The design and initial testing of a five axis magnetic bearing system in an energy storage flywheel is presented. The flywheel is under development at the University of Texas Center for Electro mechanics (UT-CEM) for application in a transit bus. The bearing system for the prototype features homopolar permanent magnet bias magnetic bearings. The system has been successfully tested to the maximum design speed of 42,000 rpm. A gain-scheduled, MIMO control algorithm was required to control the system modes affected by rotor gyroscopics. The implementation and basis for this control scheme is discussed. The cross-axis forces produced by this approach are described in terms of circumferential cross coupled stiffness and damping to explain the effect on system stability. Dynamic test results are discussed relative to the rotordynamic and control system design.