Governance
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MN Constitution
The Minnesota Constitution establishes the foundational purpose and obligations governing school trust lands and the Permanent School Fund. Its provisions address the origin and use of school trust assets, preservation of the fund’s principal, and distribution of earnings for the support of Minnesota’s public schools.
The permanent school fund of the state consists of (a) the proceeds of lands granted by the United States for the use of schools within each township, (b) the proceeds derived from swamp lands granted to the state, (c) all cash and investments credited to the permanent school fund and to the swamp land fund, and (d) all cash and investments credited to the internal improvement land fund and the lands therein. No portion of these lands shall be sold otherwise than at public sale, and in the manner provided by law. All funds arising from the sale or other disposition of the lands, or income accruing in any way before the sale or disposition thereof, shall be credited to the permanent school fund. Within limitations prescribed by law, the fund shall be invested to secure the maximum return consistent with the maintenance of the perpetuity of the fund. The principal of the permanent school fund shall be perpetual and inviolate forever. This does not prevent the sale of investments at less than the cost to the fund; however, all losses not offset by gains shall be repaid to the fund from the interest and dividends earned thereafter. The net interest and dividends arising from the fund shall be distributed to the different school districts of the state in a manner prescribed by law.
A board of investment consisting of the governor, the state auditor, the secretary of state, and the attorney general is constituted for the purpose of administering and directing the investment of all state funds. The board shall not permit state funds to be used for the underwriting or direct purchase of municipal securities from the issuer or the issuer's agent.
As the legislature may provide, any of the public lands of the state, including lands held in trust for any purpose, may be exchanged for any publicly or privately held lands with the unanimous approval of the governor, the attorney general and the state auditor. Lands so acquired shall be subject to the trust, if any, to which the lands exchanged therefor were subject. The state shall reserve all mineral and water power rights in lands transferred by the state.
School and other public lands of the state better adapted for the production of timber than for agriculture may be set apart as state school forests, or other state forests as the legislature may provide. The legislature may also provide for their management on forestry principles. The net revenue therefrom shall be used for the purposes for which the lands were granted to the state.
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MN Statutes
Minnesota law establishes the fiduciary responsibilities, management authorities, financial requirements, and institutional roles that govern school trust lands and the Permanent School Fund. The following statutes are among the principal provisions governing that system.
§ 11A.16 – Permanent School Fund
Establishes the Permanent School Fund and identifies its assets. The fund is managed by the commissioner of Minnesota Management and Budget and invested by the State Board of Investment. Investment income is calculated and transferred to the School Endowment Fund for distribution to public schools as provided by law.
§ 16A.06, subd. 11 – Permanent School Fund reporting
Requires the commissioner of Minnesota Management and Budget to report annually to the Legislative Permanent School Fund Commission and the Legislature on Permanent School Fund transfers and investments. The State Board of Investment must provide information about how it maximized the fund’s long-term economic return.
§ 16A.125 – Forest trust land revenues and costs
Establishes the financial process for revenues and costs associated with state forest trust fund lands. Forestry revenues are credited to the forest suspense account, and management, improvement, and forest-road costs are certified annually. The cost certification must include a comparison with costs incurred on other public and private lands with similar assets. After certified costs and other authorized expenses are distributed, the remaining receipts are returned to the appropriate trust funds.
§ 84.027, subd. 18 – DNR school trust land authority and management goals
Gives the commissioner of natural resources authority and responsibility to administer school trust lands and establishes goals for their management. These include efficient management with undivided loyalty to the beneficiaries; reducing management expenditures and maximizing revenues deposited into the Permanent School Fund; receiving not less than fair-market value from sales, exchanges, and commercial leases; maximizing long-term economic return while maintaining sound natural resource conservation and management principles; balancing short- and long-term interests; and maintaining the integrity of the trust.
When the commissioner determines that an irresolvable conflict exists between maximizing long-term economic return and protecting natural-resource or recreational values on school trust lands, the statute directs the commissioner to give precedence to long-term economic return.
§ 84.085 – Donations of school trust land
Authorizes the commissioner of natural resources to accept on behalf of the Permanent School Fund, donations of land, interests in land, or improvements on land. Property accepted for this purpose becomes school trust land and must be managed consistently with the statutory goal of the Permanent School Fund.
§ 84.415 – Utility licenses and permits
Authorizes DNR to issue licenses for utility crossings over, under, or across state lands, including school trust lands. Utility-crossing fees are generally credited to the fund that would receive other income or proceeds from the land. Money received for licenses or permits involving the beds of navigable waters is credited to the Permanent School Fund.
§ 89.17 – Leases and permits on forest lands
Authorizes DNR to issue leases and permits for uses of forest lands when consistent with their management. After reasonable costs of preparing and issuing a lease are deducted, proceeds from leasing school trust lands for roads on forest lands are deposited into the Permanent School Fund.
Establishes requirements for the sale of timber from state lands. Timber generally must be sold to the highest responsible bidder at public auction, with limited authority for private sale of timber that remains unsold after auction. The minimum sale price is based on appraised value.
§ 92.025 – School trust land definition
Defines “school trust land” for purposes of chapters 92 and 94. The definition includes lands granted by the United States for schools, swamplands, internal improvement lands reserved for Permanent School Fund purposes, and lands exchanged, purchased, or granted to the Permanent School Fund.
§ 92.03 – Minimum price and annual limit for school land sales
Establishes a statutory minimum sale price of $5 per acre for school lands, including the value of timber reproduction, and limits sales of school lands to no more than 100,000 acres in a year.
§ 92.12 – Appraisal and sale of school trust lands
Establishes appraisal requirements for school trust and other state lands. Land, merchantable timber, and improvements must be valued, and the appraised value establishes the minimum sale price until a subsequent appraisal changes it. The statute also directs the commissioner to hold sales of school trust and other state lands.
§ 92.122 – Compensation to the Permanent School Fund
Requires DNR to compensate the Permanent School Fund when revenue generated from school trust lands and associated resources is diminished by management practices, as determined by the commissioner. Compensation is also required before applying a policy or designation that prohibits revenue generation from school trust lands.
The statute authorizes compensation through land exchanges, leases with rental payments to the Permanent School Fund, or condemnation of the affected school trust land.
§ 92.145 – Unsold school trust lands
Excludes school trust lands from the general authority to sell state parcels over the counter after they remain unsold at public sale.
Authorizes DNR to lease lands under its jurisdiction for removal of sand, gravel, clay, rock, marl, peat, and black dirt; storage of mining materials; roads and railroads; compensation of the Permanent School Fund; and other authorized uses. Money received from leases is credited to the fund to which the land belongs. Certain longer-term commercial and peat leases require Executive Council approval.
§ 92.83 – Condemnation of school trust land
Provides a mechanism for extinguishing the school trust interest in lands where long-term economic return is prohibited by designation or policy. The commissioner may acquire the school trust interest through condemnation when funding is available, with the portion of the award representing land value deposited into the Permanent School Fund.
§ 93.14 – Mineral leasing authority
Authorizes the commissioner of natural resources to lease state-owned lands and mineral interests for prospecting and mining of iron ore and other ores, subject to applicable statutory requirements.
§ 93.22 – Distribution of mineral payments
Establishes how payments from state mineral leases are distributed. Twenty percent of payments made under the applicable mineral-leasing statutes is credited to the Minerals Management Account for administration and management of state mineral resources. Remaining payments are distributed according to the ownership classification of the land or mineral interests, including deposits to the Permanent School Fund for school trust mineral interests.
§ 93.2236 – Minerals Management Account
Establishes the Minerals Management Account. When the account balance exceeds $3 million on specified quarterly dates, the excess is distributed among the Permanent School Fund, Permanent University Fund, and taxing districts in proportion to mineral-lease revenues received from those land classifications during the previous biennium. Subject to legislative appropriation, account funds may also be used for mineral-resource management and projects intended to enhance future mineral income and promote new mineral opportunities.
§ 94.342 – School trust land exchange requirements
Establishes classifications and restrictions governing state land exchanges. School trust land may be exchanged for other Class A state land only when the school trust lands director is appointed temporary trustee for purposes of the exchange. The Legislative Permanent School Fund Commission must provide independent legal counsel to review such exchanges.
§ 94.343 – Class A land exchanges
Establishes procedures and conditions for exchanges involving Class A state lands, including valuation, Land Exchange Board approval, mineral reservations, title requirements, and conveyance. Unlike other Class A lands, school trust land may not be exchanged for land of lesser value with a cash payment used to make up the difference.
§ 94.3495 – Expedited land exchanges
Provides an expedited process for certain exchanges of public lands. School trust lands exchanged under this process must be exchanged only for lands of equal or greater value. All expedited exchanges require unanimous approval of the Land Exchange Board.
§ 127A.30 – Legislative Permanent School Fund Commission
Establishes the Legislative Permanent School Fund Commission and its responsibilities. The commission advises DNR and the school trust lands director, reviews statutes governing school trust lands, and recommends changes in law, policy, and implementation. The commission reports annually to the Legislature with recommendations for securing long-term economic return for the Permanent School Fund.
§ 127A.31 – Goal of the Permanent School Fund
Establishes the goal of securing the maximum long-term economic return from school trust lands consistent with the fiduciary responsibilities imposed by the trust relationship, sound natural resource conservation and management principles, and other applicable state law.
§ 127A.32 – School Endowment Fund
Establishes the School Endowment Fund for the purpose of providing aid to public schools. The fund consists of income from the Permanent School Fund. The statute also authorizes acceptance of certain donations to the Permanent School Fund.
§ 127A.33 – Distribution of School Endowment Fund earnings
Requires the commissioner of education to distribute School Endowment Fund earnings semiannually. Distributions are based on each eligible school district’s adjusted average daily membership during the preceding year.
§ 127A.351 – Fiduciary policy and purpose
Establishes the policy underlying the school trust lands director position. The state, as trustee, must manage school trust lands and their revenues consistent with the best interests of the beneficiaries. Ecological benefits are considered when doing so is in the best interests of the school trust lands.
The statute also requires consideration of both income for current beneficiaries and preservation of trust assets for future beneficiaries, balancing short- and long-term interests so that long-term benefits are not lost in an effort to maximize short-term gains.
§ 127A.352 – School trust land policy recommendations and fiduciary disagreements
Requires the Legislative Permanent School Fund Commission to recommend policies consistent with the Minnesota Constitution and state law. The commissioner of natural resources and the school trust lands director are also responsible for recommending necessary or desirable statutory changes relating to school trust lands and their responsibilities.
If the school trust lands director has an irreconcilable disagreement with the commissioner of natural resources regarding fiduciary responsibilities for school trust lands, the director must report the disagreement to the Legislative Permanent School Fund Commission and the governor.
§ 127A.353 – School trust lands director
Establishes the school trust lands director position and its duties and powers. The director is appointed by the governor and is required to act in a fiduciary capacity for the beneficiaries.
Among other responsibilities, the director evaluates the financial position and current and potential market value of school trust land assets; provides advice and recommendations to the governor, Executive Council, Land Exchange Board, and DNR; advises DNR on management plans, leases, royalty agreements, land sales and exchanges, cost certification, and revenue-generating opportunities; and keeps beneficiaries, policymakers, and the public informed.
The statute also requires the director, in conjunction with DNR, to develop and implement a ten-year strategic plan and a 25-year management framework addressing asset value, cash flow, portfolio performance, management priorities, resource stewardship, and ecosystem-services markets. It authorizes the director to evaluate and initiate real estate development projects with DNR and to recommend strategies for school trust land leases, sales, and exchanges.