Education Funding

‘Trust’ Lands Center Of 2 Controversies Over School Funding

By Reagan Walker — November 01, 1989 8 min read

Two seemingly disparate state actions in recent months have underscored efforts to ensure that the public schools receive their full share of a legacy originally bequeathed them by Thomas Jefferson and the Continental Congress.

In Mississippi, the state’s highest court ruled last month that the school district in the small county seat of Forest had the right to earn income from downtown property that was essentially being rented out for free.

And Utah officials created a storm of controversy this summer by suggesting that money be raised for their hard-pressed schools by allowing souvenir shops and tourist cabins to be built on state-owned land within national parks.

Both steps were directed at a continuing financial sore point in a number of Southern and Western states--the lack of adequate income from “school trust” lands, which were set aside by the federal government when the states were created specifically to raise funds for public schools.

Of the 27 states that originally held school-trust lands, 15 still hold more than 500,000 acres each.

Some states have managed their school-trust lands to provide a steady flow of money for education. But in others, many districts receive virtually nothing for the land because of mismanagement of leases or the scattering of tracts in areas with restrictions on land use.

In Mississippi, for example, many districts earn as little as 1 cent per acre from land leases that were negotiated decades ago for 99 years.

And in Utah, much of the school-trust land is pocketed in national parks and forests, severely limiting any revenue-producing uses.

If school-trust lands could be put to more profitable use, officials in both states said, millions of dollars could be raised for public education. But efforts to free up the lands often have become tangled in a web of politics and special-interest concerns.

The roots of school-trust lands are found in the Northwest Ordinance of 1785, written by Jefferson and passed by the Continental Congress under the Articles of Confederation. The law was a prelude to the better-known Ordinance of 1787, which established the political system for the Northwest Territories.

The ordinance, which provided for the survey and disposition of frontier lands east of the Mississippi River, called for land to be divided into townships, each containing 36 sections of one square mile each.

The ordinance set aside the 16th section of each township for “the maintenance of public schools within the said township.”

When Mississippi became a state, the “16th section” lands were preserved for their original purpose.

As many Western states were established, four sections per township were set aside for the purpose of funding schools.

Many states began selling off their school-trust lands in the late 19th century. The Mississippi Supreme Court ruled in 1895, however, that the lands should continue to be held by the state in trust for public schools.

Since then, a series of court challenges over the lands’ use in that state have upheld the holding of the tracts as “a sacred trust.”

In 1978, the Mississippi legislature passed the 16th Section Land Reform Act, which transferred control of the lands from county boards of supervisors to school boards. The law also said that adequate compensation must be received for all uses of school-trust lands.

County boards, which had controlled the school-trust lands since 1880, had not negotiated leases with the interest of schools in mind, many school officials contended at the time.

Mississippi currently has a total of 662,000 acres designated as school-trust land.

Even after the reform law was passed, though, many school districts did not renegotiate the leases, said James O. Nelson, the assistant secretary of state for public lands. In fact, a 1984 investigation by The Clarion-Ledger of Jackson found many abuses still existed. For example:

Elected officials or their relatives in many towns paid less than $1 an acre to live on 16th-section land.

A country club in the town of Pearl paid 13 cents an acre for its 72-acre golf course.

The 16th section in the city of Brandon contained more than 100 99-year leases that earned nothing for the school district because they were approved in the 1940’s for one-time payments of $1 an acre or less.

The investigation found that civic and nonprofit organizations, railroad companies, the timber industry, and state and federal agencies all paid bargain-basement prices for use of the school-trust lands.

Many school boards were reluctant to renegotiate the leases because they viewed them as binding contracts, no matter how low the payment, Mr. Nelson said.

Some school-board members or their relatives also held 16th-section leases, he added, and so did not want to renegotiate.

In Winston County, a backlash over efforts to increase the revenue through renegotiated leases resulted in the election of a school board sympathetic to leaseholders.

In 1984, Secretary of State Dick Molpus launched an ambitious campaign to urge school boards to get the leases changed. At that point, Mr. Nelson recalled, the 100 school districts with trust lands had nearly 10,000 leases, a third of which were for 50 cents per acre or less.

Since then, most 25-year leases have been renegotiated, Mr. Nelson said.

Mr. Molpus’s plan was pursued vigorously. The state successfully sued the Louisville school board, for example, because it refused to renegotiate its leases.

And the country club in Pearl was forced to relinquish its lease on the golf course after a lawsuit. The school board is currently negotiating with the city to receive $16,000 a year for the property, which the city plans to open as a public facility.

The school boards are not seeking to get full market value for their land, Mr. Nelson said. In fact, many of the new leases are worth only 5 percent of the market value. But even at that rate, the lands generate far more revenue than did the earlier deals.

Mr. Nelson added, however, that renegotiating the nearly 4,000 99-year leases has been more problematic.

Those efforts were boosted significantly by the state supreme court’s Oct. 11 decision voiding a 16th-section land lease in Forest.

In its ruling, the court held that the school district and the secretary of state’s office could use the 1978 trust-land reform law to challenge the validity of any lease, including those negotiated before the law was passed.

The decision “will give board members even more ammunition” to seek new leases, Mr. Nelson said.

The Forest school board had moved in 1986 to renegotiate one of its more than 400 school-trust land leases. That prompted court action by the leaseholder, William C. Thompson.

A county judge ruled that the $7.50 one-time fee accepted by the board of supervisors in the 1940’s for the 99-year lease on a 16th-section tract in the downtown area was adequate.

But Judge Lenore Prather, writing for the higher court, said the $7.50 lease was “grossly inadequate.” It amounts to a donation of the trust land, she said, which is prohibited by the state constitution. The court ordered the school board to hold a competition for a new lease.

School officials in Forest said they will meet this month to make a decision on renegotiating some of the other leases, all of which are located within the city limits.

Officials there estimate they could receive as much as $500,000 a year if the leases are renegotiated based on a fairer market price.

Since the state has undertaken the aggressive campaign to get the leases renegotiated, revenues from school-trust lands have risen from $6.8 million in 1983 to $19 million in 1988.

More school boards are becoming aware of the potential revenue, Mr. Nelson noted. “Economic forces are causing school boards to realize that this is an important asset that must be managed to help meet the basic needs of their schools,” he said.

In Utah and other Western states, the problem with school-trust lands is their location.

Much of Utah’s 3.7 million acres of school-trust land is difficult to manage because the tracts are embedded in national forests and parks, military bases, Indian reservations, and grazing lands run by the federal Bureau of Land Management.

“When the federal government created national parks around our school-trust lands,” said Karl Kappe, a policy analyst at the division of lands and forestry, “it greatly constricted our ability to generate revenue.”

Utah officials said school lands generated only $12.5 million last year.

Frustrated by the situation, the board of state land in July proposed selling 82,000 acres of land located in four national parks. The land could be developed for tourist shops, resort cabins, and public showers, board members suggested.

The suggestion sparked outcrys from conservationists and federal officials. But the state never intended to see the “checkerboard” lands developed, Mr. Kappe said, adding that the suggestion was intended only to draw attention to the issue.

“Now that we have the attention of all the parties involved,” he said, “we hope to work out some other kind of arrangement.”

The arrangement the state prefers would be to exchange land inside the national facilities for federal land located elsewhere. Gov. Norman H. Bangerter recently asked the state board to postpone selling the land in hopes of negotiating an exchange through the Congress.

Such exchanges have been complicated in the past, however, by several issues, including determining equal valuation, mineral rights, archeological and wildlife concerns.

With more than 8 million acres, Arizona has more school-trust land than any other state.

Glen Collins, deputy land commissioner, said his state has strict rules governing the leasing of school lands, thus avoiding the problems that Mississippi has experienced. Moreover, it has successfully negotiated the type of land exchanges with the federal government that Utah is seeking.

Public auctions are held for the leases, which can only be negotiated for 10 years. The amount paid also must meet the appraisal value established by the land department, Mr. Collins said.

In recent years, the state has traded about 2.5 million acres with the Bureau of Land Management, receiving land near fast-growing cities in exchange for land in the environmentally sensitive San Pedro River area.

“Through strict laws and careful negotiating,” Mr. Collins said, “we have managed to avoid the school-trust land dilemmas of other states.”

A version of this article appeared in the November 01, 1989 edition of Education Week as ‘Trust’ Lands Center Of 2 Controversies Over School Funding

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