Colorado School Trust Lands and Fund
On August 1, 1876, Colorado became a state, and received section 16 and 36 in each township of six square miles. Congress granted the school and institutional lands in exchange for Colorado agreeing to never tax the federal lands within its borders. Schools received 3.7 million acres and now hold 2.8 million surface acres and almost 4 million mineral acres[1]. These school trust lands are managed by Director Bill Ryan, under the direction of the 5-member Colorado State Land Board. The Colorado Land Board pledges their fiduciary duty on the website stating, “The State Land Board, as the trustee, has a legal and ethical obligation to act solely in the best interest of our beneficiaries.“ The main office is located at 1127 Sherman Street, Suite 300, Denver 80203 (website: slb.colorado.gov). There are 6 additional area offices. In FY2022, the management costs associated with running the Land Board were approximately 3.5% of revenues earned, among the lowest of all the school trust land states.
“Grazing leases are a huge part of land stewardship for us. Grazing improves the land over time if you do it right. We expect lessees to maintain the long-term quality of trust lands because our agency needs to earn money not only for today’s students, but also for future generations of children.”
Colorado Gross Revenue from School Trust lands
The largest revenue sources are oil, gas, and minerals, grazing and agriculture, and commercial leases. Grazing and agriculture leases covered 96% of the land. The Land Board has worked diligently to generate revenue from renewable energy sources. Colorado’s first wind turbine was on trust land. Renewable energy on trust lands generated 225 megawatts of power.
Colorado’s Constitution created the Stewardship Trust, a special management designation for approximately 10% of school trust lands. The Stewardship Trust currently contains 109 properties totaling 296,617 acres. Even with this designation, Trust land is working land. The stewardship tools enable the land office to protect resources for the long-term benefit of beneficiaries while continuing to generate revenue in the short-term.
Current FY2023 revenues for the State Land Board are slated to break the record set in FY2022 when the 147-year-old agency hit a record high operating revenue of $206 million. Of that amount, slightly more than $114 million was distributed to the Department of Education’s Building Excellent Schools Today (BEST) program. The State Land Board has been the largest funding source for the BEST program since it was created in 2008. By Q4 of FY2023, the agency will have distributed more than $1 billion to BEST which awards competitive capital construction grants to school districts to build new school buildings or enhance existing ones. To date, more than 525 schools have received a BEST grant.
The FY2022 higher-than-anticipated revenue is largely a result of oil and gas commodity prices reaching international highs. Nonetheless, the Land Board believes that the continuing transition to a lower-carbon economy will lead to a decline in revenues in the long-term. The agency is making a strategic effort to diversify revenue opportunities with renewable leasing sources and expanding earnings from the Permanent Fund. Recent operational highlights include:
Through land sales or ground leases, trust land has made possible several new affordable housing projects, including the 106-unit building at 13th and Sherman in downtown Denver.
Executed first-ever geologic carbon sequestration exploration lease to evaluate feasibility of a project in Washington County.
The first-ever commercial conservation bank in Colorado is located on trust land. The Table Top Conservation Bank, which conserves and enhances more than two hundred acres of habitat on trust land for the federally threatened Preble’s Meadow Jumping Mouse, was approved in late 2021 and closed on the sale of its first credits shortly thereafter. Royalties to the Land Board exceeded $500,000.
In summer 2023 the Nextera will bring online its 240 megawatts solar renewable energy project built entirely on School Trust land. This will bring the total amount of renewable energy generated on trust land to 500 megawatts. The project also includes 100 megawatts of battery storage.
In FY2023, the Land Board and the federal Bureau of Land Management completed the transfer of 15,000 acres in satisfaction of the “in lieu” debt—land owed to the state of Colorado since statehood. One final transaction of 1,900 acres is expected to close in October 2023, which will fully satisfy the "in lieu” debt to Colorado.
At statehood, Colorado was required to establish the Public School Permanent Fund.
“That the two sections of land in each township herein granted for the support of common schools shall be disposed of only at public sale and at a price not less than two dollars and fifty cents per acre, the proceeds to constitute a permanent school fund, the interest of which to be expended in the support of common schools.”
The Public School Trust Fund is managed by the elected State Treasurer and the Permanent Fund Investment Board (PFIB) which was created in 2016 “to ensure reasonable growth of the endowment.” Intergenerational trusts, like the Colorado School Trust, are to balance the benefits between the current generation and future generations. However, Colorado’s current statutory distribution policies set by the legislature advantage current beneficiaries at the expense of future generations. Colorado statute presently directs 50% of all revenues, plus 100% of Permanent Fund income, be distributed each year. This limits the amount of reinvestment into the corpus to less than 40% of total income each year. The assertion is made on the PBIF website that they are committed to the long-term productivity and sound stewardship of the fund, but the legislature has enacted statutes that have directed most of the money to current students with little revenue invested in the fund to provide for future school children. Non-renewable resources can only be produced once, leaving none of their value for future generations of school children. Education groups need to lobby a change. Unlike most other western states, Colorado has deposited no revenue from the lands in the fund. Current schools are robbing the future for future schools.
This year, $96 million was reinvested into the Permanent Fund. However, last fiscal year nothing was deposited. As of March 31, 2023, the Permanent Fund value is $1.33 billion. Interest earnings in FY2022 were a record high of more than $33 million, peanuts compared to what it would have been had all proceeds been invested in the Public School Permanent Fund.
Market Value Colorado Public School Permanent Fund
The Public School Permanent Fund is invested along with the other institutional trusts created at statehood for the University of Colorado, Colorado State University, Fort Lewis College, parks, corrections, and public buildings. The school fund constitutes 99% of the combined fund. Again, no land revenue went into the Public School Permanent Fund. Because of the asset allocation of the fund, there were significant losses in FY 2022, over $100 million. The FY2022 return was -11.64%. They do not calculate the 5-year time weighted return less fees like other endowments. The 5-year rate of return was only 1.84%.
Distribution to Colorado BEST Program & Department of Education
The first $21 million of interest income earned each year goes to the Colorado Department of Education that is not the beneficiary of the school trust. There is no guarantee that all of the school trust money is distributed to schools, the actual beneficiary. Much of the money given to the BEST program is derived from non-renewable resources which under trust law should belong equally to current and future schools. Other states with similar enabling act language invest all the annual net revenue from school lands and generally experience ever-rising revenue for their schools while balancing the inter-generational aspects of their trust. Colorado is eating its seed corn as to the school lands.
[1] 4,007,726 mineral acres all trusts per FY2022 Annual Report available at slb.colorado.gov under About Us, then under Reports.