Minnesota School Trust Lands and Fund
On May 11, 1858, Minnesota joined the union, and Congress granted two sections per township “for the use of schools.”[1] Schools received 2,969,991 acres and now hold 2.5 million surface acres and 3.5 million mineral acres. These school trust lands are managed by the Department of Natural Resources with the Office of School Trust Lands, established in 2012. The School Trust Lands Director is Aaron VandeLinde, and there is oversight by the twelve member Legislative Permanent School Commission.
Minnesota Annual Gross Revenue
The office is located at 500 Lafayette Road, Saint Paul, Minnesota 55155. The office is responsible for advising the Governor, Executive Council, Legislative Permanent School Fund Commission, and Department of Natural Resources on school trust management activities. They also work with the Permanent School Fund Commission on legislation to secure the maximum long-term revenue from school trust assets and develop long-range strategic plans to ensure professional management of the school lands. They have a fiduciary duty to ensure that both current and future beneficiaries receive maximum economic returns from school trust assets. As trustees, they have legal and ethical responsibilities to act solely in their best interest of the beneficiaries of the trusts created at statehood.
During Fiscal Year 2022, the school trust lands generated $56 million in gross revenue. The largest revenue sources were iron mining and timber harvesting. There have been 193 million tons of iron ore mined in Minnesota on school trust lands. That iron is enough to build 424,000 wind turbines. The timber harvests on school trust lands have produced enough wood for 3 billion notebooks.
The goal of the Office of School Trust Lands is to provide “sustainable asset management strategies that maximize long-term revenue for Minnesota’s public schools.” Their three most significant accomplishments in fiscal year 2022 have been:
Completion of Phase 1 of a consolidated plan for the full scope of their revenue-generating activities. They have provided the foundational information into a single integrated plan to bolster revenue. Phase 2 will focus on the costs and performance of the revenue producing activities.
Drafted a consultation policy to ensure orderly consultation and coordination between the Office of School Trust Lands and the Department of Natural Resources. This is a huge accomplishment since the goals of the two departments are not aligned as one is focused on revenue for schools and the other on state objectives on hunting, wildlife, minerals etc.
Outreach to deliver relevant news and information on school trust lands. They hit the ball out of the park on this one, as Minnesota now has more information on their school trust lands in a very readable format on the web than any other states.
Read their accomplishments on line at this link OSTL Accomplishments Report 2022-23 (mn.gov). It also links to the Strategic long-term plan.
The largest revenue source is from iron mining which is non-renewable. Eighty percent of mineral revenue is invested in the Permanent School Fund. The other 20% goes into the Minerals Management Account to cover mineral management expenses in the Department of Natural Resources’ Division of Lands & Minerals. Any balance over $3 million is also invested in the fund. This effectively puts a $3 million cap on mineral management expenses. Timber revenue, as the second largest revenue source, goes into the Forest Suspense Account, where annual costs are certified, and the net revenue is then deposited in the Permanent School Fund.
The Commissioner of Minnesota Management and Budget has overall management responsibilities for the Permanent School Fund. Investments are made by the State Board of Investments which was established in 1885 and manages well over $100 billion in state assets including the Permanent School Fund. Investment income from the Permanent School Fund is allocated to the Department of Education who then redistributes to school districts.
Minnesota Market Value of Permanent School Fund
Wise and prudent investment along with profitable iron revenue and timber harvesting revenue on the trust lands has led to a 50% growth in the Permanent School Fund since FY2012. The market value of the Permanent School Fund as of June 30, 2022, is $1.74 billion. The five-year time weighted return net of fees is not available for Minnesota, though it is the gold standard of reporting for similarly situated school funds and most of the other states do have that data point. Over the past 20 years the return has been 6.91%.
Every student in Minnesota is a trust fund baby. All 849,443 public school students are the recipients of the distributions from the Permanent School Fund which is now almost $2 billion. MInnesota distributes funding to 329 school districts, 181 academies and charter schools. The annual distribution to schools from the fund has increased 38% over the last decade.
Minnesota Distribution to Schools
Every public school district and charter school in Minnesota annually receives funding from the Permanent School Fund (PSF) based on student enrollment and current size of the fund. This funding is in addition to the general education aid that the state provides to all school districts.
Distributions derived from the Permanent School Fund provide resources for educational supplies, designing and modeling school curricula, teacher salaries, extracurricular activities, establishing and maintaining quality facilities, and everything else that makes Minnesota's schools among the top-performing, most rigorous schools in the country. The revenue generated from school trust lands is used exclusively for the benefit of Minnesota's schoolchildren without question, without exception, and in perpetuity.
[1] Minnesota Enabling Act