A bill introduced last week in the state Legislature would change how Minnesota handles its reciprocity funds.

Rep. Bud Nornes, R-Fergus Falls, presented a bill that would create a new tuition reciprocity account that the state could use to make and receive payments to other states.

Under the current system, reciprocity funds paid to Minnesota from Wisconsin are added to the state’s general fund while the Office of Higher Education makes payments to North Dakota. The bill would create a central reciprocity account that would have the potential to give money back to students.

In a committee meeting Thursday, Nornes said the OHE currently has to pay the existing debt to North Dakota out of its own budget. With the creation of the new account, the North Dakota debt could be paid with money currently coming from Wisconsin.

The OHE receives an appropriation from the state general fund to cover the cost of paying North Dakota each fiscal year. But the appropriation from the state to the OHE is only an estimated amount and is paid before the OHE pays North Dakota. If the state appropriation is not enough, the OHE must find the money in its own budget to cover the cost.

“They don’t have a lot of loose cash over there,” Nornes said of the OHE.

Recently, the OHE had to transfer funds from the state grant program in order to pay North Dakota.

Nornes said the money could potentially be put back in the state grant program to be used for students.

“It’s very beneficial when we are receiving money from Wisconsin,” said Ginny Dodds, manager of state financial aid programs at OHE.

For the past decade, Wisconsin has paid Minnesota as part of the reciprocity agreement, but estimates from the OHE predict the money will decrease in coming years, and Minnesota will even pay Wisconsin $1 million in 2015.

With the reciprocity agreement, states are required to pay each other for a variety of reasons. Tuition differences, the amount of students and the cost of enrolling students at a university all determine the amount of money one state must pay another.

Minnesota has always paid North Dakota under the reciprocity agreement. Because of Minnesota’s larger population, Dodds said more Minnesota students attend North Dakota schools than North Dakota students attend Minnesota schools.

OHE researchers don’t predict this trend will change.

Minnesota’s population is 5.3 million, while North Dakota’s is 670,000, according to the U.S. Census Bureau. Dodds said there are simply more Minnesotans to go to school in North Dakota. She said North Dakota has also pushed in recent years to recruit more out-of-state students due to their declining high school graduation rate.

In Wisconsin, Dodds said location is the determining factor. Much of Minnesota’s population is concentrated in the Twin Cities area, which is near the Wisconsin border, while Wisconsin’s population is mostly on the eastern half of the state.

Students from Wisconsin attending school in Minnesota used to pay a comparable amount to tuition in a Wisconsin school. But as of 2008, students attending college in either state are required to pay the higher of the two tuitions.

Because Minnesota students paid more to attend school, Wisconsin paid Minnesota a supplemental fund to cover Minnesota’s lost tuition.

But Nornes said the money that comes from Wisconsin should be going to the OHE and Minnesota college students.

Rep. Connie Doepke, R-Orono, was concerned at the meeting that creating the account would leave a hole in the general fund because the money coming from Wisconsin would be redirected to the new reciprocity fund.

In an interview, Nornes said they were working on a measure to replace those funds but said if there was a hole it would be relatively small in comparison to the entire general fund.