Permanent School Funds Created From the Proceeds
of School Trust Grants
Paper by Margaret R. Bird*
Permanent school funds, derived from school trust lands, have $38 billion dollars invested to support public schools. There is little awareness of the existence of these lands or funds by educators or the public. Few understand that 134 million acres were once granted by Congress and states for schools.
No serious research into these funds, their investment, or their impact has occurred since an exhaustive study, by Dr. Fletcher Harper Swift of Columbia University, was published in 1911. This information is an attempt to give an updated snapshot of where eighteen of the state funds are a century later.
Originally 134 million acres of land were granted by Congress or by the original thirteen states to support schools. At one time every state in the nation had either school trust lands or school funds or both. Today, school lands exist in only 24 states. Eighteen states were gracious in providing information, Utah being one of the states.
Origins of the School Lands and Permanent Funds
Embedded throughout the history of the United States, yet understood by few, is the concept of land grants for the support of education. Early founding documents of the nation, as well as the founding compact for each state known as the statehood or enabling act, dealt extensively with these land grants for education. On May 20, 1785, the Continental Congress adopted an ordinance that provided for the survey and sale of the unsettled lands stretching to the Pacific Ocean. The territory was to be divided into townships, each six miles on a side. Each township was to be subdivided into 36 one-mile square lots, which are called sections today. Lot 16 was reserved "of each township, for the maintenance of public schools within the said township."
In 1850, Congress granted two sections per township for education. It was, however, in 1894 that Utah, Arizona and New Mexico received four sections because their arid lands might be less able to support schools. In all, over 134 million acres were set aside for the support of schools. Every state in the nation had either lands or permanent funds or both.
States receiving the grant from Congress received it in their statehood act. In order to receive the granted school lands, the state had to agree not to tax federal lands within its border. Those untaxed federal lands within a state remain a significant tax burden and a drain on education budgets today. Untaxed federal and state lands comprise about half or more of Utah.
The statehood or enabling act, which granted school lands and may specify that the proceeds from the lands be used to create a permanent school fund, is the federal part of the bilateral compact with each state. The state's part of the solemn bilateral compact was the original state constitution. The United States District Court for the District of Utah has held:
The state school land grants were not unilateral gifts made by the United States Congress. Rather, they were in the nature of a bilateral compact entered into between two sovereigns. In return for receiving the federal lands Utah disclaimed all interest in the remainder of the public domain, agreed to forever hold federal lands immune from taxation, and agreed to hold the granted lands, or the proceeds therefrom, in trust as a common school fund. Thus, the land grants involved here were in the nature of a contract, with a bargained-for consideration exchanged between the two governments.
The school lands are either leased or sold to generate revenue. Today lands are leased for every economic activity that occurs on private lands - convenience stores, oil and gas production, habitat protection, coal mining, commercial developments, malls, industrial parks, home sites, timber harvesting, etc.