SCHOOL TRUST LANDSa sacred irrevocable trust

United States Supreme Court

“All these restrictions in combination indicate Congress’ concern both that the grants provide the most substantial support possible to the beneficiaries and that only those beneficiaries profit from the trust.”

Lassen v. Arizona

State Supreme Courts• The school trusts are “real, enforceable trusts that

impose upon the state the same fiduciary duties applicable to private trusts.” (County of Skamania v. State, Washington Supreme Court)

• The state, as trustee, has an absolute duty to manage the trust estate for the exclusive benefit of the beneficiaries, and return full value from the use and disposition of the trust property. (Oklahoma Education Association v. Nigh, Oklahoma Supreme Court)

• The trustee owes the beneficiaries of the trust its “undivided loyalty and good faith, and its acts must be in the sole interest of such beneficiaries.” (State ex rel. Ebke v. Board of Educational Lands and Funds, Nebraska Supreme Court)

FIDUCIARY DUTY

“A trustee is held to something stricter than the morals of the market place. Not honesty alone, but the punctilio of an honor the most sensitive, is then the standard of behavior… the level of conduct for fiduciaries [has] been kept at a level higher than that trodden by the crowd.”

Meinhard v. Salmon, 164 N.E. 545 (N.Y. 1928)

Fiduciary Duties of the trustee include:

• Undivided loyalty• Accountability• Make trust property productive• NOT comingle accounts• Obtain the best possible price• Inform the beneficiary• Preserve the trust

The State of Minnesota through DNR is the trustee for school trust lands with the

full fiduciary duties of a trustee.

The duty to enforce the

school trust is a responsibility of

the Attorney General

School Lands granted in trust to statesin state enabling acts

• Minnesota’s Enabling Act:

“…granted to said State for the use of schools…”

• Utah’s Enabling Act:

“…granted to said State for the support of common schools…”

Utah Legislature made 3 significant changes to

honor their fiduciary duty:

1-Manage permanent school fund as an endowment

2-Manage school lands to support schools

3-Make a difference in educational opportunities for every child from their trust

Before 1994, school land managed

• within Department of Natural Resources• with divided loyalty• using school lands for DNR’s mission• with low financial returns • with little accountability• with political favors• and no one knew what school lands did for

education—in fact, no one knew there were 3.5 million of acres of school land

Utah trust changes opposed by:

• Ranching and agriculture• Environmental community• Petroleum• Mining• Department of Natural

Resources• Forestry and timber• Association of Counties• Some in education

Prior to 1994, Utah was the poster child for:

• The lowest permanent school fund in the nation.

• The lowest surface lease rates to the federal government.

• The lowest grazing fee in the nation.

• Among the states with the lowest annual revenue.

• No one knew how much revenue came to education or how the revenue benefited their school.

In 1994, Utah Legislature

• could not change the prior century of abuse

• chose at that point to honor their sacred obligations as trustee for future generations of school children and set the school trust up with undivided loyalty

• “the punctilio of an honor the most sensitive” was the standard

• removed the trust from DNR• set trust up to make money• made trust quasi independent

Utah Legislature

• began the steps in 1994 toward managing the school fund professionally;

• created the School and Institutional Trust Lands Administration in 1994, as a quasi independent agency bound by fiduciary duty and based on a corporate model; and

• created School LAND Trust program in 1999 to provide school based councils to expend the funds in each school for academics.

Utah School Fund

$0

$200

$400

$600

$800

$1,000

$1,200

$1,400

Mill

ions

1990 1992 1994 1996 1998 2000 2002 2004 2006 2008 2010

Fiscal Year

Fixed Income Real Estate Equities

Minnesota’s Permanent School Fund

• In 1908, MN Permanent School Fund was $20 million- second largest in the nation.

• In 2010, MN Permanent School Fund was $674 million—in the lowest third in the nation.

Utah trust now supported by:

• Ranching and agriculture

• Environmental community

• Petroleum

• Mining

• Department of Natural Resources

• Forestry and timber

• Counties

• All in Education

• Public generally