SCHOOL TRUST LANDS
a 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:
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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 states
in 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
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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:
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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
$1,400
$1,200
Millions
$1,000
$800
$600
$400
$200
$0
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:
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Ranching and agriculture
Environmental community
Petroleum
Mining
Department of Natural
Resources
Forestry and timber
Counties
All in Education
Public generally