1.1CONFERENCE COMMITTEE REPORT ON H. F. No. 22441.2A bill for an act1.3relating to the permanent school fund; changing the Permanent School Fund 1.4Advisory Committee into a legislative commission; establishing a permanent 1.5school fund board; granting the board authority to employ a director to oversee, 1.6manage, and administer school trust lands;amending Minnesota Statutes 2010, 1.7sections 16A.06, subdivision 11; 16A.125, subdivision 5; 84.027, subdivision 1.818; 84.085, subdivision 1; 92.12, subdivision 1; 92.121; 92.13; 93.2236; 94.342, 1.9subdivision 5; 127A.30; 477A.11, subdivisions 3, 4, by adding a subdivision; 1.10477A.12, subdivisions 2, 3; Minnesota Statutes 2011 Supplement, section 1.11477A.12, subdivision 1; proposing coding for new law in Minnesota Statutes, 1.12chapter 127A.1.13April 24, 20121.14The Honorable Kurt Zellers1.15Speaker of the House of Representatives1.16The Honorable Michelle L. Fischbach1.17President of the Senate1.18We, the undersigned conferees for H. F. No. 2244 report that we have agreed upon 1.19the items in dispute and recommend as follows:1.20That the Senate recede from its amendments and that H. F. No. 2244 be further 1.21amended as follows:1.22Delete everything after the enacting clause and insert:1.23    "Section 1. Minnesota Statutes 2010, section 15A.0815, subdivision 3, is amended to 1.24read:1.25    Subd. 3. Group II salary limits. The salaries for positions in this subdivision may 1.26not exceed 85 percent of the salary of the governor:1.27    Executive director of Gambling Control Board;1.28    Commissioner, Iron Range Resources and Rehabilitation Board;1.29    Commissioner, Bureau of Mediation Services;1.30    Ombudsman for Mental Health and Developmental Disabilities;1.31    Chair, Metropolitan Council; 1.32    School trust lands director;2.1    Executive director of pari-mutuel racing; and2.2    Commissioner, Public Utilities Commission.2.3    Sec. 2. Minnesota Statutes 2010, section 16A.06, subdivision 11, is amended to read:2.4    Subd. 11. Permanent school fund reporting. The commissioner shall annually 2.5report to the Legislative Permanent School Fund Advisory Committee Commission, and 2.6the legislature the amount of the permanent school fund transfer and information about 2.7the investment of the permanent school fund provided by the State Board of Investment. 2.8The State Board of Investment shall provide information about how they maximized the 2.9long-term economic return of the permanent school fund.2.10    Sec. 3. Minnesota Statutes 2010, section 16A.125, subdivision 5, is amended to read:2.11    Subd. 5. Forest trust lands. (a) The term "state forest trust fund lands" as used 2.12in this subdivision, means public land in trust under the Constitution set apart as "forest 2.13lands under the authority of the commissioner" of natural resources as defined by section 2.1489.001, subdivision 13
         .2.15(b) The commissioner of management and budget shall credit the revenue from the 2.16forest trust fund lands to the forest suspense account. The account must specify the trust 2.17funds interested in the lands and the respective receipts of the lands.2.18(c) After a fiscal year, the commissioner of management and budget shall certify the 2.19total costs incurred for forestry during that year under appropriations for the protection,2.20improvement, administration, and management of state forest trust fund lands and 2.21construction and improvement of forest roads to enhance the forest value of the lands. The 2.22certificate must specify the trust funds interested in the lands. After presentation to the 2.23Legislative Permanent School Fund Commission, the commissioner of natural resources 2.24shall supply the commissioner of management and budget with the information needed for 2.25the certificate. The certificate shall include an analysis that compares costs certified under 2.26this section with costs incurred on other public and private lands with similar land assets.2.27(d) After a fiscal year, the commissioner shall distribute the receipts credited to the 2.28suspense account during that fiscal year as follows:2.29(1) the amount of the certified costs incurred by the state for forest management, 2.30forest improvement, and road improvement during the fiscal year shall be transferred to 2.31the forest management investment account established under section 
         89.039;2.32(2) the balance of the certified costs incurred by the state during the fiscal year 2.33shall be transferred to the general fund; and3.1(3) the balance of the receipts shall then be returned prorated to the trust funds in 3.2proportion to their respective interests in the lands which produced the receipts.3.3    Sec. 4. Minnesota Statutes 2010, section 84.027, subdivision 18, is amended to read:3.4    Subd. 18. Permanent school fund authority; reporting.(a) The commissioner 3.5of natural resources has the authority and responsibility for the administration of school 3.6trust lands under sections 
         92.121 and 
         127A.31. The commissioner shall biannually report 3.7to the Permanent School Fund Advisory Committee Legislative Permanent School Fund 3.8Commission and the legislature on the management of the school trust lands that shows 3.9how the commissioner has and will continue to achieve the following goals:3.10    (1) manage the school trust lands efficiently and in a manner that reflects the 3.11undivided loyalty to the beneficiaries consistent with the commissioner's fiduciary duties;3.12    (2) reduce the management expenditures of school trust lands and maximize the 3.13revenues deposited in the permanent school trust fund;3.14    (3) manage the sale, exchange, and commercial leasing of school trust lands, 3.15requiring returns of not less than fair market value, to maximize the revenues deposited in 3.16the permanent school trust fund and retain the value from the long-term appreciation of 3.17the school trust lands; and3.18    (4) manage the school trust lands to maximize the long-term economic return for the 3.19permanent school trust fund while maintaining sound natural resource conservation and 3.20management principles;3.21(5) optimize school trust land revenues and maximize the value of the trust consistent 3.22with the balancing of short-term and long-term interests, so that long-term benefits are not 3.23lost in an effort to maximize short-term gains; and3.24(6) maintain the integrity of the trust and prevent the misapplication of its lands 3.25and its revenues.3.26(b) When the commissioner finds an irresolvable conflict between maximizing the 3.27long-term economic return and protecting natural resources and recreational values on 3.28school trust lands, the commissioner shall give precedence to the long-term economic 3.29return in managing school trust lands. By July 1, 2018, the permanent school fund 3.30shall be compensated for all school trust lands included under a designation or policy 3.31provision that prohibits long-term economic return. The commissioner shall submit 3.32recommendations to the appropriate legislative committees and divisions on methods of 3.33funding for the compensation required under this paragraph, including recommendations 3.34for appropriations from the general fund, nongeneral funds, and the state bond fund. Any 3.35uncompensated designation or policy provision restrictions on the long-term economic 4.1return on school trust lands remaining after July 1, 2018, shall be compiled and submitted 4.2to the Legislative Permanent School Fund Commission for review.4.3(c) By December 31, 2013, the report required under paragraph (a) shall provide an 4.4inventory and identification of all school trust lands that are included under a designation 4.5or policy provision that prohibits long-term economic return. The report shall include a 4.6plan to compensate the permanent school fund through the purchase or exchange of the 4.7lands or a plan to manage the school trust land to generate long-term economic return to 4.8the permanent school fund. Subsequent reports under paragraph (a) shall include a status 4.9report of the commissioner's progress in maximizing the long-term economic return on 4.10lands identified in the 2013 report.4.11(d) When future designations or policies by the commissioner prohibit the long-term 4.12economic return on school trust land, the conflict shall be resolved by compensating the 4.13permanent school fund through an exchange or purchase of the lands before designation or 4.14application of the policy.4.15    Sec. 5. Minnesota Statutes 2010, section 92.45, is amended to read:4.1692.45 STATE LAND ON MEANDERED LAKES WITHDRAWN FROM 4.17SALE.4.18All state lands, excluding school trust lands, bordering on or adjacent to meandered 4.19lakes and other public waters and watercourses, with the live timber growing on them, 4.20are withdrawn from sale except as provided in this section. The commissioner of natural 4.21resources may sell the timber as otherwise provided by law for cutting and removal under 4.22conditions the commissioner prescribes. The conditions must be in accordance with 4.23approved, sustained-yield forestry practices. The commissioner must reserve the timber 4.24and impose other conditions the commissioner deems necessary to protect watersheds, 4.25wildlife habitat, shorelines, and scenic features. Within the area in Cook, Lake, and St. 4.26Louis Counties described in the Act of Congress approved July 10, 1930, (Statutes at 4.27Large, volume 46, page 1020), the timber on state lands is subject to restrictions like those 4.28now imposed by the act on federal lands.4.29The following land is reserved for public travel: of all land bordering on or adjacent 4.30to meandered lakes and other public waters and watercourses and withdrawn from sale, a 4.31strip two rods wide, the ordinary high-water mark being its waterside boundary, and its 4.32landside boundary a line drawn parallel to the ordinary high-water mark and two rods 4.33distant landward from it. Wherever the conformation of the shore line or conditions 4.34require, the commissioner must reserve a wider strip.5.1Except for sales under section 
         282.018, subdivision 1, when a state agency or any 5.2other unit of government requests the legislature to authorize the sale of state lands 5.3bordering on or adjacent to meandered lakes and other public waters and watercourses, the 5.4commissioner shall evaluate the lands and their public benefits and make recommendations 5.5on the proposed dispositions to the committees of the legislature with jurisdiction 5.6over natural resources. The commissioner shall include any recommendations of the 5.7commissioner for disposition of lands withdrawn from sale under this section over which 5.8the commissioner has jurisdiction. The commissioner's recommendations may include a 5.9public sale, sale to a private party, acquisition by the commissioner for public purposes, 5.10retention of a conservation easement for shoreland preservation by the commissioner 5.11under chapter 84C, or a cooperative management agreement with, or transfer to, another 5.12unit of government.5.13The commissioner may sell state lands bordering on or adjacent to the Mississippi 5.14River or any lakes, waters, and watercourses in its bottom lands, desired or needed by the 5.15United States government for, or in connection with, any project heretofore authorized 5.16by Congress, to improve navigation in the Mississippi River at public sale according 5.17to law, as in other cases, upon application by an authorized United States official. The 5.18application must describe the land and include a map showing its location with reference 5.19to adjoining properties.5.20    Sec. 6. Minnesota Statutes 2010, section 94.342, subdivision 5, is amended to read:5.21    Subd. 5. Additional restrictions on school trust land. School trust land may 5.22be exchanged with other Class A land only if the Permanent School Fund Advisory 5.23Committeeschool trust lands director is appointed as temporary trustee of the school trust 5.24land for purposes of the exchange. The committeeLegislative Permanent School Fund 5.25Commission shall provide independent legal counsel to review the exchanges.5.26    Sec. 7. Minnesota Statutes 2010, section 127A.30, is amended to read:5.27127A.30 LEGISLATIVE PERMANENT SCHOOL FUND ADVISORY 5.28COMMITTEE COMMISSION.5.29    Subdivision 1. Commission established; membership. A state (a) The Legislative5.30Permanent School Fund Advisory Committee Commission of 12 members is established 5.31to advise the Department of Natural Resources and the school trust lands director on the 5.32management of permanent school fund land, which is held in trust for the school districts 5.33of the state and to review legislation affecting permanent school fund land. The advisory 5.34committee must consist commission consists of the following persons or their designees: 6.1the chairs of the education committees of the legislature, the chairs of the legislative 6.2committees with jurisdiction over the K-12 education budget, the chairs of the legislative 6.3committees with jurisdiction over the environment and natural resources policy and budget, 6.4the chair of the senate Committee on Finance and the chair of the house of representatives 6.5Committee on Ways and Means, the commissioner of education, one superintendent 6.6from a nonmetropolitan district, one superintendent from a metropolitan area district, one 6.7person with an expertise in forestry, one person with an expertise in minerals and mining, 6.8one person with an expertise in real estate development, one person with an expertise 6.9in renewable energy, one person with an expertise in finance and land management, 6.10and one person with an expertise in natural resource conservation. The school district 6.11superintendents shall be appointed by the commissioner of education. The committee 6.12members with areas of expertise in forestry, minerals and mining, real estate development, 6.13renewable energy, finance and land management, and natural resource conservation shall 6.14be appointed by the commissioner of natural resources. Members of the legislature shall 6.15be given the opportunity to recommend candidates for vacancies on the committee to the 6.16commissioners of education and natural resources. The advisory committee must also 6.17include a nonvoting member appointed by the commissioner of natural resources. The 6.18commissioner of natural resources shall provide administrative support to the committee. 6.19The members of the committee shall serve without compensation. The members of the 6.20Permanent School Fund Advisory Committee shall elect their chair and are bound by the 6.21provisions of sections 43A.38 and 116P.09, subdivision 6.6.22(1) six members of the senate, including three majority party members appointed by 6.23the majority leader and three minority party members appointed by the minority leader; and6.24(2) six members of the house of representatives, including three majority party 6.25members appointed by the speaker of the house and three minority party members 6.26appointed by the minority leader.6.27(b) Appointed legislative members serve at the pleasure of the appointing authority 6.28and continue to serve until their successors are appointed.6.29(c) The first meeting of the commission shall be convened by the chair of the 6.30Legislative Coordinating Commission. Members shall elect a chair, vice-chair, secretary, 6.31and other officers as determined by the commission. The chair may convene meetings as 6.32necessary to conduct the duties prescribed by this section.6.33    Subd. 2. Duties.  The advisory committeecommission shall review the policies of 6.34the Department of Natural Resources and current statutes on management of school trust 6.35fund lands at least annually and shall recommend necessary changes in statutes, policy, 6.36and implementation in order to ensure provident utilization of the permanent school fund 7.1lands. By January 15 of each year, the advisory committee commission shall submit 7.2a report to the legislature with recommendations for the management of school trust 7.3lands to secure long-term economic return for the permanent school fund, consistent with 7.4sections 
         92.121 and 
         127A.31. The committee's commission's annual report may include 7.5recommendations to:7.6    (1) manage the school trust lands efficiently;7.7    (2) reduce the management expenditures of school trust lands and maximize the 7.8revenues deposited in the permanent school trust fund;7.9    (3) manage the sale, exchange, and commercial leasing of school trust lands to 7.10maximize the revenues deposited in the permanent school trust fund and retain the value 7.11from the long-term appreciation of the school trust lands; and7.12    (4) manage the school trust lands to maximize the long-term economic return for 7.13the permanent school trust fund while maintaining sound natural resource conservation 7.14and management principles; and7.15(5) manage the asset allocation of the permanent school fund.7.16    Subd. 3.Duration.Notwithstanding section 15.059, subdivision 5, the advisory 7.17committee is permanent and does not expire.7.18    Sec. 8. [127A.351] POLICY AND PURPOSE.7.19(a) The purpose of sections 127A.351 to 127A.353 is to establish a school trust lands 7.20director position to recommend management policies for Minnesota's school trust lands in 7.21accordance with the provisions of the Minnesota Constitution, article XI, section 8.7.22(b) As trustee, the state must manage the lands and revenues generated from the 7.23lands consistent with the best interests of the trust beneficiaries as defined in the Minnesota 7.24Constitution, article XI, section 8. When it is in the best interest of the school trust lands, 7.25ecological benefits shall be taken into consideration.7.26(c) The trustee must be concerned with both income for the current beneficiaries 7.27and the preservation of trust assets for future beneficiaries, which requires a balancing of 7.28short-term and long-term interests so that long-term benefits are not lost in an effort to 7.29maximize short-term gains.7.30(d) Sections 127A.351 to 127A.353 shall be liberally construed to enable the school 7.31trust lands director and the commissioner of natural resources to faithfully fulfill the 7.32state's obligations to the trust beneficiaries.7.33    Sec. 9. [127A.352] POLICY RECOMMENDATIONS; DUTIES.8.1    Subdivision 1.Recommendations.The Legislative Permanent School Fund 8.2Commission shall recommend policies for the school trust lands director and the 8.3commissioner of natural resources that are consistent with the Minnesota Constitution, 8.4state law, and the goals established under section 84.027, subdivision 18.8.5    Subd. 2.Duties.The commissioner of natural resources and the school trust lands 8.6director shall recommend to the governor and the Legislative Permanent School Fund 8.7Commission any necessary or desirable changes in statutes relating to the trust or their 8.8trust responsibilities consistent with the policies under section 127A.351.8.9    Subd. 3.Notice to commission and governor.If the school trust lands director has 8.10an irreconcilable disagreement with the commissioner of natural resources pertaining to 8.11the fiduciary responsibilities consistent with the school trust lands, it is the duty of the 8.12director to report the subject of the disagreement to the Legislative Permanent School 8.13Fund Commission and the governor.8.14    Sec. 10. [127A.353] SCHOOL TRUST LANDS DIRECTOR.8.15    Subdivision 1.Appointment.The school trust lands director shall be appointed 8.16by the governor. The commissioner of administration shall provide office space for 8.17the director. The commissioner shall provide human resources, payroll, accounting, 8.18procurement, and other similar administrative services to the school trust lands director. 8.19The director's appointment is subject to the advice and consent of the senate.8.20    Subd. 2.Qualifications.The governor shall select the school trust lands director on 8.21the basis of outstanding professional qualifications and knowledge of finance, business 8.22practices, minerals, forest and real estate management, and the fiduciary responsibilities 8.23of a trustee to the beneficiaries of a trust. The school trust lands director serves in the 8.24unclassified service for a term of four years. The first term shall end on December 31, 8.252016. The governor may remove the school trust lands director for cause. If a director 8.26resigns or is removed for cause, the governor shall appoint a director for the remainder of 8.27the term.8.28    Subd. 3.Compensation.Compensation of the school trust lands director shall be 8.29established under chapter 15A.8.30    Subd. 4.Duties; powers.(a) The school trust lands director shall:8.31(1) take an oath of office before assuming any duties as the director;8.32(2) evaluate the school trust land asset position;8.33(3) determine the estimated current and potential market value of school trust lands;9.1(4) advise the governor, Executive Council, commissioner of natural resources, 9.2and the Legislative Permanent School Fund Commission on the management of school 9.3trust lands, including:9.4(i) Department of Natural Resources school trust land management plans;9.5(ii) leases of school trust lands;9.6(iii) royalty agreements on school trust lands;9.7(iv) land sales and exchanges;9.8(v) cost certification; and9.9(vi) revenue generating options;9.10(5) propose to the Legislative Permanent School Fund Commission legislative 9.11changes that will improve the asset allocation of the school trust lands;9.12(6) develop a ten-year strategic plan and a 25-year framework for management of 9.13school trust lands, in conjunction with the commissioner of natural resources, that is 9.14updated every five years and implemented by the commissioner, with goals to:9.15(i) retain core real estate assets;9.16(ii) increase the value of the real estate assets and the cash flow from those assets;9.17(iii) rebalance the portfolio in assets with high performance potential and the 9.18strategic disposal of selected assets;9.19(iv) establish priorities for management actions; and9.20(v) balance revenue enhancement and resource stewardship;9.21(7) submit to the Legislative Permanent School Fund Commission for review an 9.22annual budget and management plan for the director; and9.23(8) keep the beneficiaries, governor, legislature, and the public informed about the 9.24work of the director by reporting to the Legislative Permanent School Fund Commission 9.25in a public meeting at least once during each calendar quarter.9.26(b) In carrying out the duties under paragraph (a), the school trust lands director 9.27shall have the authority to:9.28(1) direct and control money appropriated to the director;9.29(2) establish job descriptions and employ up to five employees in the unclassified 9.30service, within the limitations of money appropriated to the director;9.31(3) enter into interdepartmental agreements with any other state agency; and9.32(4) submit recommendations on strategies for school trust land leases, sales, or 9.33exchanges to the commissioner of natural resources and the Legislative Permanent School 9.34Fund Commission.10.1    Sec. 11. COSTS OF SCHOOL TRUST LANDS DIRECTOR AND LEGISLATIVE 10.2PERMANENT SCHOOL FUND COMMISSION.10.3(a) The costs of the school trust lands director, including the costs of hiring staff, 10.4and the Legislative Permanent School Fund Commission for fiscal years 2014 and 2015 10.5shall be from the state forest development account under Minnesota Statutes, section 10.616A.125, and from the minerals management account under Minnesota Statutes, section 10.793.2236, as appropriated by the legislature.10.8(b) The school trust lands director and the Legislative Permanent School Fund 10.9Commission shall submit to the 2014 legislature a proposal to fund the operational costs 10.10of the Legislative Permanent School Fund Commission and school trust lands director 10.11and staff with a cost certification method using revenues generated by the permanent 10.12school fund lands.10.13    Sec. 12. EFFECTIVE DATE.10.14Sections 1 to 10 are effective July 1, 2013."10.15Delete the title and insert:10.16"A bill for an act10.17relating to the permanent school fund; changing the Permanent School Fund 10.18Advisory Committee into a legislative commission; providing for a director 10.19for school trust lands;amending Minnesota Statutes 2010, sections 15A.0815, 10.20subdivision 3; 16A.06, subdivision 11; 16A.125, subdivision 5; 84.027, 10.21subdivision 18; 92.45; 94.342, subdivision 5; 127A.30; proposing coding for new 10.22law in Minnesota Statutes, chapter 127A."

11.1We request the adoption of this report and repassage of the bill.11.2House Conferees:11.3
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                     						11.4Tim O'DriscollCarolyn McElfatrick11.5
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                     						11.6Denny McNamaraDenise Dittrich11.7
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                     						11.8Steve Simon11.9Senate Conferees:11.10
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                     						11.11Benjamin A. KruseThomas M. Bakk11.12
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                     						11.13John J. CarlsonGen Olson11.14
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                     						11.15Dave A. Thompson