ST. PAUL -- Four years after it was created by the Legislature and days after becoming the subject of Gov. Jesse Ventura's first veto of the year, a state college savings program may be ready to go.
Similar state-run college investment plans are springing up around the country as college costs rise.
The plans allow parents and grandparents to invest in mutual funds that grow tax-free until the money is withdrawn, when it is taxed at the student's rate.
While some states let investors deduct all or part of the contributions from state taxes, Minnesota is taking a different route.
"The unique feature of the Minnesota plan is that our program has a matching grant," said Phil Lewenstein, director of communications, legislation and outreach services for the state Higher Education Services Office.
Up to $100,000 total can be contributed per child. For families that earn $50,000 or less per year, the state will contribute a 15 percent match per year, up to $300. For families that earn between $50,000 and $80,000, the state will contribute a 5 percent match per year, up to $300.
"We think it will be an attractive program if we can get it up and going," Lewenstein said. "We haven't even marketed it yet, but we have had 3,000 inquiries in our database."
Although families throughout the country will be able to invest in the Minnesota program, only Minnesota families will get the state match.
Lewenstein said the decline in the stock market apparently hasn't curbed interest because the rate of inquires has grown over the past year. If stocks were the only option, the downturn may have had more of an effect, he said.
But like most states, Minnesota also will offer an age-related option that moves the money from riskier stocks into more conservative investments as the child grows older, as well as fixed-rate investments.
"I think it's significant that we have these different options," he said.
During the first year of the program, the state would match up to $1.52 million. Lawmakers then would reevaluate the funding to see if it's enough or too much.
House Higher Education Finance Committee Chairwoman Peggy Leppik said it was a good use of state money.
"It's one way of encouraging families to save for their children's higher education," said Leppik, R-Golden Valley. "We want people to take responsibility for that."
Ventura last week vetoed a measure laying out a process for setting up the tax-deferred savings accounts.
While the governor stressed his support for the EdVest program, he objected to the process lawmakers had approved for getting it up and running. The bill would have sent it through a rulemaking process, which could take up to nine months.
"I believe the program should begin as soon as possible," Ventura wrote in a letter accompanying the veto.
He asked lawmakers to put the guidelines into law this year, which would make rulemaking unnecessary. The House has included such a provision in a higher education bill that will be considered in a joint House-Senate conference committee.
The program, pushed by former Gov. Arne Carlson, was signed into law in 1997. Ventura said the four-year delay has prevented families from accessing about $6 million of dollars in state matching funds. The money has gone back into the general treasury.
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