Senator Putnam proposes tax on endowment growth to fund Minnesota state grants

Senator Mark Putnam introduced Senate File 3194, proposing a new excise tax on the increase in higher‑education institutions' assets above set thresholds to create a dedicated revenue stream for Minnesota's state grant program.

The legislation would create a special revenue fund and impose a tax on asset growth at institutions whose endowments exceed $100 million, with graduated rates tied to endowment-per-student. "The state grant needs its own source of dedicated and stable funding," Putnam told the committee.

Supporters framed the bill as a response to a reported $211 million shortfall in the state grant this past year and to long‑term declines in higher education funding as a share of the state budget. Putnam said the tax would apply to the change in value — investment income not spent to fulfill institutional purposes — and would encourage institutions to spend on financial aid and tuition relief to reduce taxable growth.

Greg Goldman, executive vice president for finance and operations and chief financial officer for the University of Minnesota, told the committee the university supports the goal of stabilizing the state grant program and commends the narrowed scope in the adopted amendment. But Goldman said the bill remains "challenging to interpret and apply," pointing to definitional questions about what counts as an asset and how donor and statutory restrictions (for example, permanent university funds) should be treated. He cautioned that the university's finances include funds that are legally restricted or managed for the state and that treatment of those funds in the tax could have significant consequences.

Committee members asked about constitutionality and donor incentives. Goldman said he could not opine on constitutionality without legal review. Several senators raised the potential for the tax to disincentivize donations; Putnam responded that he hoped donors would focus on mission and students rather than reaction to taxation. Putnam also compared the concept to a 2017 federal provision taxing endowment income and noted ongoing federal proposals that revisit endowment taxes.

Committee action: the A4 amendment to SF 3194 was offered by Senator Putnam and adopted by voice vote; the bill as amended was laid over for further consideration. The committee record includes a letter of opposition from the Minnesota Private College Council (referred to in committee materials) and a revenue estimate showing projected receipts in fiscal years 2027–29.

What remains unresolved are precise statutory definitions (what is an "asset," how to treat bond proceeds, working capital, donor restrictions and permanent funds), the potential constitutional questions for the University of Minnesota as a public institution, and the bill's final revenue treatment and rate schedule. Putnam and university staff said they will continue to work on language and technical fixes.

Looking ahead, the committee will retain the bill for further drafting and legal review before any final vote.