Land swap could put school funds in jeopardy
REGIONAL – Supporters of a proposal to swap school state trust lands inside the Boundary Waters Canoe Area Wilderness (BWCAW) for other property in the Superior National Forest claim it would provide a windfall for area schools.
But the impact would be blunted because revenues generated by school trust lands are shared across the state. Meanwhile, other federal dollars distributed to schools and counties could be at risk in the exchange.
The idea of a land exchange or purchase of land locked inside the BWCAW has been percolating for years, but has gained more traction recently as the Minnesota Legislature has sought ways to increase the revenue generated on state school trust lands.
The Permanent School Fund Advisory Committee’s membership was altered this year, creating slots for legislators from both the majority and minority parties. In addition, legislation to hire a school trust lands director, whose main task is to maximize revenues generated by school trust lands, will take effect on July 1.
As part of that effort, the Minnesota Legislature passed a statute seeking to expedite the exchange of land within the BWCAW for federally-owned lands. The Legislature also approved a statute that “encouraged” the sale or exchange of other state-owned lands in the BWCAW not considered school trust lands.
Former U.S. Rep. Chip Cravaack weighed in on the issue, introducing a bill to “fast track” the exchange process to direct the U.S. Department of Agriculture to complete the exchange within one year. Although the bill passed the U.S. House, it never advanced in the Senate and died when Congress adjourned in 2012.
School trust lands
Moving approximately 93,000 acres of school trust lands out of the BWCAW, where they are subject to the guidelines and restrictions created by the BWCAW Act, could produce more revenue by opening new lands to mining operations and timber sales. Some estimates have pegged the potential revenue at as much as $1 million to $1.4 million annually.
But Cathy Erickson, a finance specialist for the Arrowhead Regional Computing Consortium, said all that additional money would not flow to area school districts.
“Even though the majority of the lands are in northeastern Minnesota, all school districts in the state receive the same allocation per pupil unit each year,” Erickson told St. Louis County School Board members at a study session last week. “This is also a trust, so revenue distributed to the schools is only the interest of the trust on the yearly revenue it generates.”
At present, districts receive about $28 per pupil unit from the interest generated by roughly $900 million in school trust fund revenue. The land exchange might gain a few additional dollars per pupil unit, but wouldn’t provide a huge windfall for districts, Erickson said.
Effect on other dollars
Meanwhile, depending on which lands are included in the exchange, other federal dollars, some of which go to school districts, could be affected.
Even if the exchange of lands is equal by acre, there is a possibility that acres could change within counties that hold school trust lands in the BWCAW. That, in turn, could affect the Secure Rural School funds that school districts receive from the federal government.
The amount varies by district. But for St. Louis County School District, which now receives more than $200,000 in Secure Rural School funding, the risk could be substantial.
That funding is already imperiled because it was only renewed for a single year. Erickson said ARCC is encouraging school districts to contact their representatives in Congress to get the Secure Rural Schools Act reauthorized for at least another decade.
There are other federal dollars that could be affected by the land exchange.
Under longstanding federal statutes, federal land managers, such as the U.S. Forest Service, are required to pay 25 percent of their receipts from the sale of timber or other resources to schools and counties in which those federal lands exist.
Those sales have provided more than $100,000 annually to the St. Louis County School District while the Lake Superior School District, based in Two Harbors, received $163,000 last year.
The Cook County School Board, concerned about the financial impact of the exchange, approved a letter of support for a proposal that would have required the Department of Natural Resources to conduct a cost-benefit analysis of the land exchange proposal.
The letter also called on the DNR to analyze two alternative proposals — one to sell the acres to the federal government and the other to establish a recreational fee for use of state lands in the BWCAW.
Erickson said another option being considered is crafting legislation that would grandfather in existing federal payments to schools at their current levels regardless of where the land is exchanged.
Meanwhile, federal payments to counties authorized by the Thye-Blatnik Act of 1948 could also be threatened.
The legislation provides in-lieu-of-tax payments to St. Louis, Cook and Lake counties for federal wilderness land. Payment is calculated based on three-quarters of one percent of the appraised value of the land. In 2012, the three counties received $6 million from the U.S. Forest Service.
Under the proposed land exchange, the Congressional Budget Office estimated that Lake, Cook and St. Louis counties would be eligible for an additional $6 million in payments between 2014-2022.
But there would have been no net gain for counties after the House attached an amendment to Cravaack’s bill that ensured that the state school trust lands located within the BWCAW traded for equal-value federal lands within the Superior National Forest would not be used to calculate payments to the counties under the Thye-Blatnik Act.
Those concerns have not prevented backers of the land exchange to court support. St. Louis County commissioners recently voted 5-1 to back a resolution supporting the exchange, but added an amendment that would maintain Thye-Blatnik funds to St. Louis, Lake and Cook counties under the current formula.
The amendment did not mollify everyone’s concerns over a potential loss of federal funds as a result of the exchange.
“The Thye-Blatnik Act is in peril if this is brought to the attention of this Congress,” said Ely resident Becky Rom.
St. Louis County School Board members shared similar concerns about the potential loss of school funds. The Range Association of Municipalities and Schools had sent a resolution seeking support for the exchange from area school districts. Superintendent Teresa Knife Chief had recommended the board approve the resolution, but several board members wanted to delay action until they got more information.
Following the study session last week, board members were uncertain if they would adopt the resolution. One possibility would be to make their support contingent on the guarantee that they would not lose any federal funding as a result of the exchange. Another option would be to simply endorse the state Legislature’s attempts to generate more revenue from school trust lands.
Erickson said there are lots of unknowns about how the land exchange might affect funding for schools and counties, and ARCC will be among those keeping a close watch over how the exchange proceeds, if it does.