OHE outlines state grant shortfall and policy levers as committee reviews governor's higher education bill

The House Higher Education Finance and Policy Committee heard a presentation from the Office of Higher Education (OHE) on House File 42‑52 and the A‑1 amendment, which package multiple higher education policy updates and recommendations from the governor's office. OHE representatives said the hearing was intended to get the proposals on the record; the committee laid the bill over for further consideration.

Dennis Olsen, commissioner of the Minnesota Office of Higher Education, introduced OHE staff. Nicole Whalen, OHE's financial aid research manager, told members the state grant program is the largest need‑based grant program in Minnesota, serving roughly 76,000 students with an annual budget near $247 million and an average award just under $3,000. Whalen said changes to the federal FAFSA and a surge in FAFSA completions increased projected demand and contributed to a structural deficit.

OHE provided two main budgetary levers the governor proposes to reduce spending pressure: setting negative student aid index (SAI) values to $0 when calculating state awards (estimated savings about $37 million) and capping the tuition/fee maximum used in calculations at the average tuition and fees of four‑year public institutions (estimated savings about $40 million). Whalen said those changes would reduce but not eliminate the projected shortfall and that without the agency's prior rationing the program would have faced an approximately $131 million shortfall.

Members pressed OHE on distributional effects and specifics. Representative Eric asked whether the $14,721 tuition cap estimate is comparable to the University of Minnesota's projected tuition; Whalen said the figure is an average of four‑year public institutions and is roughly $4,000 less than the University of Minnesota's projected FY27 tuition. Representative Liebling requested a breakdown showing impacts by income level and combined effects on related programs (North Star Promise); Whalen said she could provide that data to members after the hearing.

OHE staff also summarized multiple statutory and regulatory changes in the A‑1 amendment: consolidating and cleaning reporting requirements, clarifying protections for pregnant and parenting students, updating residency language, adjusting work‑study statutes and procedures, refining licensing and registration language for private and out‑of‑state postsecondary institutions (changes OHE said were prompted by federal court litigation), amending doula training grant eligibility to allow accredited asynchronous programs to qualify, and strengthening fraud and misuse language for state financial aid programs.

On licensing and exemption changes, OHE attorneys told the committee the revisions respond to a federal court decision in an as‑applied First Amendment challenge (Armstrong Equine Massage) that found content‑based distinctions in exemptions vulnerable to strict scrutiny. To reduce litigation risk, OHE proposes removing content‑based exemptions and relying on content‑neutral thresholds (for example, exemptions tied to short programs under a clock‑hour or dollar threshold).

Committee members raised process and transparency concerns, asking for lists of affected institutions, the fiscal note implications, and stakeholder outreach. Several members said they had not had an in‑depth briefing in advance and asked OHE to provide institution‑level impacts, a list of programs potentially affected by licensing changes, and distributional analyses for student outcomes.

The chair laid HF 42‑52 over for further deliberation and asked OHE to supply follow‑up materials; the committee did not vote on the bill at this hearing.

Next steps include OHE providing requested data (tuition cap calculations, distributional impacts by income, list of institutions affected by licensing/exemption changes) and committee consideration of A‑1 amendment language and pending member amendments.