Second Substitute H.B. 168
8 Brad L. Dee
9 Gregory H. Hughes
10 Don L. Ipson
11 Rebecca Chavez-Houck
12 Joel K. Briscoe
13 Jacob L. Anderegg
14 Jerry B. Anderson
15 Stewart Barlow
16 Roger E. Barrus
17 Jim Bird
18 LaVar Christensen
19 Kay J. Christofferson
20 Jon Cox
21 Rich Cunningham
22 Jack R. Draxler
23 Susan Duckworth
24 Rebecca P. Edwards
25 Steve Eliason
Janice M. FisherGage Froerer
Francis D. Gibson
Brian M. Greene
Richard A. Greenwood
Stephen G. Handy
Lynn N. Hemingway
Eric K. Hutchings
Michael S. Kennedy
Brian S. King
Bradley G. Last
Dana L. Layton
David E. Lifferth
John G. Mathis
Kay L. McIff
Mike K. McKellCarol Spackman Moss
Merrill F. Nelson
Michael E. Noel
Lee B. Perry
Jeremy A. Peterson
Val L. Peterson
Dixon M. Pitcher
Marie H. Poulson
Edward H. Redd
Marc K. Roberts
Douglas V. Sagers
V. Lowry Snow
Robert M. Spendlove
26 Jon E. Stanard
27 Keven J. Stratton
28 John R. WestwoodMark A. Wheatley
Ryan D. Wilcox
Larry B. WileyBrad R. Wilson 29
30 LONG TITLE
31 General Description:
32 This bill modifies and enacts provisions relating to the management of state trust lands
33 and funds.
34 Highlighted Provisions:
35 This bill:
36 . modifies provisions relating to the director of the School Children's Trust Section,
38 . the required qualifications of the director;
39 . the removal of the director; and
40 . the duties of the director;
41 . modifies provisions relating to the School Children's Trust Section;
42 . requires the School Children's Trust Section to provide staff support to the
43 nominating committee for board members of the School and Institutional Trust
44 Lands Administration;
45 . enacts the School and Institutional Trust Fund Management Act;
46 . establishes the School and Institutional Trust Fund Office, a board of trustees of the
47 Office, and the position of director of the office;
48 . provides for the management of a fund consisting of money from the sale or use of
49 land granted to the state under the Utah Enabling Act and other proceeds, revenue,
50 and assets;
51 . provides for a nominating committee for members of the School and Institutional
52 Trust Fund Board of Trustees;
53 . provides for funding office operations; and
54 . repeals Investment of Land Grant Trust Fund Money provisions.
55 Money Appropriated in this Bill:
57 Other Special Clauses:
58 This bill takes effect on July 1, 2014.
59 Utah Code Sections Affected:
61 53A-16-101.6 , as enacted by Laws of Utah 2012, Chapter 224
62 53C-1-201 , as last amended by Laws of Utah 2013, Chapters 220 and 412
63 53C-1-203 , as last amended by Laws of Utah 2012, Chapter 224
64 53C-3-102 , as enacted by Laws of Utah 1994, Chapter 294
65 63E-1-102 , as last amended by Laws of Utah 2013, Chapter 220
67 53D-1-101 , Utah Code Annotated 1953
68 53D-1-102 , Utah Code Annotated 1953
69 53D-1-103 , Utah Code Annotated 1953
70 53D-1-104 , Utah Code Annotated 1953
71 53D-1-105 , Utah Code Annotated 1953
72 53D-1-201 , Utah Code Annotated 1953
73 53D-1-202 , Utah Code Annotated 1953
74 53D-1-203 , Utah Code Annotated 1953
75 53D-1-301 , Utah Code Annotated 1953
76 53D-1-302 , Utah Code Annotated 1953
77 53D-1-303 , Utah Code Annotated 1953
78 53D-1-304 , Utah Code Annotated 1953
79 53D-1-401 , Utah Code Annotated 1953
80 53D-1-402 , Utah Code Annotated 1953
81 53D-1-403 , Utah Code Annotated 1953
82 53D-1-501 , Utah Code Annotated 1953
83 53D-1-502 , Utah Code Annotated 1953
84 53D-1-503 , Utah Code Annotated 1953
85 53D-1-601 , Utah Code Annotated 1953
86 53D-1-602 , Utah Code Annotated 1953
87 53D-1-603 , Utah Code Annotated 1953
88 53D-1-604 , Utah Code Annotated 1953
89 53D-1-701 , Utah Code Annotated 1953
90 53D-1-702 , Utah Code Annotated 1953
92 51-7a-101 , as last amended by Laws of Utah 2011, Chapter 342
93 51-7a-102 , as enacted by Laws of Utah 2006, Chapter 277
94 51-7a-201 , as enacted by Laws of Utah 2006, Chapter 277
95 51-7a-202 , as enacted by Laws of Utah 2006, Chapter 277
96 51-7a-301 , as last amended by Laws of Utah 2010, Chapter 286
97 51-7a-302 , as enacted by Laws of Utah 2006, Chapter 277
99 Be it enacted by the Legislature of the state of Utah:
100 Section 1. Section 53A-16-101.6 is amended to read:
101 53A-16-101.6. Creation of School Children's Trust Section -- Duties.
102 (1) As used in this section:
103 (a) "School and institutional trust lands" is as defined in Section 53C-1-103 .
104 (b) "Section" means the School Children's Trust Section created in this section.
105 (c) "Trust" means:
106 (i) the School LAND Trust Program created in Section 53A-16-101.5 ; and
107 (ii) the lands and funds associated with the trusts described in Subsection
108 53C-1-103 (7).
109 (2) There is established a School Children's Trust Section within the State Office of
111 (3) (a) The section shall have a director.
112 (b) The director shall have professional qualifications and expertise in the areas
113 generating revenue to the trust, including:
114 (i) economics;
115 (ii) energy development;
116 (iii) finance;
117 (iv) investments;
121 (viii) risk management; and
123 (c) The director shall be appointed as provided in this Subsection (3).
124 (d) The School and Institutional Trust Lands Board of Trustees nominating committee
125 shall submit to the State Board of Education the name of one person to serve as director.
126 (e) The State Board of Education may:
127 (i) appoint the person described in Subsection (3)(d) to serve as director; or
128 (ii) deny the appointment of the person described in Subsection (3)(d) to serve as
130 (f) If the State Board of Education denies an appointment under this Subsection (3):
131 (i) the State Board of Education shall provide in writing one or more reasons for the
132 denial to the School and Institutional Trust Lands Board of Trustees nominating committee;
134 (ii) the School and Institutional Trust Lands Board of Trustees nominating committee
135 and the State Board of Education shall follow the procedures and requirements of this
136 Subsection (3) until the State Board of Education appoints a director.
139 (g) The State Board of Education may remove the director only by majority vote of a
140 quorum in an open and public meeting after proper notice and the inclusion of the removal item
141 on the agenda.
142 (4) The State Board of Education shall make rules regarding:
143 (a) regular reporting from the School Children's Trust Section director to the State
144 Board of Education, to allow the State Board of Education to fulfill its duties in representing
145 the trust beneficiaries; and
146 (b) the day-to-day reporting of the School Children's Trust Section director.
147 (5) (a) The director shall annually submit a proposed section budget to the State Board
148 of Education.
149 (b) After approving a section budget, the State Board of Education shall propose the
150 approved budget to the Legislature.
151 (6) The director is entitled to attend any presentation, discussion, meeting, or other
152 gathering concerning the trust, subject to:
153 (a) provisions of law prohibiting the director's attendance to preserve confidentiality; or
154 (b) other provisions of law that the director's attendance would violate.
157 the trust consistent with the state's perpetual obligations under:
158 (a) the Utah Enabling Act;
159 (b) the Utah Constitution;
160 (c) state statute; and
161 (d) standard trust principles described in Section 53C-1-102 .
163 (a) productive use of school and institutional trust lands[
164 (b) the efficient and prudent investment of funds managed by the School and
165 Institutional Trust Fund Office, created in Section 53D-1-201 .
167 (a) on behalf of current and future beneficiaries of the trust, school community
168 councils, schools, and school districts;
169 (b) on federal, state, and local land decisions and policies that affect the trust; and
170 (c) to:
171 (i) the School and Institutional Trust Lands Administration;
172 (ii) the School and Institutional Trust Lands Board of Trustees;
173 (iii) the Legislature;
175 (iv) the School and Institutional Trust Fund Office, created in Section 53D-1-201 ;
176 (v) the School and Institutional Trust Fund Board of Trustees, created in Section
177 53D-1-301 ;
182 profitable management of the trust and report annually to the State Board of Education and the
185 described in Subsections [
186 Section 2. Section 53C-1-201 is amended to read:
187 53C-1-201. Creation of administration -- Purpose -- Director -- Participation in
188 Risk Management Fund.
189 (1) (a) There is established within state government the School and Institutional Trust
190 Lands Administration.
191 (b) The administration shall manage all school and institutional trust lands and assets
192 within the state, except as otherwise provided in Title 53C, Chapter 3, Deposit and Allocation
193 of Revenue from Trust Lands, and [
194 School and Institutional Trust Fund Management Act.
195 (2) The administration is an independent state agency and not a division of any other
197 (3) (a) It is subject to the usual legislative and executive department controls except as
198 provided in this Subsection (3).
199 (b) (i) The director may make rules as approved by the board that allow the
200 administration to classify a business proposal submitted to the administration as protected
201 under Section 63G-2-305 , for as long as is necessary to evaluate the proposal.
202 (ii) The administration shall return the proposal to the party who submitted the
203 proposal, and incur no further duties under Title 63G, Chapter 2, Government Records Access
204 and Management Act, if the administration determines not to proceed with the proposal.
205 (iii) The administration shall classify the proposal pursuant to law if it decides to
206 proceed with the proposal.
207 (iv) Section 63G-2-403 does not apply during the review period.
208 (c) The director shall make rules in compliance with Title 63G, Chapter 3, Utah
209 Administrative Rulemaking Act, except that the administration is not subject to Subsections
210 63G-3-301 (6) and (7) and Section 63G-3-601 , and the director, with the board's approval, may
211 establish a procedure for the expedited approval of rules, based on written findings by the
212 director showing:
213 (i) the changes in business opportunities affecting the assets of the trust;
214 (ii) the specific business opportunity arising out of those changes which may be lost
215 without the rule or changes to the rule;
216 (iii) the reasons the normal procedures under Section 63G-3-301 cannot be met without
217 causing the loss of the specific opportunity;
218 (iv) approval by at least five board members; and
219 (v) that the director has filed a copy of the rule and a rule analysis, stating the specific
220 reasons and justifications for its findings, with the Division of Administrative Rules and
221 notified interested parties as provided in Subsection 63G-3-301 (10).
222 (d) (i) The administration shall comply with Title 67, Chapter 19, Utah State Personnel
223 Management Act, except as provided in this Subsection (3)(d).
224 (ii) The board may approve, upon recommendation of the director, that exemption for
225 specific positions under Subsections 67-19-12 (2) and 67-19-15 (1) is required in order to enable
226 the administration to efficiently fulfill its responsibilities under the law. The director shall
227 consult with the executive director of the Department of Human Resource Management prior
228 to making such a recommendation.
229 (iii) The positions of director, deputy director, associate director, assistant director,
230 legal counsel appointed under Section 53C-1-305 , administrative assistant, and public affairs
231 officer are exempt under Subsections 67-19-12 (2) and 67-19-15 (1).
232 (iv) Salaries for exempted positions, except for the director, shall be set by the director,
233 after consultation with the executive director of the Department of Human Resource
234 Management, within ranges approved by the board. The board and director shall consider
235 salaries for similar positions in private enterprise and other public employment when setting
236 salary ranges.
237 (v) The board may create an annual incentive and bonus plan for the director and other
238 administration employees designated by the board, based upon the attainment of financial
239 performance goals and other measurable criteria defined and budgeted in advance by the board.
240 (e) The administration shall comply with Title 63G, Chapter 6a, Utah Procurement
241 Code, except where the board approves, upon recommendation of the director, exemption from
242 the Utah Procurement Code, and simultaneous adoption of rules under Title 63G, Chapter 3,
243 Utah Administrative Rulemaking Act, for procurement, which enable the administration to
244 efficiently fulfill its responsibilities under the law.
245 (f) (i) Except as provided in Subsection (3)(f)(ii), the administration is not subject to
246 the fee agency requirements of Section 63J-1-504 .
247 (ii) The following fees of the administration are subject to the requirements of Section
248 63J-1-504 : application, assignment, amendment, affidavit for lost documents, name change,
249 reinstatement, grazing nonuse, extension of time, partial conveyance, patent reissue, collateral
250 assignment, electronic payment, and processing.
251 (4) The administration is managed by a director of school and institutional trust lands
252 appointed by a majority vote of the board of trustees with the consent of the governor.
253 (5) (a) The board of trustees shall provide policies for the management of the
254 administration and for the management of trust lands and assets.
255 (b) The board shall provide policies for the ownership and control of Native American
256 remains that are discovered or excavated on school and institutional trust lands in consultation
257 with the Division of Indian Affairs and giving due consideration to Title 9, Chapter 9, Part 4,
258 Native American Grave Protection and Repatriation Act. The director may make rules in
259 accordance with Title 63G, Chapter 3, Utah Administrative Rulemaking Act, to implement
260 policies provided by the board regarding Native American remains.
261 (6) In connection with joint ventures and other transactions involving trust lands and
262 minerals approved under Sections 53C-1-303 and 53C-2-401 , the administration, with board
263 approval, may become a member of a limited liability company under Title 48, Chapter 2c,
264 Utah Revised Limited Liability Company Act, or Title 48, Chapter 3a, Utah Revised Uniform
265 Limited Liability Company Act, as appropriate pursuant to Section 48-3a-1405 and is
266 considered a person under Section 48-2c-102 or Section 48-3a-102 .
267 (7) Subject to the requirements of Subsection 63E-1-304 (2), the administration may
268 participate in coverage under the Risk Management Fund created by Section 63A-4-201 .
269 Section 3. Section 53C-1-203 is amended to read:
270 53C-1-203. Board of trustees nominating committee -- Composition --
271 Responsibilities -- Per diem and expenses.
272 (1) There is established an 11 member board of trustees nominating committee.
273 (2) (a) The State Board of Education shall appoint five members to the nominating
274 committee from different geographical areas of the state.
275 (b) The governor shall appoint five members to the nominating committee on or before
276 the December 1 of the year preceding the vacancy on the nominating committee as follows:
277 (i) one individual from a nomination list of at least two names of individuals
278 knowledgeable about institutional trust lands submitted on or before the October 1 of the year
279 preceding the vacancy on the nominating committee by the University of Utah and Utah State
280 University on an alternating basis every four years;
281 (ii) one individual from a nomination list of at least two names submitted by the Utah
282 Farm Bureau in consultation with the Utah Cattleman's Association and the Utah Wool
283 Growers' Association on or before the October 1 of the year preceding the vacancy on the
284 nominating committee;
285 (iii) one individual from a nomination list of at least two names submitted by the Utah
286 Petroleum Association on or before the October 1 of the year preceding the vacancy on the
287 nominating committee;
288 (iv) one individual from a nomination list of at least two names submitted by the Utah
289 Mining Association on or before the October 1 of the year preceding the vacancy on the
290 nominating committee; and
291 (v) one individual from a nomination list of at least two names submitted by the
292 executive director of the Department of Natural Resources after consultation with statewide
293 wildlife and conservation organizations on or before the October 1 of the year preceding the
294 vacancy on the nominating committee.
295 (c) The president of the Utah Association of Counties shall designate the chair of the
296 Public Lands Steering Committee, who must be an elected county commissioner or councilor,
297 to serve as the eleventh member of the nominating committee.
298 (3) (a) Except as required by Subsection (3)(b), each member shall serve a four-year
300 (b) Notwithstanding the requirements of Subsection (3)(a), the state board and the
301 governor shall, at the time of appointment or reappointment, adjust the length of terms to
302 ensure that the terms of committee members are staggered so that approximately half of the
303 committee is appointed every two years.
304 (c) When a vacancy occurs in the membership for any reason, the replacement shall be
305 appointed for the unexpired term.
306 (4) The nominating committee shall select a chair and vice chair from its membership
307 by majority vote.
308 (5) (a) The nominating committee shall nominate at least two candidates for each
309 position or vacancy which occurs on the board of trustees except for the governor's appointee
310 under Subsection 53C-1-202 (5).
311 (b) The nominations shall be by majority vote of the committee.
312 (6) A member may not receive compensation or benefits for the member's service, but
313 may receive per diem and travel expenses in accordance with:
314 (a) Section 63A-3-106 ;
315 (b) Section 63A-3-107 ; and
316 (c) rules made by the Division of Finance pursuant to Sections 63A-3-106 and
317 63A-3-107 .
318 (7) The School Children's Trust Section, established in Section 53A-16-101.6 , shall
319 provide staff support to the nominating committee.
320 Section 4. Section 53C-3-102 is amended to read:
321 53C-3-102. Deposit and allocation of money received.
322 (1) (a) The director shall pay to the [
323 Office, created in Section 53D-1-201 , all money received, accompanied by a statement
324 showing the respective sources of this money.
325 (b) Each source shall be classified as to sales, rentals, royalties, interest, fees, penalties,
326 and forfeitures.
327 (2) All money received from the sale of lands granted by Section 6 of the Utah
328 Enabling Act for the support of the common schools, all money received from the sale of lands
329 selected in lieu of those lands, all money received from the United States under Section 9 of the
330 Utah Enabling Act, all money received from the sale of lands or other securities acquired by the
331 state from the investment of those funds, all sums paid for fees, all forfeitures, and all penalties
332 paid in connection with these sales shall be deposited in the Permanent State School Fund.
333 (3) All money received from the sale or other disposition of institutional trust lands
334 granted to the state by the United States under Section 7, 8, or 12 of the Utah Enabling Act, and
335 all sums paid for fees, forfeitures, and penalties received in connection with these sales or
336 dispositions shall go to the respective permanent funds established for the benefit of those
337 institutions under the Utah Enabling Act and the Utah Constitution.
338 (4) (a) All lands acquired by the state through foreclosure of mortgages securing school
339 or institutional trust funds or through deeds from mortgagors or owners of those lands shall
340 become a part of the respective school or institutional trust lands.
341 (b) All money received from these lands shall be treated as money received from
342 school or institutional trust lands.
343 (5) All money received from the sale of lands acquired by the state through foreclosure
344 of mortgages securing trust funds or through deeds from mortgagors or owners of such lands,
345 whether a profit is realized or a loss sustained on the principal invested, shall be regarded as
346 principal and shall go into the principal or permanent fund from which it was originally taken
347 in reimbursement of that fund, with profits being used to offset losses.
348 (6) (a) All money received by the director as a first or down payment on applications to
349 purchase, permit, or lease trust lands or minerals shall be paid to the state treasurer and held in
350 suspense pending final action on those applications.
351 (b) After final action the payments received under Subsection (6)(a) shall either be
352 credited to the appropriate fund or account, or refunded to the applicant in accordance with the
353 action taken.
354 Section 5. Section 53D-1-101 is enacted to read:
358 53D-1-101. Title.
359 (1) This title is known as "School and Institutional Trust Fund."
360 (2) This chapter is known as the "School and Institutional Trust Fund Management
362 Section 6. Section 53D-1-102 is enacted to read:
363 53D-1-102. Definitions.
364 (1) "Account" means the School and Institutional Trust Fund Management Account,
365 created in Section 53D-1-203 .
366 (2) "Beneficiaries":
367 (a) means those for whose benefit the trust fund is managed and preserved, consistent
368 with the enabling act, the Utah Constitution, and state law; and
369 (b) does not include other government institutions or agencies, the public at large, or
370 the general welfare of the state.
371 (3) "Board" means the board of trustees established in Section 53D-1-301 .
372 (4) "Director" means the director of the office.
373 (5) "Enabling act" means the act of Congress, dated July 16, 1894, enabling the people
374 of Utah to form a constitution and state government and to be admitted into the Union.
375 (6) "Nominating committee" means the committee established under Section
376 53D-1-501 .
377 (7) "Office" means the School and Institutional Trust Fund Office, created in Section
378 53D-1-201 .
379 (8) "School children's trust section" means the School Children's Trust Section within
380 the State Office of Education, established in Section 53A-16-101.6 .
381 (9) "Trust fund" means money derived from:
382 (a) the sale or use of land granted to the state under Sections 6, 8, and 12 of the
383 Enabling Act;
384 (b) proceeds referred to in Section 9 of the Enabling Act from the sale of public land;
386 (c) revenue and assets referred to in Utah Constitution, Article X, Section 5,
387 Subsections (1)(c), (e), and (f).
388 Section 7. Section 53D-1-103 is enacted to read:
389 53D-1-103. Application of other law.
390 (1) The office, board, and nominating committee are subject to Title 52, Chapter 4,
391 Open and Public Meetings Act.
392 (2) Subject to Subsection 63E-1-304 (2), the office may participate in coverage under
393 the Risk Management Fund, created in Section 63A-4-201 .
394 (3) The office and board are subject to Title 63G, Chapter 2, Government Records
395 Access and Management Act.
396 (4) (a) In making rules under this chapter, the director is subject to and shall comply
397 with Title 63G, Chapter 3, Utah Administrative Rulemaking Act, except as provided in
398 Subsection (4)(b).
399 (b) Subsections 63G-3-301 (6) and (7) and Section 63G-3-601 do not apply to the
400 director's making of rules under this chapter.
401 (5) Title 63G, Chapter 7, Governmental Immunity Act of Utah, applies to a board
402 member to the same extent as it applies to an employee, as defined in Section 63G-7-102 .
403 (6) (a) A board member, the director, and an office employee or agent are subject to:
404 (i) Title 67, Chapter 16, Utah Public Officers' and Employees' Ethics Act; and
405 (ii) other requirements that the board establishes.
406 (b) In addition to any restrictions or requirements imposed under Subsection (6)(a), a
407 board member, the director, and an office employee or agent may not directly or indirectly
408 acquire an interest in the trust fund or receive any direct benefit from any transaction dealing
409 with trust fund money.
410 (7) (a) Except as provided in Subsection (7)(b), the office shall comply with Title 67,
411 Chapter 19, Utah State Personnel Management Act.
412 (b) (i) Upon a recommendation from the director after the director's consultation with
413 the executive director of the Department of Human Resource Management, the board may
414 provide that specified positions in the office are exempt from Section 67-19-12 and the career
415 service provisions of Title 67, Chapter 19, Utah State Personnel Management Act, as provided
416 in Subsection 67-19-15 (1), if the board determines that exemption is required for the office to
417 fulfill efficiently its responsibilities under this chapter.
418 (ii) The director position is exempt from Section 67-19-12 and the career service
419 provisions of Title 67, Chapter 19, Utah State Personnel Management Act, as provided in
420 Subsection 67-19-15 (1).
421 (iii) (A) After consultation with the executive director of the Department of Human
422 Resource Management, the director shall set salaries for positions that are exempted under
423 Subsection (7)(b)(i), within ranges that the board approves.
424 (B) In approving salary ranges for positions that are exempted under Subsection
425 (7)(b)(i), the board shall consider salaries for similar positions in private enterprise and other
426 public employment.
427 (8) The office is subject to legislative appropriation, to executive branch budgetary
428 review and recommendation, and to legislative and executive branch review.
429 Section 8. Section 53D-1-104 is enacted to read:
430 53D-1-104. Attorney general representation.
431 (1) The attorney general shall:
432 (a) represent the board, director, and office in any legal action relating to the trust fund;
433 (b) undertake suits for damages and any other necessary or appropriate relief in the
434 name of the trust fund and the state; and
435 (c) ensure that legal counsel assigned to provide legal counsel to the board, director,
436 and office is present at all board meetings.
437 (2) The attorney general may institute an action to enforce this chapter or to protect the
438 interests of beneficiaries.
439 Section 9. Section 53D-1-105 is enacted to read:
440 53D-1-105. Annual audit by state auditor.
441 (1) The state auditor shall conduct an annual audit of the trust fund money and assets
442 on a fund by fund basis, including:
443 (a) an evaluation of the independent custodial arrangements made for the management
444 and investment of trust fund money and assets; and
445 (b) a verification of the accuracy of the office's report of returns generated on the
446 office's investments.
447 (2) The state auditor shall:
448 (a) report the results of an audit under this section in writing; and
449 (b) make the written audit report available to the public.
450 (3) The state auditor shall consult with the board at least annually as to whether
451 additional matters should be included within the scope of the annual audit.
452 Section 10. Section 53D-1-201 is enacted to read:
454 53D-1-201. School and Institutional Trust Fund Office -- Status -- Duties.
455 (1) There is created within state government the School and Institutional Trust Fund
457 (2) The office is an independent state agency within the executive branch and is not a
458 division of any other executive branch department.
459 (3) The office shall manage the trust fund.
460 (4) No later than September 1 of each year, the office shall provide to the Division of
461 Finance financial information for the prior fiscal year that the Division of Finance requests for
462 financial reporting purposes.
463 Section 11. Section 53D-1-202 is enacted to read:
464 53D-1-202. Access to office records and personnel.
465 (1) The office shall provide board members and the director of the school children's
466 trust section access to all office records and personnel as necessary for board members and the
467 director of the school children's trust section to fulfill their responsibilities to ensure that the
468 office is in full compliance with applicable law and policies.
469 (2) If the director requires, board members and the director of the school children's
470 trust section shall maintain confidentiality of information they obtain from office records and
472 Section 12. Section 53D-1-203 is enacted to read:
473 53D-1-203. Funding of office operations.
474 (1) There is created an enterprise fund known as the School and Institutional Trust
475 Fund Management Account.
476 (2) The account is funded by money deposited into the account as provided in
477 Subsection (3).
478 (3) The director shall deposit into the account an amount of money from the earnings
479 from trust fund assets equal to the annual appropriation that the Legislature makes to the office,
480 to pay for the office's operating costs.
481 (4) (a) The office may use money in the account to pay for the office's operting costs.
482 (b) If the amount of money deposited into the account under Subsection (3) in any year
483 exceeds the amount required by the office during that year to fund its operations, the office
484 shall distribute that excess money proportionately to the various funds established for the
485 beneficiaries of land grants under the enabling act, based on the balances of those funds as of
486 June 30.
487 (5) (a) Before distributing earnings from trust fund assets, the office may deduct any
488 audit, risk management, consulting, equipment, legal, and custodial costs and management fees
489 incurred in managing the trust fund assets.
490 (b) The costs and fees described in Subsection (5)(a) are separate from and in addition
491 to the office's operating costs that are paid from the account.
492 Section 13. Section 53D-1-301 is enacted to read:
494 53D-1-301. Board of trustees -- Creation -- Membership.
495 (1) There is created a School and Institutional Trust Fund Board of Trustees.
496 (2) The board consists of:
497 (a) the state treasurer; and
498 (b) four additional members who are appointed by the state treasurer on a nonpartisan
499 basis from a list of at least two qualified candidates per position, nominated by the nominating
500 committee, as provided in Section 53D-1-503 .
501 (3) The state treasurer shall appoint members under Subsection (2)(b) who possess:
502 (a) outstanding professional qualifications pertinent to the prudent investment of trust
503 fund money; and
504 (b) expertise in institutional investment management.
505 (4) (a) The term of a board member under Subsection (2)(b) is six years.
506 (b) Notwithstanding Subsection (4)(a), the nominating committee shall stagger terms
507 of initial board members so that the term of not more than one member expires in any year.
508 (c) A board member may not serve consecutive terms, except that:
509 (i) a board member whose term is less than six years because of the staggering of terms
510 under Subsection (4)(b) may serve a full consecutive term after the completion of the initial
511 term; and
512 (ii) a member appointed to fill a vacancy may serve a full consecutive term after filling
513 a previous unexpired term.
514 (d) A board member shall serve until a successor is appointed, confirmed, and
516 (5) Before assuming duties as a board member, a member shall take an oath of office
517 that includes the following:
518 "I solemnly swear to carry out my duties as a member of the School and Institutional
519 Trust Fund Board of Trustees and to act with undivided loyalty to the beneficiaries of the trust
520 fund that the board oversees, to the best of my abilities and consistent with the law."
521 (6) The state treasurer may remove a board member for cause, subject to the
522 affirmative vote of at least two other board members, besides the state treasurer.
523 (7) The state treasurer shall fill a vacancy in the same manner as the initial appointment
524 under Subsection (2)(b)(i).
525 (8) A board member may not receive any compensation or benefits for the member's
526 service, but the member may receive per diem and travel expenses in accordance with:
527 (a) Section 63A-3-106 ;
528 (b) Section 63A-3-107 ; and
529 (c) rules made by the Division of Finance pursuant to Sections 63A-3-106 and
530 63A-3-107 .
531 Section 14. Section 53D-1-302 is enacted to read:
532 53D-1-302. Board chair and vice chair -- Quorum.
533 (1) (a) The state treasurer is the chair of the board.
534 (b) The chair shall faithfully represent the will of the board to the extent the board's
535 will is consistent with state law.
536 (2) (a) The board shall annually select a vice chair from its membership.
537 (b) The vice chair shall act as chair in the absence of the chair.
538 (3) (a) Three members of the board constitute a quorum for the purpose of holding a
540 (b) Unless otherwise specified in this title, an action of the board requires the
541 affirmative vote of at least three members.
542 Section 15. Section 53D-1-303 is enacted to read:
543 53D-1-303. Board authority and duties.
544 (1) The board has broad policymaking authority over the office and the trust fund.
545 (2) (a) The board shall establish policies for the management of:
546 (i) the office, including:
547 (A) an investment management code of conduct and associated compliance policy;
548 (B) a policy for the strategic allocation of trust fund assets;
549 (C) a soft dollar policy; and
550 (D) a policy articulating the board's investment philosophy for trust fund assets; and
551 (ii) the trust fund.
552 (b) Policies that the board adopts shall:
553 (i) be consistent with the enabling act, the Utah Constitution, and other applicable state
555 (ii) reflect undivided loyalty to the beneficiaries consistent with fiduciary duties;
556 (iii) be designed to prudently optimize trust fund returns and increase the value of the
557 trust fund, consistent with the balancing of short-term and long-term interests, so that the
558 fiduciary duty of intergenerational equity is met;
559 (iv) be designed to maintain the integrity of the trust fund and prevent the
560 misapplication of money in the trust fund;
561 (v) enable the board to oversee the activities of the office; and
562 (vi) otherwise be in accordance with standard trust principles as provided by state law.
563 (3) The board shall:
564 (a) establish a conflict of interest policy for the office and board members;
565 (b) establish policies governing the evaluation, selection, and monitoring of
566 independent custodial arrangements;
567 (c) ensure that the office is managed according to law;
568 (d) establish bylaws to govern the board;
569 (e) establish the compensation of the director;
570 (f) annually examine the compensation and performance of the director as part of the
571 board's budget review process;
572 (g) annually report the director's compensation to the Legislature; and
573 (h) adopt policies to provide for annual training of board members regarding their
574 duties and responsibilities.
575 (4) The board may:
576 (a) after conferring with the director:
577 (i) hire one or more consultants to advise the board, director, or office on issues
578 affecting the management of the trust fund; and
579 (ii) pay compensation to any consultant hired under Subsection (4)(a)(i), subject to
580 budgetary constraints; and
581 (b) submit to the director a written question or set of questions concerning policies and
582 practices affecting the management of the trust fund.
583 Section 16. Section 53D-1-304 is enacted to read:
584 53D-1-304. Board meetings.
585 (1) The board shall hold at least nine meetings per year to conduct business.
586 (2) The board chair or two board members:
587 (a) may call a board meeting; and
588 (b) if calling a board meeting, shall provide as much advance notice as is reasonable
589 under the circumstances to all board members, the director, and the director of the school
590 children's trust section.
591 (3) Any board member may place an item on a board meeting agenda.
592 (4) The board shall annually adopt a set of parliamentary procedures to govern board
594 (5) The board may establish an attendance policy to govern the attendance of board
595 members at board meetings.
596 Section 17. Section 53D-1-401 is enacted to read:
598 53D-1-401. Appointment of director -- Qualifications -- Nature of employment --
599 Removal by State Board of Education petition.
600 (1) The office shall be managed by a director.
601 (2) On or before January 25, 2015, the board shall appoint an individual as director.
602 (3) The board shall ensure that an individual appointed as director possesses:
603 (a) outstanding professional qualifications pertinent to the prudent investment of trust
604 fund money; and
605 (b) expertise in institutional investment management.
606 (4) The director is an at-will employee who may be removed by the board at any time
607 with or without cause.
608 (5) (a) The State Board of Education may submit a written petition to the board
609 requesting the board to remove the director for cause, explained in the petition.
610 (b) The board shall hold a hearing on a petition under Subsection (5)(a) within 45 days
611 after receiving the petition.
612 (c) If, after holding a hearing, the board finds by a preponderance of the evidence that
613 there is cause for removing the director, the board shall remove the director.
614 Section 18. Section 53D-1-402 is enacted to read:
615 53D-1-402. Director duties and responsibilities.
616 (1) The director has broad authority to manage the office to fulfill its purposes,
617 consistent with the enabling act, the Utah Constitution, state law, and board policies.
618 (2) The director shall:
619 (a) before assuming the duties of director, take an oath that includes the following:
620 "I solemnly swear to carry out my duties as director of the School and Institutional
621 Trust Fund Office with undivided loyalty to the beneficiaries of the trust fund managed by the
622 office, to the best of my abilities and consistent with the law.";
623 (b) carry out the policies of the board;
624 (c) act with undivided loyalty to those entitled to the benefit of income from the trust
625 fund, consistent with the director's fiduciary duties and responsibilities;
626 (d) follow the prudent investor rule, prudently seeking to obtain the optimum return
627 from the investment of trust fund money and assets, balancing short-term and long-term
628 interests under the principle of intergenerational equity;
629 (e) exercise full discretionary authority to manage, maintain, transfer, or sell assets of
630 the trust fund in the manner that the director determines to be most favorable to beneficiaries;
631 (f) maintain the integrity of the trust fund and prevent, through prudent management,
632 the misapplication of trust fund money;
633 (g) adopt rules, as provided in Subsection 53D-1-103 (3), that are necessary for the
634 proper exercise of the director's duties under this chapter and policies established by the board;
635 (h) faithfully manage the office under policies established by the board;
636 (i) annually submit to the board:
637 (i) an office budget; and
638 (ii) a financial plan for operations of the office;
639 (j) after board approval of the office budget, submit the budget to the governor and the
641 (k) direct and control budget expenditures;
642 (l) establish job descriptions and, within budgetary constraints, employ staff necessary
643 to accomplish the purposes of the office;
644 (m) in accordance with generally accepted principles of fund accounting, establish a
645 system to identify and account for the trust fund assets;
646 (n) notify the director of the school children's trust section of major items that the
647 director knows may be useful to the director of the school children's trust section in protecting
648 the rights of beneficiaries;
649 (o) maintain appropriate records of trust fund activities to enable auditors to conduct
650 periodic audits;
651 (p) respond in writing within a reasonable time to a request by the director of the
652 school children's trust section for information on policies and practices affecting the
653 management of the trust fund; and
654 (q) respond to a question that the board submits under Subsection 53D-1-303 (4)(c)
655 within a reasonable time after receiving the question.
656 (3) The office may:
657 (a) sue or be sued; and
658 (b) contract with other public agencies for personnel management services.
659 Section 19. Section 53D-1-403 is enacted to read:
660 53D-1-403. Reports.
661 (1) At least annually, the director shall report in person to the Legislative Management
662 Committee, the governor, and the State Board of Education, concerning the office's
663 investments, performance, estimated distributions, and other activities.
664 (2) The director shall report to the board concerning the work of the director and the
665 investment activities and other activities of the office:
666 (a) in a public meeting at least nine times per year; and
667 (b) as otherwise requested by the board.
668 (3) (a) Before November 1 of each year, the director shall:
669 (i) submit a written report to each school community council, created under Section
670 53A-1a-108 , concerning the office's investments, performance, estimated distributions, and
671 other activities; and
672 (ii) post the written report described in Subsection (3)(a)(i) on the office's website.
673 (b) A report under Subsection (3)(a) shall be prepared in simple language designed to
674 be understood by the general public.
675 (4) The director shall provide to the board:
676 (a) monthly written reports on the activities of the office;
677 (b) quarterly financial reports; and
678 (c) any other report requested by the board.
679 (5) The director shall:
680 (a) invite the director of the school children's trust section to attend any meeting at
681 which the director gives a report under this section; and
682 (b) provide the director of the school children's trust section:
683 (i) a copy of any written report prepared under this section; and
684 (ii) any other report requested by the director of the school children's trust section.
685 Section 20. Section 53D-1-501 is enacted to read:
687 53D-1-501. Nominating committee -- Membership -- Terms -- Vacancies --
689 (1) There is established a School and Institutional Trust Fund Nominating Committee.
690 (2) The nominating committee consists of:
691 (a) two members appointed by the State Board of Education;
692 (b) two members, appointed by the director of the school children's trust section, each
693 of whom is a member of a respected professional organization;
694 (c) the chief investment officer of the University of Utah endowment;
695 (d) the chief investment officer of the Utah State University endowment; and
696 (e) the director of the school children's trust section.
697 (3) An individual appointed as a member of the nominating committee under
698 Subsection (2)(a) or (b) shall be appointed based on the individual's expertise in:
699 (a) investment finance;
700 (b) institutional asset management;
701 (c) trust administration; or
702 (d) the practice of law in the areas of capital markets, securities law, trusts,
703 foundations, endowments, investment finance, institutional asset management, or trust
705 (4) The term of a member appointed under Subsection (2)(a) or (b) is four years, except
706 that the initial term of members appointed under Subsection (2)(b) is two years.
707 (5) A nominating committee member shall serve until a successor is appointed and
709 (6) (a) If a member appointed under Subsection (2)(a) or (b) leaves office, the vacancy
710 shall be filled in the same manner as the initial appointment under Subsection (2)(a) or (b).
711 (b) An individual appointed to fill a vacancy under Subsection (6)(a) serves the
712 remainder of the unexpired term.
713 (7) A member of the nominating committee may not receive compensation or benefits
714 for the member's service, but may receive per diem and travel expenses in accordance with:
715 (a) Section 63A-3-106 ;
716 (b) Section 63A-3-107 ; and
717 (c) rules made by the Division of Finance pursuant to Sections 63A-3-106 and
718 63A-3-107 .
719 Section 21. Section 53D-1-502 is enacted to read:
720 53D-1-502. Chair and vice chair -- Quorum and voting requirements -- Bylaws --
722 (1) The nominating committee shall select a chair and vice chair from its members.
723 (2) (a) Four members of the nominating committee constitute a quorum.
724 (b) An action of the nominating committee requires the affirmative vote of at least four
726 (3) The nominating committee shall establish bylaws to govern the nominating
728 (4) The school children's trust section shall provide staff support to the nominating
730 Section 22. Section 53D-1-503 is enacted to read:
731 53D-1-503. Nominating process -- Replacement list of candidates -- Interim
733 (1) The nominating committee shall nominate at least two candidates for each position
734 or vacancy on the board.
735 (2) The nominating committee shall:
736 (a) nominate candidates who meet the criteria stated in Subsection 53D-1-301 (3); and
737 (b) consider the character and reputation of candidates the nominating committee
739 (3) If the state treasurer considers the candidates nominated under Subsection (1) to be
740 unacceptable, the state treasurer may request the nominating committee to nominate at least
741 two other candidates per appointment.
742 (4) As many times as the state treasurer considers candidates nominated by the
743 nominating committee to be unacceptable under Subsection (3), the nominating committee
744 shall follow the process described in Subsections (1) and (2) until the state treasurer appoints a
746 Section 23. Section 53D-1-601 is enacted to read:
748 53D-1-601. General management and investment principles -- Duty of person with
749 special skills or expertise.
750 (1) Board members, the director, and office staff shall act in the best interests of the
751 beneficiaries and comply with the duty of undivided loyalty to the beneficiaries.
752 (2) A person who manages and invests trust fund money or assets shall:
753 (a) manage and invest in good faith and with the care a prudent professional in a like
754 position would exercise under similar circumstances;
755 (b) consider, as relevant:
756 (i) general economic conditions;
757 (ii) the possible effect of inflation or deflation;
758 (iii) any expected tax consequences of investment decisions or strategies;
759 (iv) the role that each investment or course of action plays within the overall
760 investment portfolio of the trust fund;
761 (v) the expected net return from income and the appreciation of investments;
762 (vi) the expected returns and risk characteristics of individual assets;
763 (vii) the needs of the beneficiaries to receive distributions and to preserve capital;
764 (viii) liquidity;
765 (ix) asset allocation; and
766 (x) costs and management fees; and
767 (c) make management and investment decisions about an individual asset not in
768 isolation but in the context of the trust fund's portfolio of investments as a whole and as part of
769 an overall investment strategy, having risk and return objectives reasonably suited to the trust
770 fund and to the beneficiaries.
771 (3) A person who has special skills or expertise, or who is selected to assist in
772 managing and investing the trust fund money or assets based on the person's representation of
773 having special skills or expertise, has a duty to use those skills and that expertise in managing
774 and investing trust fund money and assets.
775 Section 24. Section 53D-1-602 is enacted to read:
776 53D-1-602. Office authority, responsibilities, and duties.
777 (1) In managing and investing trust fund money and assets, the office:
778 (a) may incur only costs that are appropriate and reasonable in relation to the assets, the
779 purposes of the trust fund, and the skills available to the office; and
780 (b) shall make a reasonable effort to verify facts related to the management and
781 investment of trust fund money and assets.
782 (2) Except as otherwise provided by law, the office may invest in any kind of property
783 or any type of investment that is:
784 (a) consistent with this part; and
785 (b) in the best interests of the beneficiaries.
786 (3) The office shall diversify the investments of trust fund money and assets.
787 (4) Within a reasonable time after receiving a contribution to the trust fund, the office
788 shall make and carry out decisions concerning the retention or disposition of the contribution or
789 to rebalance the trust fund portfolio, in order to bring the trust fund into compliance with the
790 purposes, terms, and distribution requirements of trust fund money and assets.
791 (5) The board may delegate any management or investment function to the director, a
792 committee of board members, or an employee of the office.
793 Section 25. Section 53D-1-603 is enacted to read:
794 53D-1-603. Director authority, responsibilities, and duties.
795 (1) (a) The director may delegate to an external agent the management of a portion of
796 the trust fund money or assets, if the delegation is prudent under the circumstances and
797 consistent with the purposes of the trust fund.
798 (b) The director shall periodically review the actions of an agent under Subsection
799 (1)(a) in order to monitor the agent's performance and compliance with the scope and terms of
800 the delegation.
801 (2) The director shall act in good faith, with the care that a prudent professional in a
802 like position would exercise under similar circumstances, in:
803 (a) selecting an agent;
804 (b) establishing the scope and terms of a delegation under Subsection (1); and
805 (c) periodically reviewing the agent's actions, as provided in Subsection (1)(b).
806 (3) In performing a delegated function, an agent owes a duty to the state and the
807 beneficiaries to exercise reasonable care to comply with the scope and terms of the delegation.
808 Section 26. Section 53D-1-604 is enacted to read:
809 53D-1-604. Compliance not determined by hindsight.
810 Compliance with a provision of this part in making a decision or taking an action is
811 determined in light of the facts and circumstances existing at the time a decision is made or an
812 action is taken and not by hindsight.
813 Section 27. Section 53D-1-701 is enacted to read:
815 53D-1-701. Petition for review of director or office decision or action -- Hearing
816 examiner -- Decision -- Judicial review.
817 (1) (a) Subject to Subsection (1)(b), a person aggrieved by a decision or action of the
818 director or office may, in accordance with rules adopted by the board under Section 53D-1-702 ,
819 petition the board for an administrative review of the decision or action.
820 (b) A person may not petition for review of:
821 (i) a decision whether to buy, sell, hold, or exchange a specific investment; or
822 (ii) an action to buy, sell, hold, or exchange a specific investment.
823 (2) (a) The board may appoint a qualified hearing examiner to take evidence and make
824 a recommendation for board action on the petition.
825 (b) If the board appoints a hearing examiner under Subsection (2)(a), the board shall, in
826 conducting its review and making its decision on the petition, consider the hearing examiner's
828 (3) In making its decision on the petition, the board shall:
829 (a) make findings and conclusions and base its decision on the findings and
831 (b) uphold the decision or action of the director or office unless the board finds, by a
832 preponderance of the evidence, that the decision or action violated applicable law, policy, or
833 rule; and
834 (c) inform the person who filed the petition of the person's right to judicial review of
835 the board's decision.
836 (4) A person aggrieved by a final decision of the board on a petition filed under this
837 section may seek judicial review of that decision as provided in Sections 63G-4-402 and
838 63G-4-403 .
839 Section 28. Section 53D-1-702 is enacted to read:
840 53D-1-702. Board rules on petition for review of director or office decision or
842 (1) The board shall make rules, in accordance with Title 63G, Chapter 3, Utah
843 Administrative Rulemaking Act, to govern proceedings on a petition under Section 53D-1-701 .
844 (2) Rules under Subsection (1) shall ensure procedural due process in proceedings
845 relating to a petition under Section 53D-1-701 .
846 Section 29. Section 63E-1-102 is amended to read:
847 63E-1-102. Definitions -- List of Independent entities.
848 As used in this title:
849 (1) "Authorizing statute" means the statute creating an entity as an independent entity.
850 (2) "Committee" means the Retirement and Independent Entities Committee created by
851 Section 63E-1-201 .
852 (3) "Independent corporation" means a corporation incorporated in accordance with
853 Chapter 2, Independent Corporations Act.
854 (4) (a) "Independent entity" means an entity having a public purpose relating to the
855 state or its citizens that is individually created by the state or is given by the state the right to
856 exist and conduct its affairs as an:
857 (i) independent state agency; or
858 (ii) independent corporation.
859 (b) "Independent entity" includes the:
860 (i) Utah Dairy Commission created by Section 4-22-2 ;
861 (ii) Heber Valley Historic Railroad Authority created by Section 63H-4-102 ;
862 (iii) Utah State Railroad Museum Authority created by Section 63H-5-102 ;
863 (iv) Utah Science Center Authority created by Section 63H-3-103 ;
864 (v) Utah Housing Corporation created by Section 35A-8-704 ;
865 (vi) Utah State Fair Corporation created by Section 63H-6-103 ;
866 (vii) Workers' Compensation Fund created by Section 31A-33-102 ;
867 (viii) Utah State Retirement Office created by Section 49-11-201 ;
868 (ix) School and Institutional Trust Lands Administration created by Section
869 53C-1-201 ;
870 (x) School and Institutional Trust Fund Office created by Section 53D-1-201 ;
875 63H-1-201 .
876 (c) Notwithstanding this Subsection (4), "independent entity" does not include:
877 (i) the Public Service Commission of Utah created by Section 54-1-1 ;
878 (ii) an institution within the state system of higher education;
879 (iii) a city, county, or town;
880 (iv) a local school district;
881 (v) a local district under Title 17B, Limited Purpose Local Government Entities - Local
882 Districts; or
883 (vi) a special service district under Title 17D, Chapter 1, Special Service District Act.
884 (5) "Independent state agency" means an entity that is created by the state, but is
885 independent of the governor's direct supervisory control.
886 (6) "Money held in trust" means money maintained for the benefit of:
887 (a) one or more private individuals, including public employees;
888 (b) one or more public or private entities; or
889 (c) the owners of a quasi-public corporation.
890 (7) "Public corporation" means an artificial person, public in ownership, individually
891 created by the state as a body politic and corporate for the administration of a public purpose
892 relating to the state or its citizens.
893 (8) "Quasi-public corporation" means an artificial person, private in ownership,
894 individually created as a corporation by the state which has accepted from the state the grant of
895 a franchise or contract involving the performance of a public purpose relating to the state or its
897 Section 30. Repealer.
898 This bill repeals:
899 Section 51-7a-101 , Title.
900 Section 51-7a-102 , Definitions.
901 Section 51-7a-201 , Investment of land grant trust funds.
902 Section 51-7a-202 , State treasurer to follow "prudent investor" rule -- Standard of
904 Section 51-7a-301 , Investment advisory committee -- Creation.
905 Section 51-7a-302 , Investment advisory committee -- Duties.
906 Section 31. Effective date.
907 This bill takes effect on July 1, 2014.
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