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Key: (1) language to be deleted (2) new language

CHAPTER 249--H.F.No. 2244
An act
relating to the permanent school fund; changing the Permanent School
Fund Advisory Committee into a legislative commission; providing for a
director for school trust lands;amending Minnesota Statutes 2010, sections
15A.0815, subdivision 3; 16A.06, subdivision 11; 16A.125, subdivision 5;
84.027, subdivision 18; 92.45; 94.342, subdivision 5; 127A.30; proposing coding
for new law in Minnesota Statutes, chapter 127A.
BE IT ENACTED BY THE LEGISLATURE OF THE STATE OF MINNESOTA:

    Section 1. Minnesota Statutes 2010, section 15A.0815, subdivision 3, is amended to
read:
    Subd. 3. Group II salary limits. The salaries for positions in this subdivision may
not exceed 85 percent of the salary of the governor:
    Executive director of Gambling Control Board;
    Commissioner, Iron Range Resources and Rehabilitation Board;
    Commissioner, Bureau of Mediation Services;
    Ombudsman for Mental Health and Developmental Disabilities;
    Chair, Metropolitan Council;
    School trust lands director;
    Executive director of pari-mutuel racing; and
    Commissioner, Public Utilities Commission.

    Sec. 2. Minnesota Statutes 2010, section 16A.06, subdivision 11, is amended to read:
    Subd. 11. Permanent school fund reporting. The commissioner shall annually
report to the Legislative Permanent School Fund Advisory Committee Commission, and
the legislature the amount of the permanent school fund transfer and information about
the investment of the permanent school fund provided by the State Board of Investment.
The State Board of Investment shall provide information about how they maximized the
long-term economic return of the permanent school fund.

    Sec. 3. Minnesota Statutes 2010, section 16A.125, subdivision 5, is amended to read:
    Subd. 5. Forest trust lands. (a) The term "state forest trust fund lands" as used
in this subdivision, means public land in trust under the Constitution set apart as "forest
lands under the authority of the commissioner" of natural resources as defined by section
89.001, subdivision 13.
(b) The commissioner of management and budget shall credit the revenue from the
forest trust fund lands to the forest suspense account. The account must specify the trust
funds interested in the lands and the respective receipts of the lands.
(c) After a fiscal year, the commissioner of management and budget shall certify the
total costs incurred for forestry during that year under appropriations for the protection,
improvement, administration, and management of state forest trust fund lands and
construction and improvement of forest roads to enhance the forest value of the lands. The
certificate must specify the trust funds interested in the lands. After presentation to the
Legislative Permanent School Fund Commission, the commissioner of natural resources
shall supply the commissioner of management and budget with the information needed for
the certificate. The certificate shall include an analysis that compares costs certified under
this section with costs incurred on other public and private lands with similar land assets.
(d) After a fiscal year, the commissioner shall distribute the receipts credited to the
suspense account during that fiscal year as follows:
(1) the amount of the certified costs incurred by the state for forest management,
forest improvement, and road improvement during the fiscal year shall be transferred to
the forest management investment account established under section 89.039;
(2) the balance of the certified costs incurred by the state during the fiscal year
shall be transferred to the general fund; and
(3) the balance of the receipts shall then be returned prorated to the trust funds in
proportion to their respective interests in the lands which produced the receipts.

    Sec. 4. Minnesota Statutes 2010, section 84.027, subdivision 18, is amended to read:
    Subd. 18. Permanent school fund authority; reporting. (a) The commissioner
of natural resources has the authority and responsibility for the administration of school
trust lands under sections 92.121 and 127A.31. The commissioner shall biannually report
to the Permanent School Fund Advisory Committee Legislative Permanent School Fund
Commission and the legislature on the management of the school trust lands that shows
how the commissioner has and will continue to achieve the following goals:
    (1) manage the school trust lands efficiently and in a manner that reflects the
undivided loyalty to the beneficiaries consistent with the commissioner's fiduciary duties;
    (2) reduce the management expenditures of school trust lands and maximize the
revenues deposited in the permanent school trust fund;
    (3) manage the sale, exchange, and commercial leasing of school trust lands,
requiring returns of not less than fair market value, to maximize the revenues deposited in
the permanent school trust fund and retain the value from the long-term appreciation of
the school trust lands; and
    (4) manage the school trust lands to maximize the long-term economic return for the
permanent school trust fund while maintaining sound natural resource conservation and
management principles;
(5) optimize school trust land revenues and maximize the value of the trust consistent
with the balancing of short-term and long-term interests, so that long-term benefits are not
lost in an effort to maximize short-term gains; and
(6) maintain the integrity of the trust and prevent the misapplication of its lands
and its revenues.
(b) When the commissioner finds an irresolvable conflict between maximizing the
long-term economic return and protecting natural resources and recreational values on
school trust lands, the commissioner shall give precedence to the long-term economic
return in managing school trust lands. By July 1, 2018, the permanent school fund
shall be compensated for all school trust lands included under a designation or policy
provision that prohibits long-term economic return. The commissioner shall submit
recommendations to the appropriate legislative committees and divisions on methods of
funding for the compensation required under this paragraph, including recommendations
for appropriations from the general fund, nongeneral funds, and the state bond fund. Any
uncompensated designation or policy provision restrictions on the long-term economic
return on school trust lands remaining after July 1, 2018, shall be compiled and submitted
to the Legislative Permanent School Fund Commission for review.
(c) By December 31, 2013, the report required under paragraph (a) shall provide an
inventory and identification of all school trust lands that are included under a designation
or policy provision that prohibits long-term economic return. The report shall include a
plan to compensate the permanent school fund through the purchase or exchange of the
lands or a plan to manage the school trust land to generate long-term economic return to
the permanent school fund. Subsequent reports under paragraph (a) shall include a status
report of the commissioner's progress in maximizing the long-term economic return on
lands identified in the 2013 report.
(d) When future designations or policies by the commissioner prohibit the long-term
economic return on school trust land, the conflict shall be resolved by compensating the
permanent school fund through an exchange or purchase of the lands before designation or
application of the policy.

    Sec. 5. Minnesota Statutes 2010, section 92.45, is amended to read:
92.45 STATE LAND ON MEANDERED LAKES WITHDRAWN FROM
SALE.
All state lands, excluding school trust lands, bordering on or adjacent to meandered
lakes and other public waters and watercourses, with the live timber growing on them,
are withdrawn from sale except as provided in this section. The commissioner of natural
resources may sell the timber as otherwise provided by law for cutting and removal under
conditions the commissioner prescribes. The conditions must be in accordance with
approved, sustained-yield forestry practices. The commissioner must reserve the timber
and impose other conditions the commissioner deems necessary to protect watersheds,
wildlife habitat, shorelines, and scenic features. Within the area in Cook, Lake, and St.
Louis Counties described in the Act of Congress approved July 10, 1930, (Statutes at
Large, volume 46, page 1020), the timber on state lands is subject to restrictions like those
now imposed by the act on federal lands.
The following land is reserved for public travel: of all land bordering on or adjacent
to meandered lakes and other public waters and watercourses and withdrawn from sale, a
strip two rods wide, the ordinary high-water mark being its waterside boundary, and its
landside boundary a line drawn parallel to the ordinary high-water mark and two rods
distant landward from it. Wherever the conformation of the shore line or conditions
require, the commissioner must reserve a wider strip.
Except for sales under section 282.018, subdivision 1, when a state agency or any
other unit of government requests the legislature to authorize the sale of state lands
bordering on or adjacent to meandered lakes and other public waters and watercourses, the
commissioner shall evaluate the lands and their public benefits and make recommendations
on the proposed dispositions to the committees of the legislature with jurisdiction
over natural resources. The commissioner shall include any recommendations of the
commissioner for disposition of lands withdrawn from sale under this section over which
the commissioner has jurisdiction. The commissioner's recommendations may include a
public sale, sale to a private party, acquisition by the commissioner for public purposes,
retention of a conservation easement for shoreland preservation by the commissioner
under chapter 84C, or a cooperative management agreement with, or transfer to, another
unit of government.
The commissioner may sell state lands bordering on or adjacent to the Mississippi
River or any lakes, waters, and watercourses in its bottom lands, desired or needed by the
United States government for, or in connection with, any project heretofore authorized
by Congress, to improve navigation in the Mississippi River at public sale according
to law, as in other cases, upon application by an authorized United States official. The
application must describe the land and include a map showing its location with reference
to adjoining properties.

    Sec. 6. Minnesota Statutes 2010, section 94.342, subdivision 5, is amended to read:
    Subd. 5. Additional restrictions on school trust land. School trust land may
be exchanged with other Class A land only if the Permanent School Fund Advisory
Committee school trust lands director is appointed as temporary trustee of the school trust
land for purposes of the exchange. The committee Legislative Permanent School Fund
Commission shall provide independent legal counsel to review the exchanges.

    Sec. 7. Minnesota Statutes 2010, section 127A.30, is amended to read:
127A.30 LEGISLATIVE PERMANENT SCHOOL FUND ADVISORY
COMMITTEE COMMISSION.
    Subdivision 1. Commission established; membership. A state (a) The Legislative
Permanent School Fund Advisory Committee Commission of 12 members is established
to advise the Department of Natural Resources and the school trust lands director on the
management of permanent school fund land, which is held in trust for the school districts
of the state and to review legislation affecting permanent school fund land. The advisory
committee must consist commission consists of the following persons or their designees:
the chairs of the education committees of the legislature, the chairs of the legislative
committees with jurisdiction over the K-12 education budget, the chairs of the legislative
committees with jurisdiction over the environment and natural resources policy and budget,
the chair of the senate Committee on Finance and the chair of the house of representatives
Committee on Ways and Means, the commissioner of education, one superintendent
from a nonmetropolitan district, one superintendent from a metropolitan area district, one
person with an expertise in forestry, one person with an expertise in minerals and mining,
one person with an expertise in real estate development, one person with an expertise
in renewable energy, one person with an expertise in finance and land management,
and one person with an expertise in natural resource conservation. The school district
superintendents shall be appointed by the commissioner of education. The committee
members with areas of expertise in forestry, minerals and mining, real estate development,
renewable energy, finance and land management, and natural resource conservation shall
be appointed by the commissioner of natural resources. Members of the legislature shall
be given the opportunity to recommend candidates for vacancies on the committee to the
commissioners of education and natural resources. The advisory committee must also
include a nonvoting member appointed by the commissioner of natural resources. The
commissioner of natural resources shall provide administrative support to the committee.
The members of the committee shall serve without compensation. The members of the
Permanent School Fund Advisory Committee shall elect their chair and are bound by the
provisions of sections 43A.38 and 116P.09, subdivision 6.
(1) six members of the senate, including three majority party members appointed by
the majority leader and three minority party members appointed by the minority leader; and
(2) six members of the house of representatives, including three majority party
members appointed by the speaker of the house and three minority party members
appointed by the minority leader.
(b) Appointed legislative members serve at the pleasure of the appointing authority
and continue to serve until their successors are appointed.
(c) The first meeting of the commission shall be convened by the chair of the
Legislative Coordinating Commission. Members shall elect a chair, vice-chair, secretary,
and other officers as determined by the commission. The chair may convene meetings as
necessary to conduct the duties prescribed by this section.
    Subd. 2. Duties. The advisory committee commission shall review the policies of
the Department of Natural Resources and current statutes on management of school trust
fund lands at least annually and shall recommend necessary changes in statutes, policy,
and implementation in order to ensure provident utilization of the permanent school fund
lands. By January 15 of each year, the advisory committee commission shall submit
a report to the legislature with recommendations for the management of school trust
lands to secure long-term economic return for the permanent school fund, consistent with
sections 92.121 and 127A.31. The committee's commission's annual report may include
recommendations to:
    (1) manage the school trust lands efficiently;
    (2) reduce the management expenditures of school trust lands and maximize the
revenues deposited in the permanent school trust fund;
    (3) manage the sale, exchange, and commercial leasing of school trust lands to
maximize the revenues deposited in the permanent school trust fund and retain the value
from the long-term appreciation of the school trust lands; and
    (4) manage the school trust lands to maximize the long-term economic return for
the permanent school trust fund while maintaining sound natural resource conservation
and management principles; and
(5) manage the asset allocation of the permanent school fund.
    Subd. 3. Duration. Notwithstanding section 15.059, subdivision 5, the advisory
committee is permanent and does not expire.

    Sec. 8. [127A.351] POLICY AND PURPOSE.
(a) The purpose of sections 127A.351 to 127A.353 is to establish a school trust lands
director position to recommend management policies for Minnesota's school trust lands in
accordance with the provisions of the Minnesota Constitution, article XI, section 8.
(b) As trustee, the state must manage the lands and revenues generated from the
lands consistent with the best interests of the trust beneficiaries as defined in the Minnesota
Constitution, article XI, section 8. When it is in the best interest of the school trust lands,
ecological benefits shall be taken into consideration.
(c) The trustee must be concerned with both income for the current beneficiaries
and the preservation of trust assets for future beneficiaries, which requires a balancing of
short-term and long-term interests so that long-term benefits are not lost in an effort to
maximize short-term gains.
(d) Sections 127A.351 to 127A.353 shall be liberally construed to enable the school
trust lands director and the commissioner of natural resources to faithfully fulfill the
state's obligations to the trust beneficiaries.

    Sec. 9. [127A.352] POLICY RECOMMENDATIONS; DUTIES.
    Subdivision 1. Recommendations. The Legislative Permanent School Fund
Commission shall recommend policies for the school trust lands director and the
commissioner of natural resources that are consistent with the Minnesota Constitution,
state law, and the goals established under section 84.027, subdivision 18.
    Subd. 2. Duties. The commissioner of natural resources and the school trust lands
director shall recommend to the governor and the Legislative Permanent School Fund
Commission any necessary or desirable changes in statutes relating to the trust or their
trust responsibilities consistent with the policies under section 127A.351.
    Subd. 3. Notice to commission and governor. If the school trust lands director has
an irreconcilable disagreement with the commissioner of natural resources pertaining to
the fiduciary responsibilities consistent with the school trust lands, it is the duty of the
director to report the subject of the disagreement to the Legislative Permanent School
Fund Commission and the governor.

    Sec. 10. [127A.353] SCHOOL TRUST LANDS DIRECTOR.
    Subdivision 1. Appointment. The school trust lands director shall be appointed
by the governor. The commissioner of administration shall provide office space for
the director. The commissioner shall provide human resources, payroll, accounting,
procurement, and other similar administrative services to the school trust lands director.
The director's appointment is subject to the advice and consent of the senate.
    Subd. 2. Qualifications. The governor shall select the school trust lands director on
the basis of outstanding professional qualifications and knowledge of finance, business
practices, minerals, forest and real estate management, and the fiduciary responsibilities
of a trustee to the beneficiaries of a trust. The school trust lands director serves in the
unclassified service for a term of four years. The first term shall end on December 31,
2016. The governor may remove the school trust lands director for cause. If a director
resigns or is removed for cause, the governor shall appoint a director for the remainder of
the term.
    Subd. 3. Compensation. Compensation of the school trust lands director shall be
established under chapter 15A.
    Subd. 4. Duties; powers. (a) The school trust lands director shall:
(1) take an oath of office before assuming any duties as the director;
(2) evaluate the school trust land asset position;
(3) determine the estimated current and potential market value of school trust lands;
(4) advise the governor, Executive Council, commissioner of natural resources,
and the Legislative Permanent School Fund Commission on the management of school
trust lands, including:
(i) Department of Natural Resources school trust land management plans;
(ii) leases of school trust lands;
(iii) royalty agreements on school trust lands;
(iv) land sales and exchanges;
(v) cost certification; and
(vi) revenue generating options;
(5) propose to the Legislative Permanent School Fund Commission legislative
changes that will improve the asset allocation of the school trust lands;
(6) develop a ten-year strategic plan and a 25-year framework for management of
school trust lands, in conjunction with the commissioner of natural resources, that is
updated every five years and implemented by the commissioner, with goals to:
(i) retain core real estate assets;
(ii) increase the value of the real estate assets and the cash flow from those assets;
(iii) rebalance the portfolio in assets with high performance potential and the
strategic disposal of selected assets;
(iv) establish priorities for management actions; and
(v) balance revenue enhancement and resource stewardship;
(7) submit to the Legislative Permanent School Fund Commission for review an
annual budget and management plan for the director; and
(8) keep the beneficiaries, governor, legislature, and the public informed about the
work of the director by reporting to the Legislative Permanent School Fund Commission
in a public meeting at least once during each calendar quarter.
(b) In carrying out the duties under paragraph (a), the school trust lands director
shall have the authority to:
(1) direct and control money appropriated to the director;
(2) establish job descriptions and employ up to five employees in the unclassified
service, within the limitations of money appropriated to the director;
(3) enter into interdepartmental agreements with any other state agency; and
(4) submit recommendations on strategies for school trust land leases, sales, or
exchanges to the commissioner of natural resources and the Legislative Permanent School
Fund Commission.

    Sec. 11. COSTS OF SCHOOL TRUST LANDS DIRECTOR AND LEGISLATIVE
PERMANENT SCHOOL FUND COMMISSION.
(a) The costs of the school trust lands director, including the costs of hiring staff,
and the Legislative Permanent School Fund Commission for fiscal years 2014 and 2015
shall be from the state forest development account under Minnesota Statutes, section
16A.125, and from the minerals management account under Minnesota Statutes, section
93.2236, as appropriated by the legislature.
(b) The school trust lands director and the Legislative Permanent School Fund
Commission shall submit to the 2014 legislature a proposal to fund the operational costs
of the Legislative Permanent School Fund Commission and school trust lands director
and staff with a cost certification method using revenues generated by the permanent
school fund lands.

    Sec. 12. EFFECTIVE DATE.
Sections 1 to 10 are effective July 1, 2013.
Presented to the governor April 25, 2012
Signed by the governor April 28, 2012, 9:56 p.m.

700 State Office Building, 100 Rev. Dr. Martin Luther King Jr. Blvd., St. Paul, MN 55155 ♦ Phone: (651) 296-2868 ♦ TTY: 1-800-627-3529 ♦ Fax: (651) 296-0569