Agency: School & Institutional Trust Lands

Line Item: School & Inst Trust Lands

Function

The state is divided into townships that are six miles square. Each of these township squares is divided into 36 sections, each being one mile square. Under the terms of the Enabling Act, as part of Congress' granting Utah statehood, the federal government awarded sections 2, 16, 32, and 36 in each thirty-six section township of Utah for the support of the common schools. The state was also given 1.6 million acres to fund higher and special education needs within the state.

It is important to understand that these lands are not like other state lands but are granted to the state in trust for the benefit of the various beneficiaries (primarily public education). State law says that 'As trustee, the state must manage the lands and revenues generated from the lands in the most prudent and profitable manner possible, and not for any purpose inconsistent with the best interests of the trust beneficiaries… the beneficiaries do not include other governmental institutions or agencies, the public at large, or the general welfare of this state' (UCA 53C-1-102).

SITLA was established under UCA 53C-1-201 as a quasi-governmental independent state agency to manage all school and institutional trust lands and associated assets. A seven-member Board of Trustees establishes the agency's policies.

Administrative expenditures are funded from the various beneficiary land use revenues as allocated based on the beneficiary's pro-rata share of mineral, surface, and miscellaneous income.

Statutory Authority

The following laws govern operations of SITLA:

• UCA Title 53C is known as the 'School and Institutional Trust Lands Management Act.' Highlights include:

• The state has a duty of undivided loyalty to the beneficiaries
• The administration is an independent state agency and not a Division of any other department
• The administration is subject to most of the usual legislative and executive department controls. Certain exceptions are made in matters of confidentiality, rulemaking, personnel issues, and the procurement code.
• The board may create an annual incentive and bonus plan for the director and other administration employees designated by the board, based upon reaching financial performance goals and other measurable goals
• The administration is managed by a director appointed by the board of trustees

• UCA 53C-1-202 creates the seven-member Board of Trustees. Members are appointed on a nonpartisan basis by the governor with the consent of the Senate.
• UCA 53C-1-204 spells out requirements for the policies established by the board.
• UCA 53C-1-Part 3 lays out the responsibilities of the director
• UCA 53C-1-305 requires the attorney general to represent the board, director, or administration in any legal matter. However, subsection (3) allows the administration, with consent of the attorney general, to employ in-house legal counsel.
• UCA 53C-2-Part 4 details disposition of mineral leases from trust lands.
• UCA 53C-3-Part 1 creates the Land Grant Management Fund. Revenue comes from:

• All revenues derived from trust lands except revenues from the sales of those lands
• All interest earned by the fund
• All revenues obtained from other activities of the agency
• Money from sales of school trust lands is deposited in the Permanent State School Fund

• UCA 53C-3-101 allows the director to expend monies from the fund in accordance with the approved budget to support the agency. Any unspent amount is distributed back to the beneficiaries.
• UCA 53C-3-104 requires money from the sale or management of reservoir lands to be deposited in the Water Resources Construction Fund created in UCA 73-10-8.
• UCA 53C-3-Part 2 details distributions of mineral bonus, rental, and royalty revenues gained from lands acquired by state/federal land exchanges.

Intent Language

It is the intent of the Legislature to allow SITLA to purchase one vehicle in FY2009.

Funding Detail

Funding for SITLA operations is provided through the Land Grant Management Fund (an enterprise fund), which consists of:

• Revenues provided from trust land activities other than land sales. (Revenues from land sales go directly to the nonexpendable trust fund of the land's designated beneficiary).
• Revenues from other activities of the Administration.

Land use revenues include licenses, permit fees, royalties, and lease revenues charged for the use of trust lands. In exchange, SITLA allows the use of selected trust lands for activities such as grazing, logging, mineral extraction, and development.

Revenues that have not been appropriated for use by SITLA are distributed directly to the beneficiaries or the Permanent School Fund. Unexpended appropriations to SITLA are also distributed to the beneficiaries or to their trust funds.

In 1999 SITLA traded 377,000 acres of trust lands isolated within federal lands for $50 million cash, $13 million in future coal revenue, coal and coal bed methane, and 139,000 acres of land or surface/mineral rights with readily developable commercial and mineral value. Today those acquired lands are the base of the agency's single largest revenue source, natural gas royalties.

The State Treasurer handles SITLA's investments. Interest and dividend income from the Permanent School Fund is directly distributed to individual schools. Passage of Constitutional Amendment Number One (effective January 1, 2003), eliminated the requirement that a portion of interest earnings be held back as a protection against inflation, and clarified that stock dividends are part of the 'interest' earnings that may be distributed.

Program: Board

Function

The seven-member Board of Trustees is created in Utah Code 53C-1-202. Their purpose as stated in section 53C-1-204 of the code is to "...establish policies for the management of the School and Institutional Trust Lands Administration."

Utah law requires the policies to:

• be consistent with the Utah Enabling Act, the Utah Constitution, and state law;
• reflect undivided loyalty to the beneficiaries consistent with fiduciary duties;
• require the return of not less than fair market value for the use, sale, or exchange of school and institutional trust assets;
• seek to optimize trust land revenues and increase the value of trust land holdings consistent with the balancing of short and long-term interests, so that long-term benefits are not lost in an effort to maximize short-term gains;
• maintain the integrity of the trust and prevent the misapplication of its lands and its revenues; and
• have regard for and seek General Fund appropriation compensation for the general public's use of natural and cultural resources consistent with the duties of the administration as trustee for the beneficiaries.

Funding Detail

The single largest expenditure in this program is the Board's incentive award package for senior management.

Program: Director

Funding Detail

The Director of the School and Institutional Trust Lands Administration is required by statute to "...manage the School and Institutional Trust Lands Administration in fulfillment of its purpose." That purpose has been identified in UCA 53C-1-102 to "...manage the lands and revenues generated from the lands in the most prudent and profitable manner possible, and not for any purpose inconsistent with the best interest of the trust beneficiaries."

The office consists of the director, associate director, block planner, the public affairs officer, and an office technician. Aside from personal services, the largest costs consist of consulting contracts.

Program: Public Relations

Function

This program's goal is to gain the necessary political and public support for SITLA to accomplish its mission: 'to administer the trust lands prudently and profitably for Utah's schoolchildren.'

Funding Detail

Program: Administration

Function

This program includes the department administrative assistant and the office staff that provide support for the rest of the agency. Costs for rent, office supplies, and insurance are paid out of this program. Staff in this program also supports the Board of Trustees.

Funding Detail

This program includes the department administrative assistant and the office staff that provide support for the rest of the agency. Costs for rent, office supplies, and insurance are paid out of this program. Staff in this program also supports the Board of Trustees.

Program: Accounting

Function

This program accounts for all revenue and expenditures of the agency from trust lands. It is responsible for developing and coordinating the budget and the review process before the Board of Trustees and other committees. Additional responsibilities include setting up, creating and maintaining financial data, payroll, coordinating investments with the State Treasurer, and managing the business system for the agency.

Funding Detail

Program: Auditing

Function

This program consists of auditors who ensure compliance with lease terms, contracts, rules, internal policies, and statutes. If inconsistencies are found, the program issues assessments, recommends solutions to the director and board, and works with the agency attorneys in collecting the assessments.

Funding Detail

Program: Mining

Function

This program manages and administers approximately 4.6 million acres of subsurface mineral rights held in trust lands. Mineral assets must be managed under strict fiduciary guidelines with focus on generating revenue today and protecting long term assets for the future. The program engages in marketing its mineral assets, enforcing existing contractual rights, leasing, and attracting industry to trust lands for exploration and development.

Funding Detail

Program: Surface

Function

This program administers the surface uses of the trust lands. Surface activities include leasing for such uses as telecommunications sites, industrial and commercial enterprises and residential purposes, as well as easements, permits, rights-of-way, and sales.

Funding Detail

Program: Development - Operating

Funding Detail

The budget reflected here represents the cost of operating the Development program.

Program: Legal/Contracts

Function

This program defends and prosecutes lawsuits and pursues administrative adjudication involving the agency, drafts and/or reviews regulations, and provides general legal advice to the agency. Although statute requires most agencies to use attorneys from the Attorney General's office, the Legislature has recognized the need for SITLA to keep a separate legal staff.

Funding Detail

Program: Data Processing

Function

This program is a support function. The agency depends heavily on the use of data processing to support its ability to maximize revenues. The program operates the agency's fiscal, land management, and Geographic Information System software.

Funding Detail

Program: Forestry and Grazing

Function

This program administers the renewable resources of approximately 3.4 million acres of trust land. Activities include issuing permits for grazing, harvesting small forest products, holding timber sales, and special use leases for agricultural products. This need is met by staff and contract labor that receive and process applications, inventory vegetation production for grazing, and inventory and mark timber for sales.

Funding Detail

Program: Development - Capital

Function

The objective of this program is to identify and facilitate real estate development opportunities on trust land parcels.

Funding Detail

In FY 2008 the Capital Development program was converted into a separate line item. For funding details of this program after FY 2007, please refer to SITLA Capital line item.