons other than the 
        account owner become the property of the account owner.  A 
        person does not acquire an interest in an account by making 
        contributions to an account.  Contributions to an account must 
        be made by check, money order, or other commercially acceptable 
        means as permitted by the United States Internal Revenue Service 
        and authorized by the plan administrator in cooperation with the 
        office and the board. 
           Subd. 2.  [AUTHORITY OF ACCOUNT OWNER.] An account owner is 
        the only person entitled to: 
           (1) select or change a beneficiary or a contingent account 
        owner; or 
           (2) request distributions or rollover distributions from an 
        account. 
           Subd. 3.  [SECURITY FOR LOANS.] An interest in an account 
        or matching grant account must not be used as security for a 
        loan. 
           Subd. 4.  [SEPARATE ACCOUNTING.] The plan must provide a 
        separate account for each beneficiary for whom contributions are 
        made.  Each account must have a single account owner and a 
        single beneficiary.  An account owner must not open more than 
        one account for the same beneficiary, but several account owners 
        may open accounts for the same beneficiary. 
           Subd. 5.  [NAMING OF BENEFICIARY.] The account owner must 
        designate the beneficiary of an account when the account is 
        established, except for accounts established under section 
        529(e)(1)(C) of the Internal Revenue Code, which do not require 
        a designated beneficiary until a distribution is made. 
           Subd. 6.  [CHANGE OF BENEFICIARY.] An account owner may 
        change the beneficiary of an account to a member of the family 
        of the current beneficiary, at any time without penalty, if the 
        change will not cause the total account balance of all accounts 
        held for the new beneficiary to exceed the maximum account 
        balance limit as provided in subdivision 8.  A change of 
        beneficiary other than as permitted in this subdivision is 
        treated as a nonqualified distribution under section 136A.246, 
        subdivision 3. 
           Subd. 7.  [CHANGE OF ACCOUNT OWNERSHIP.] An account owner 
        may transfer ownership of an account to another person eligible 
        to be an account owner.  All transfers of ownership are absolute 
        and irrevocable. 
           Subd. 8.  [MAXIMUM ACCOUNT BALANCE LIMIT.] (a) When a 
        contribution is made, the total account balance of all accounts 
        held for the same beneficiary, including matching grant 
        accounts, must not exceed the maximum account balance limit as 
        determined under this subdivision. 
           (b) The maximum account balance limit is reduced for 
        withdrawals from any account for the same beneficiary that are 
        qualified distributions, distributions due to the death or 
        disability of the beneficiary, or distributions due to the 
        beneficiary receiving a scholarship.  Subsequent contributions 
        must not be made to replenish an account if the contribution 
        results in the total account balance of all accounts held for 
        the beneficiary to exceed the reduced maximum account balance 
        limit.  Any subsequent contributions must be rejected.  A 
        subsequent contribution accepted in error must be returned to 
        the account owner plus any earnings on the contribution less any 
        applicable penalties. 
           (c) The maximum account balance limit is not reduced for a 
        nonqualified distribution or a rollover distribution.  When such 
        distributions are taken, subsequent contributions may be made to 
        replenish an account up to the maximum account balance limit. 
           (d) The office must establish a maximum account balance 
        limit.  The maximum account balance limit is four times the cost 
        of one year of qualified higher education expenses at the most 
        expensive eligible educational institution in Minnesota.  The 
        office must adjust the maximum account balance limit, as 
        necessary, or on January 1 of each year.  Qualified higher 
        education expenses for the academic year prior to January 1 of 
        each year must be used in calculating the maximum account 
        balance limit.  The maximum account balance limit must not 
        exceed the amount permitted for the plan to qualify as a 
        qualified state tuition program under section 529 of the 
        Internal Revenue Code.  
           (e) If the total account balance of all accounts held for a 
        single beneficiary reaches the maximum account balance limit 
        prior to the end of that calendar year, the beneficiary may 
        receive an applicable matching grant for that calendar year. 
           Subd. 9.  [EXCESS CONTRIBUTIONS AND BALANCES.] A 
        contribution to any account for a beneficiary must be rejected 
        if the contribution would cause the total account balance of all 
        accounts held for the same beneficiary, including the matching 
        grant account, to exceed the maximum account balance limit under 
        section 529 of the Internal Revenue Code as established by the 
        office.  If a contribution under this subdivision is accepted in 
        error, the contribution must be returned to the account owner 
        plus any earnings thereon, less applicable penalties.  A payment 
        of an excess contribution to the account owner may be a 
        nonqualified distribution subject to a penalty. 
           Subd. 10.  [DORMANT ACCOUNTS.] (a) The plan administrator 
        shall attempt to locate the account owner or the beneficiary, or 
        both, to determine the disposition of a dormant account.  A fee 
        of five percent of the total account balance of the dormant 
        account, not to exceed $100, plus allowable costs, may be 
        charged for this service.  Costs will not exceed $100 or five 
        percent of the total account balance in the dormant account, 
        whichever is less. 
           (b) If the account owner, or the account owner's legal 
        heirs, are not found after three attempts by the plan 
        administrator, the remaining funds in the dormant account must 
        be turned over to the office.  The funds are treated as 
        unclaimed property for purposes of sections 345.31 to 345.60, 
        and the office shall turn all remaining dormant account funds 
        over to the commissioner of commerce.  If the dormant account 
        has a matching grant account, all amounts in the beneficiary's 
        matching grant account, if any, must be returned to the office. 
           Subd. 11.  [EFFECT OF PLAN CHANGES ON PARTICIPATION 
        AGREEMENT.] Amendments to sections 136A.241 to 136A.246 
        automatically amend the participation agreement.  Any amendments 
        to the operating procedures and policies of the plan shall amend 
        the participation agreement 30 days after adoption by the office 
        or the board. 
           Subd. 12.  [SPECIAL ACCOUNT TO HOLD PLAN ASSETS IN 
        TRUST.] All assets of the plan, including contributions to 
        accounts and matching grant accounts and earnings, are held in 
        trust for the exclusive benefit of account owners and 
        beneficiaries.  Assets must be held in a separate account in the 
        state treasury to be known as the Minnesota college savings plan 
        account.  Plan assets are not subject to claims by creditors of 
        the state, are not part of the general fund, and are not subject 
        to appropriation by the state.  Payments from the Minnesota 
        college savings plan account shall be made under sections 
        136A.241 to 136A.246. 
           Sec. 13.  Minnesota Statutes 2000, section 136A.245, 
        subdivision 2, is amended to read: 
           Subd. 2.  [FAMILY INCOME.] (a) For purposes of this 
        section, "family income" means: 
           (1) if the beneficiary is under age 25, the combined 
        adjusted gross income of the beneficiary's parents or legal 
        guardians as reported on the federal tax return or returns for 
        the most recently available tax year.  If the beneficiary's 
        parents are divorced, the income of the parent claiming the 
        beneficiary as a dependent on the federal individual income tax 
        return and the income of that parent's spouse, if any, is used 
        to determine family income; or 
           (2) if the beneficiary is age 25 or older, the combined 
        adjusted gross income of the beneficiary and spouse, if any. 
           (b) For a parent or legal guardian of beneficiaries under 
        age 25 and for beneficiaries age 25 or older who resided in 
        Minnesota and filed a federal individual income tax return two 
        years prior to the year in which the matching grant is awarded, 
        the matching grant must be based on family income from Internal 
        Revenue Service tax data on file with the Minnesota department 
        of revenue.  
           (c) Parents or legal guardians of beneficiaries under age 
        25 and beneficiaries age 25 or older who did not reside in 
        Minnesota two years prior to the year in which the matching 
        grant is awarded must provide a signed copy of their federal 
        individual income tax return to the office, regardless of who 
        the account owner is, in order to be considered for a matching 
        grant. 
           Sec. 14.  Minnesota Statutes 2000, section 136A.245, is 
        amended by adding a subdivision to read: 
           Subd. 2a.  [RESIDENCY REQUIREMENT.] (a) If the beneficiary 
        is under age 25, the beneficiary's parents or legal guardians 
        must be Minnesota residents to qualify for a matching grant.  If 
        the beneficiary is age 25 or older, the beneficiary must be a 
        Minnesota resident to qualify for a matching grant. 
           (b) To meet the residency requirements, the parent or legal 
        guardian of beneficiaries under age 25 must have filed a 
        Minnesota individual income tax return as a Minnesota resident, 
        claiming the beneficiary as a dependent, two years prior to the 
        year in which the matching grant is awarded.  For beneficiaries 
        age 25 or older, the beneficiary, and a spouse, if any, must 
        have filed a Minnesota individual income tax return as a 
        Minnesota resident two years prior to the year in which the 
        matching grant is awarded. 
           (c) A parent of beneficiaries under age 25 and 
        beneficiaries age 25 or older who did not reside in Minnesota 
        two years prior to the year in which the matching grant is 
        awarded must establish Minnesota residency through the issuance 
        of a Minnesota driver's license or identification card. 
           Sec. 15.  Minnesota Statutes 2000, section 136A.245, is 
        amended by adding a subdivision to read: 
           Subd. 2b.  [AGE AND DATE OF BIRTH DETERMINATION OF 
        BENEFICIARY.] In determining the age of the beneficiary for 
        purposes of a matching grant, the plan administrator shall use 
        the age of the beneficiary as reported on the participation 
        agreement on December 31 of the year in which the request for a 
        matching grant is made. 
           Sec. 16.  Minnesota Statutes 2000, section 136A.245, 
        subdivision 4, is amended to read: 
           Subd. 4.  [BUDGET LIMIT.] If the total amount of matching 
        grants determined under subdivision 3 exceeds the amount of the 
        appropriation for the fiscal year, the director shall 
        proportionately reduce each grant so that the total equals the 
        available appropriation.  The director must reduce matching 
        grants so that the amount of the matching grant assigned to a 
        beneficiary's account equals: 
           (1) the ratio of state appropriations for the matching 
        grant divided by the total dollar amount of matching grants for 
        all beneficiaries; multiplied by 
           (2) the dollar amount of the matching grant for each 
        eligible beneficiary. 
           Sec. 17.  Minnesota Statutes 2000, section 136A.245, is 
        amended by adding a subdivision to read: 
           Subd. 7.  [ANNUAL APPLICATION.] An account owner must 
        submit an application form for a matching grant on an annual 
        basis.  The application must be postmarked by December 31 of the 
        year preceding the awarding of the matching grant.  
           Sec. 18.  Minnesota Statutes 2000, section 136A.245, is 
        amended by adding a subdivision to read: 
           Subd. 8.  [SINGLE BENEFICIARIES WITH MULTIPLE 
        ACCOUNTS.] (a) A matching grant will first be computed on an 
        account owned by a parent or legal guardian of the beneficiary, 
        or an account owner who is also the beneficiary.  If there are 
        multiple accounts for a single beneficiary, any matching grant, 
        up to the annual maximum, will be proportionately awarded to the 
        beneficiary named in accounts owned by the parents or guardians. 
           (b) If the account owned by a parent or a guardian or an 
        account owner who is also the beneficiary does not qualify for 
        the maximum annual matching grant, any remaining matching grant 
        funds are proportionately distributed to the beneficiary to an 
        account or accounts owned by someone other than the parent or 
        guardian. 
           (c) If the account for a beneficiary is not owned by a 
        parent or a legal guardian, or an account owner who is also the 
        beneficiary, then the matching grant will be proportionately 
        distributed to the beneficiary to accounts owned by others. 
           Sec. 19.  Minnesota Statutes 2000, section 136A.245, is 
        amended by adding a subdivision to read: 
           Subd. 9.  [OWNERSHIP OF MATCHING GRANT FUNDS.] The state 
        retains ownership of all matching grants and earnings on 
        matching grants until a qualified distribution is made to a 
        beneficiary or an eligible educational institution. 
           Sec. 20.  Minnesota Statutes 2000, section 136A.245, is 
        amended by adding a subdivision to read: 
           Subd. 10.  [INACTIVE ACCOUNTS WITH MATCHING GRANTS.] (a) 
        The plan administrator will attempt to locate the account owner 
        or the beneficiary of an inactive account with a matching grant 
        to determine the disposition of the account.  No fee will be 
        charged for this service.  The matching grants and matching 
        grant earnings in the account must be returned to the office, 
        unless the account owner applies for a deferment or the 
        beneficiary begins attending an eligible educational institution 
        within one year of the date of notification. 
           (b) The account owner may apply to the plan administrator 
        for a deferment of inactive account time limits.  Upon 
        application, the plan administrator shall grant a one-time 
        deferment of two years.  In addition, the plan administrator 
        shall grant a deferment for the beneficiary's initial enlistment 
        for active duty in the armed forces of the United States, or for 
        the period of active military duty required as part of the 
        beneficiary's obligation as a member in a reserve military unit 
        of the armed forces of the United States. 
           Sec. 21.  Minnesota Statutes 2000, section 136A.245, is 
        amended by adding a subdivision to read: 
           Subd. 11.  [FORFEITURE OF MATCHING GRANTS.] (a) Matching 
        grants are forfeited if: 
           (1) the account owner transfers the total account balance 
        of an account to another account or to another qualified state 
        tuition program; 
           (2) the beneficiary receives a full tuition scholarship or 
        admission to a United States service academy; 
           (3) the beneficiary dies or becomes disabled; 
           (4) the account owner changes the beneficiary of the 
        account; or 
           (5) the account owner closes the account with a 
        nonqualified withdrawal. 
           (b) Matching grants must be proportionally forfeited if: 
           (1) the account owner transfers a portion of an account to 
        another account or to another qualified state tuition program; 
           (2) the beneficiary receives a scholarship covering a 
        portion of qualified higher education expenses; or 
           (3) the account owner makes a partial nonqualified 
        withdrawal. 
           (c) If the account owner makes a misrepresentation in a 
        participation agreement or an application for a matching grant 
        that results in a matching grant, the matching grant associated 
        with the misrepresentation is forfeited.  The office and the 
        board must instruct the plan administrator as to the amount to 
        be forfeited from the matching grant account.  The office and 
        the board must withdraw the matching grant or the proportion of 
        the matching grant that is related to the misrepresentation. 
           Sec. 22.  [136A.246] [ACCOUNT DISTRIBUTIONS.] 
           Subdivision 1.  [QUALIFIED DISTRIBUTION METHODS.] (a) 
        Qualified distributions may be made: 
           (1) directly to participating eligible educational 
        institutions on behalf of the beneficiary; 
           (2) in the form of a check payable to both the beneficiary 
        and the eligible educational institution; or 
           (3) to an account owner with a receipt verifying the 
        payment of qualified higher education expenses. 
           (b) When administratively feasible, distributions may be 
        made when the account owner and beneficiary certify prior to the 
        distribution that the distribution will be expended for 
        qualified higher education expenses a reasonable time after the 
        distribution.  The plan administrator may retain a penalty on 
        the earnings portion of the nonqualified distribution until 
        payment of qualified higher education expenses are 
        substantiated.  A payment receipt showing payment for qualified 
        higher education expenses must be submitted to the program 
        administrator within 30 days of distribution. 
           (c) Qualified distributions must be withdrawn 
        proportionally from contributions and earnings in an account 
        owner's account on the date of distribution as provided in 
        section 529 of the Internal Revenue Code. 
           Subd. 2.  [MATCHING GRANT ACCOUNTS.] Qualified 
        distributions are based on the total account balances in an 
        account owner's account and matching grant account, if any, on 
        the date of distribution.  Qualified distributions must be 
        withdrawn proportionally from each account based on the relative 
        total account balance of each account to the total account 
        balance for both accounts.  Amounts for matching grants and 
        matching grant earnings must only be distributed for qualified 
        higher education expenses. 
           Subd. 3.  [NONQUALIFIED DISTRIBUTION.] An account owner may 
        request a nonqualified distribution from an account at any 
        time.  Nonqualified distributions are based on the total account 
        balances in an account owner's account and must be withdrawn 
        proportionally from contributions and earnings as provided in 
        section 529 of the Internal Revenue Code.  The earnings portion 
        of a nonqualified distribution is subject to a penalty.  For 
        purposes of this subdivision, "earnings portion" means the ratio 
        of the earnings in the account to the total account balance, 
        immediately prior to the distribution, multiplied by the 
        distribution.  The penalty must be withheld from the total 
        amount of any distribution. 
           Subd. 4.  [NONQUALIFIED DISTRIBUTIONS FROM MATCHING GRANT 
        ACCOUNTS.] (a) If an account owner requests a nonqualified 
        distribution from an account that has a matching grant account, 
        the total account balance of the matching grant account, if any, 
        is reduced. 
           (b) After the nonqualified distribution is withdrawn from 
        the account including any penalty as provided in subdivision 3, 
        the account owner forfeits matching grant amounts in the same 
        proportion as the nonqualified distribution is to the total 
        account balance of the account. 
           Subd. 5.  [DISTRIBUTIONS DUE TO DEATH OR DISABILITY OF, OR 
        SCHOLARSHIP TO, A BENEFICIARY.] An account owner may request a 
        distribution due to the death or disability of, or scholarship 
        to, a beneficiary from an account by submitting a completed 
        request to the plan.  Prior to distribution, the account owner 
        shall certify the reason for the distribution and provide 
        written confirmation from a third party that the beneficiary has 
        died, become disabled, or received a scholarship for attendance 
        at an eligible educational institution.  The plan must not 
        consider a request to make a distribution until a third-party 
        written confirmation is received by the plan.  For purposes of 
        this subdivision, a third-party written confirmation consists of 
        the following: 
           (1) for death of the beneficiary, a certified copy of the 
        beneficiary's death certificate; 
           (2) for disability of the beneficiary, a certification by a 
        physician who is a doctor of medicine or osteopathy stating that 
        the doctor is legally authorized to practice in a state of the 
        United States and that the beneficiary is unable to attend any 
        eligible educational institution because of an injury or illness 
        that is expected to continue indefinitely or result in death.  
        Certification must be on a form approved by the plan; or 
           (3) for a scholarship award to the beneficiary, a letter 
        from the grantor of the scholarship or from the eligible 
        educational institution receiving or administering the 
        scholarship, that identifies the beneficiary by name and social 
        security number or taxpayer identification number as the 
        recipient of the scholarship and states the amount of the 
        scholarship, the period of time or number of credits or units to 
        which it applies, the date of the scholarship, and, if 
        applicable, the eligible educational institution to which the 
        scholarship is to be applied. 
           Sec. 23.  [REVISOR'S INSTRUCTION.] 
           (a) The revisor of statutes shall renumber each section of 
        Minnesota Statutes listed in column A with the section listed in 
        column B. 
            Column A          Column B 
            136A.241          136G.01 
            136A.242          136G.03 
            136A.243          136G.05 
            136A.244          136G.07 
            136A.2441         136G.09 
            136A.245          136G.11 
            136A.246          136G.13 
           (b) The revisor of statutes shall correct cross-references 
        in Minnesota Statutes that are recodified by this act, and, if 
        Minnesota Statutes, sections 136A.241 to 136A.246, are further 
        amended in the 2001 legislative session, shall codify the 
        amendments in a manner consistent with this act. 
           (c) The revisor of statutes shall change "Edvest" to 
        "Minnesota college savings plan" wherever it appears in 
        Minnesota Statutes. 
           Sec. 24.  [EFFECTIVE DATE.] 
           This article is effective the day following final enactment.
           Presented to the governor June 27, 2001 
           Signed by the governor June 30, 2001, 8:46 p.m.

700 State Office Building, 100 Rev. Dr. Martin Luther King Jr. Blvd., St. Paul, MN 55155 ♦ Phone: (651) 296-2868 ♦ TTY: 1-800-627-3529 ♦ Fax: (651) 296-0569