In the Spotlight

News & Features
Managing Our School-Trust Lands
By Leif and Robin Enger
February 25, 1998

Click for audio RealAudio 2.0 14.4

Most Minnesotans are probably unaware of the state's school-trust lands. There are 2 1/2 million acres in the trust, mostly in northern Minnesota. It's the DNR's job to make money off those acres, through timber sales, mineral rights, and the like. That money helps pay for public education. But a forthcoming report from the legislative auditor is likely to question the DNR's management of school lands.

IF YOU'RE A LITTLE FOGGY on your school-trust-lands history, here's a brush-up. It's 1858. The federal government has just given 8 million acres to the brand new state of Minnesota, specifically to help pay for public education. The ink's still damp on the state constitution which declares:

... and the income from the lease or sale of said school lands shall be distributed to the different townships throughout the State, in proportion to the number of scholars in each township, between the ages of five and twenty-one years.

In the early days of statehood, the quickest, easiest income from school trust lands was gained by selling them. And that's just what the state did, by the millions of acres. The money went into what's called the Permanent School Fund, interest from which is now divvied up to school districts. When the Department of Conservation, later renamed the DNR, was created in 1931, the agency was charged with overseeing remaining trust lands to profit the fund. It probably seemed like a good idea at the time but it created an internal discord that still flares.

Jim Lawler: We do on occasion have conflicting missions, between collecting revenue, and being a steward. It happens all the time.

Jim Lawler is the DNR's real estate administrator. For many of us the DNR is personified by a forest ranger or fish biologist, but Lawler represents the agency's other self: the for-profit landlord.

Lawler: We buy land, we sell land, we exchange land, we lease land.

Lawler says the DNR keeps a careful eye on the school trust; after all, it's about half the land under the agency's care. Over the years timber sales, mineral rights, and lakeshore leases have boosted the Permanent School Fund to more than $400 million. But the agency is bracing for a critical report from the Legislative Auditor's office, a report likely to say the DNR isn't doing nearly what the law mandates.

Legislative Auditor Jim Nobles: It really is a contract with the children of this state; that we use this land that was given to us for the purpose of public education.

Nobles isn't the first to investigate the DNR's management of the trust. In the late 1970s, holders of prime lakeshore leases - on trust land - were paying a fraction of market value; a resulting audit report criticized the agency for not maximizing profits on school lands.

Nobles: That report showed some hostility between the DNR and this office. I hope that's cooled a bit and that we're respectful in our differences. But I think the general theme is the same, and that's to remind the DNR that it is a trustee of land that needs to be managed for income generation.

As for the Permanent School Fund, Nobles says it isn't the big deal you might think. In recent years, the interest from the fund has been around $30 million annually, enough to buy every student a couple of textbooks and no more.

Not all states handle school lands this way. Some sold out their entire trusts immediately and invested the money. Others employ an agency separate from conservation interests to manage the land.

But the DNR says it's rarely as simple as just selling more timber or keeping lease rates up to date. Take this plot of trust land: eighty acres of hardwood and shoreline on Third Gilbert Lake, near Brainerd.

Greg Kvalle: ...nicely wooded as you can see... um, shoreline doesn't lend itself real well to development, more of a habitat area back here...

The DNR's Greg Kvalle says except for a little logging twenty-five years ago, the School Fund hasn't seen a dime from this parcel. But with Crow Wing County growing fast, a housing developer wants it. He's offered the DNR a trade. They get 200 acres of mature timberland for the trust. He gets about 20 acres on Gilbert Lake, and builds a new suburb. Financially it's a slamdunk for the School Fund. But Don Nyberg, whose backyard adjoins the property, says it won't be popular.

Nyberg: Right now there are very few areas close to Brainerd that are wilderness. We've had bears back here in the spring, raising their cubs. Deer use this little forest for shelter in the winter. We'll lose a lot, for the trade.

Jim Lawler, the DNR's real estate administrator, says decisions like this can't be made on a checkbook basis alone.

Lawler: You also have to live in the neighborhood. We try to do our best. We try to figure out a balance whenever we can. Sometimes we say no to income generation, sometimes we say yes. Sometimes we say, come back in five or ten years.

Some in the DNR say privately it's true the agency hasn't emphasized making money on trust land. Aside from the auditor's office, there's been little pressure to do so. But in anticipation of the report, DNR head Rod Sando recently fired off a letter to Jim Nobles. The letter blames state lawmakers for tying the agency's hands regarding trust lands; and says without a thorough look at legislative directives, no audit of the Department can be complete.