A quiet battle is brewing in the Legislature between the University and the Minnesota Department of Natural Resources.

University officials are working to stop a proposed change in how the DNR receives compensation for managing state lands. The change would affect the Iron Range Scholarship Program.

If the proposal is passed, University officials estimate, it would take away more than $62,000 in scholarships in 2006; and in 2007, almost $140,000 would be lost.

University officials said approximately 20 percent of incoming first-year students at all four University campuses receive Iron Range Scholarships, which are worth anywhere from $1,000 to $3,000 for two to four years.

In addition to reducing direct scholarship funds, the proposal would reduce the fund’s ability to generate additional money for scholarships in the future, officials said.

The Permanent University Fund supports the Iron Range Scholarship. The fund receives money from state lands and mineral rights set aside in the 1850s.

Under the current rules, the DNR is paid to manage Permanent University Fund lands with money from the state’s general fund.

The DNR’s proposal is part of Gov. Tim Pawlenty’s state budget plan and would use revenue generated by the Permanent University Fund’s land to pay for the department’s expenses.

Kathy Lewis, an attorney with the DNR’s Division of Lands and Minerals, said money from the state’s general fund has traditionally paid for the department’s management costs.

“This proposal says that the trust funds that have been receiving the revenue should have a share in the cost,” she said.

The DNR would use almost a quarter of the Permanent University Fund’s 2006 revenues to pay for the land and minerals management expenses related to the Permanent University Fund lands, according to official estimates.

The scholarship reductions are relatively small compared with the University’s overall budget, but officials have showed they are reluctant to lose financial aid opportunities in difficult budget times.

Donna Peterson, the University’s lobbyist at the Capitol, has testified against the proposal at the Legislature.

“It’s taking money away from our Permanent University Funds, which takes away from scholarships and minerals research,” she said.

The Legislature will not act on the proposal until the DNR’s budget is finalized, Peterson said.

University General Counsel Mark Rotenberg said the Permanent University Fund is a very long-standing, federally authorized program.

“We’re not eager to see this historic support structure erode in any way,” he said. “We are reviewing the proposal very carefully.”

Peter Zetterberg, director of the Office of Institutional Research and Reporting, said that if the funding change allowed the DNR to manage the Permanent University Fund lands more aggressively, it could make more money, which would benefit the scholarship endowment in the long run.