EQC’s Trust Land Management Study
The century-old question of how to pay for trust land management, which has cost more than $88 million since the trusts were established, may be heading toward legislative resolution. Over the years, the Department of Natural Resources and Conservation’s (DNRC) Trust Land Management Division has been funded by siphoning off a slice of the revenues the lands produce. But critics of this funding method, including the Montana University System, say such an approach violates the requirements of Montana’s Constitution as well as the federal laws that granted the trusts. The legislature’s Environmental Quality Council (EQC) addressed the issue in an extensive interim study and has drafted two bills to clarify the funding mechanisms for consideration by the 2007 Legislature.
The long and complex story begins with the original Enabling Act that allowed North Dakota, South Dakota, Washington, and Montana to join the Union in 1889. One of the provisions of that Act set aside sections 16 and 36 in every township across the state for the purposes of supporting educational institutions in the newly formed states. Significantly, specific lands were dedicated for specific educational beneficiaries, which resulted in the 10 trusts now managed by DNRC. Generally speaking, the Enabling Act details provisions for lands and the revenue they produce which are held in trust for the “common schools,” while the Morrill Acts (of 1862 and 1890) provide similar provisions for lands held in trust for the University System.
The legal opinions regarding the trusts go back almost as far as the Acts which granted them. In 1912, the U.S. Secretary of the Interior sent a legal opinion to the Montana Board of Land Commissioners that read: “...it is clear that the use of any portion of the principal or income derived from the lands or funds set aside and appropriated by the acts of Congress mentioned for the endowment and support of agricultural colleges in payment of administration expenses is a violation of law.” The Secretary required the state to “cease the use of the moneys in question” and “replace moneys heretofore taken...” In response, the Montana Legislature appropriated $19,372.34 to reimburse the “Agricultural College” (MSU) for the fiscal years 1897 to 1912.”
In 1967, Montana Attorney General Forrest Anderson issued his Opinion that Montana had the right to reimbursement for all charges and expenses necessarily incurred in the execution of the trust “where no provision exists to the contrary in the grants creating the trusts.” In 1994, however, Greg Petesch, the Montana legislature’s chief legal counsel, wrote an in-depth review and advised the legislature of specific concerns with violating both the Enabling Act and Article X, section 5 of the Montana Constitution by using trust revenues to fund administrative costs. Petesch’s concerns were echoed in a Mmmo to the Board of Regents by then-chief legal counsel LeRoy Schramm in 2004, in which he estimated the state could owe the University System between $11 and $14 million in restitution.
Finally, in a case of dueling Attorneys General, Washington’s AG issued a legal opinion in 1996 that says that state is “precluded from charging the expense of managing and administering Section 16 lands against proceeds of the sale of the lands” and, significantly, that “proceeds from the sale of the lands include proceeds from the sale of resources that are part of the lands.” Last year, Montana’s Attorney General,Mike McGrath, sent a “letter of counsel” to Governor Brian Schweitzer saying the deduction of revenue for administering the trust lands does not violate the Montana Constitution and re-affirming Anderson’s legal opinion.
While the draft EQC study and legislative recommendations will be finalized at the September meeting of the EQC, so far it looks like two bills will be submitted to the legislature. The proposed Morrill Act Bill makes the statutory changes necessary to remove administrative cost deductions from those lands granted by the Morrill Act. The proposed Account Combo Bill allows the Board of Regents to determine the use of revenues generated from timber proceeds on University System trust lands and includes a number of other changes to trust land management, administration, and revenue distribution.
For those wishing to explore the history of Montana’s trust lands, their management and costs in more detail, and to see the proposed bill drafts, the EQC study is available online at http://leg.state.mt.us/content/publications/lepo/ 2007trustlandadmin.pdf.
If approved by the EQC, the bill drafts will be available online at: http://laws.leg.state.mt.us/ pls/laws07/law0203w$.startup.
