School Trust Lands: Getting More Bang for the Buck

On Monday morning, the Permanent School Trust Funds Commission met to go over what has been done over the last few years.

Refocusing the Permanent School Trust Fund is probably the most important work the legislature has done in the last five years that you’ve never heard of.

Some background: As each state entered the union, they were granted a funding mechanism for their public schools, which was to set aside a certain portion of their lands and any proceeds from the sale or management. The idea was that the money generated would become principal, but the income generated would fund schools in perpetuity. Minnesota entered the Union in 1858 and like other states had this land set aside.

Minnesota has nearly 2.5 million acres of School Trust Land. While most of the School Trust Land is located in the northern Minnesota counties of Aitkin, Beltrami, Cass, Cook, Hubbard, Koochiching, Itasca, Lake, Roseau, and St. Louis, however nearly all Minnesota counties have some School Trust Land. There is a complicated story as to how most of the land ended up north, but the short version is that over time the legislature allowed swaps and purchases to occur that changed the designations of some land.
The state also has an additional 1 million acres of school trust mineral rights, where they may not own the land itself, but they own the mineral rights underneath. Revenue derived from these lands and minerals is deposited into the state's Permanent School Fund.

Every public-school district in Minnesota - all 340 of them - receives funding from the Permanent School Fund based on student enrollment and the current size of the fund. Obviously, with school funding now in the billions, this is now merely a supplement to state taxpayer money and property tax money.

The DNR is responsible for the management of these lands. They are charged with balancing maximizing long-term economic return for School Trust Land with various uses like granting timber and mining leases as well as providing recreational opportunities, wildlife habitat and adhering to conservation principles
60% of permanent School Trust Land is classified as commercial forest currently available for timber harvest, with timber sales added to the Permanent School Fund.

The Department of Natural Resources, which does an excellent job of managing many aspects of our great outdoors, is the trustee for School Trust Lands. But it treats those lands differently than normal DNR lands.

The priority for School Trust Lands is to maximize their long-term economic return for the benefit of Minnesota's schools. As part of major reform in how the Trust Lands are managed, in 2012, the Minnesota State Legislature passed a law mandating that if there is ever a conflict in these goals, long-term economic gain on School Trust Lands will take precedence.

Until the 2012 reform, School Trust Land had been allowed to be kept as conservation land mostly, with no concentrated efforts to actively manage the land as a Trust. In other words, the fiduciary responsibility to get an investment return was seriously lacking. It was one issue that Iron Range DFLers (who wanted the jobs from mining and timber) and Republicans could agree on. Metro Environmentalists Democrats, on the other hand, looked at the lands as green space that should simply be preserved and held by the state without any mining or logging activity if possible. Some of the school trust lands had been made part of the Boundary Waters Area, a Federal Park designation, which put it off limits to mining or logging, with many other use restrictions.

Scroll forward about five years, and now we have this hearing. The state has a new director of the permanent school trust lands, the DNR is more focused on getting money from the trust lands, and they are working with the counties, with mining companies and conservation groups to get the most bang for the buck for the schools. That includes getting the Federal Government to cough up money to help pay for the loss of the value of the BWCA lands, which is usually something that states are compensated for, and Minnesota was not.

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