[0:05] >> We are going to be key.

[0:07] An eye on this committee

[0:08] hearing. It is right now.

[0:11] It is 8.37

[0:13] on Wednesday, March 4th, a

[0:15] quorum is present and we will

[0:18] now come to order

[0:21] today where I'm really excited

[0:23] for this agenda. We're going to

[0:24] hear a presentation from the

[0:25] permanent School fund

[0:26] distribution group and then

[0:28] we're going to hear 2 bills

[0:30] Senate filed. 35 93 and Senate

[0:33] file 12. 0, 1,

[0:36] I we have a gun through the

[0:38] expectations of the audience a

[0:42] couple of times. But I now see

[0:44] we have a whole new crew over

[0:45] here. So I just want to remind

[0:47] everyone I'm here today that

[0:49] you have to stay seated when

[0:51] you're in the hearing room,

[0:52] there's no standing or sitting

[0:54] in the walkways are aisles.

[0:56] If there are any specific

[0:58] accommodations, please

[1:00] communicate with a surgeon

[1:01] staff. Signs are not permitted,

[1:04] clapping and other disruptions

[1:06] are not allowed. And if you do

[1:08] not follow these protocols, you

[1:10] will be asked to leave.

[1:12] Remember members to use your on

[1:14] and off switch that controls

[1:16] your microphone. And I would

[1:19] just want to say thank you to

[1:20] the sergeants for always being

[1:22] attentive and keeping us safe.

[1:25] And so we are going to bring

[1:26] begin with a presentation about

[1:28] the permanent School fund

[1:30] distribution working group.

[1:32] Last year. We created a working

[1:36] group and asked them to look

[1:38] into.

[1:39] >> How and why we are

[1:42] investing.

[1:43] >> A permanent school funds and

[1:46] are we getting the biggest bang

[1:47] for our buck when when using

[1:51] these investments as a way to

[1:54] also support our school kids

[1:56] and continue to use that

[2:00] investment into the future.

[2:03] And so the the group met

[2:07] a number of times and have come

[2:11] up with a report and some

[2:13] recommendations and based on

[2:15] those reccomendations you're

[2:16] going to hear appeal.

[2:18] And so I would like to invite

[2:21] the working Group report crew

[2:23] up Andrew Crack, who is the

[2:26] deputy director, head of active

[2:28] Strategies with the Minnesota

[2:30] State Board of Investment.

[2:32] And Erin van der Linde,

[2:34] director of the Office of

[2:36] School Trust Lands and John

[2:38] Yuill, the director legal and

[2:40] policy services of the

[2:42] Minnesota State Board of

[2:43] Investment. If you'd like to

[2:44] come up and take a seat,

[2:50] just reminding you to please

[2:54] state your name and your

[2:56] position and then you can begin

[2:59] and I think we'll start with

[3:00] Mr. Correct.

[3:02] >> Thank you. Chair finished my

[3:04] name is Andrew Correct, as you

[3:05] mentioned and the deputy

[3:06] director of the Minnesota State

[3:07] Board of Investment as a member

[3:08] of the Permanent School Fund

[3:10] Task Force. I'd like to thank

[3:12] the members here for having us

[3:13] today to give you a summary of

[3:15] the findings of the task force

[3:17] and to answer any questions you

[3:18] might have about the

[3:19] recommendations of the task

[3:21] force and the legislation

[3:22] that's been proposed.

[3:25] Wait a minute will join us or

[3:27] presentation of

[3:31] so we intend to proceed over

[3:33] the next several minutes is to

[3:34] give you some background on the

[3:36] task force and the work that we

[3:38] engaged in as well as some

[3:39] background on the permanent

[3:41] school fund itself and school

[3:43] trust lands at which point all

[3:45] turn things over for a few

[3:46] minutes to Aaron.

[3:47] And then we will walk through

[3:48] the research and

[3:51] would you speak a little bit

[3:52] closer to the microphone?

[3:53] Thank you for that problem.

[3:56] And then we'll spend some time

[3:57] going through the specific work

[3:58] research and analysis that the

[4:00] task force performed before we

[4:02] review the recommendations that

[4:03] came out of the task force and

[4:05] then we'll conclude and take

[4:06] any questions that you all may

[4:07] have. But please feel free to

[4:09] interrupt as we go through with

[4:10] any questions that come up.

[4:14] So the task force, the

[4:16] Permanent School Fund Task

[4:16] Force was created by the

[4:18] Legislature in May of 2024,

[4:21] the membership requirements to

[4:23] be part of the task force were

[4:24] to have outstanding

[4:25] professional experience in one

[4:27] of the following areas,

[4:28] institutional asset Management,

[4:30] Investment Finance Trust

[4:31] Administration investment fund,

[4:33] accounting investment, banking,

[4:35] or the practice of law in

[4:36] capital markets. Securities

[4:38] funds trusts, foundations or

[4:39] endowments.

[4:41] Ultimately the task force

[4:42] membership comprised 9 members.

[4:44] One member who was a designee

[4:46] of that Department of Education

[4:47] or the commissioner of

[4:47] Education, daily linemen,

[4:49] another member appointed by the

[4:50] state Board of Investment which

[4:52] myself,

[4:53] 4 members appointed by the

[4:54] Governor, Denise District,

[4:56] Tracy Farak, Tracy lot CA and

[4:58] Aaron Van der Linde

[4:59] and 3 members appointed by a

[5:01] vote of the Legislative

[5:02] Permanent School Fund

[5:03] Commission for Terry spent all

[5:04] Madden Paul Pelletier and Julie

[5:06] Sandstede.

[5:11] We were given a legislative

[5:12] charge and the duties of the

[5:14] task force were spelled out.

[5:18] The task force was directed to

[5:20] examine the historical returns

[5:22] on the Permanent School Fund

[5:23] Endowment and to evaluate and

[5:25] recommend potential changes to

[5:26] the distribution of earnings.

[5:29] The task force may examine

[5:30] school trust endowment policies

[5:31] and other states. And the task

[5:33] force recommendations may

[5:34] include proposed changes to

[5:36] state statutes and Minnesota's

[5:38] constitutional provisions

[5:39] governing the school Trust Fund

[5:40] Endowment.

[5:42] The task force met many times

[5:43] over are close to a year and a

[5:45] half and ultimately delivered a

[5:46] report to the Legislature on

[5:48] January. 15th of this year,

[5:53] gonna spend a few moments going

[5:55] over some background, which may

[5:56] be a preview from for many of

[5:58] you. But for those who aren't

[5:59] familiar with the permanent

[6:00] school fund in the school trust

[6:02] lands, we're going. We're going

[6:02] to take a few minutes to

[6:03] review.

[6:05] The Minnesota Constitution

[6:06] established the permanent

[6:07] school fund in 18 58 to create

[6:10] a permanent self-sustaining

[6:12] source of education funding in

[6:13] the state,

[6:15] Minnesota law, both statute and

[6:17] constitution specify how the

[6:19] fun shall be managed. And the

[6:20] formula by which the amount

[6:22] available for distribution is

[6:23] calculated.

[6:25] Today. There are 3 state

[6:26] agencies that are primarily

[6:28] involved with the ongoing

[6:29] operations of the fund.

[6:31] We have the Department of

[6:32] Natural Resources who's

[6:34] responsible for land management

[6:36] decisions on that specific

[6:38] parcels of land that our school

[6:40] trip that our school trust

[6:41] lands.

[6:44] The revenues that come from

[6:45] land management are then

[6:47] transferred to the permanent

[6:48] School fund.

[6:50] The State Board of Investment

[6:51] takes those dollars and invest

[6:53] them in financial instruments.

[6:54] Stocks and bonds and the state

[6:56] State Board of Investment or

[6:57] SBI is responsible for

[6:59] investment management decisions

[7:01] and ensuring that the proper

[7:02] amounts are distributed from

[7:03] the fund.

[7:05] Once those dollars are

[7:06] distributed from the fund's,

[7:07] they ultimately end up with the

[7:09] Department of Education who is

[7:11] responsible for a portion of

[7:12] those funds to school districts

[7:13] around the state.

[7:20] Madam Chair members, Aaron Van

[7:21] Dillen School Trust Lands.

[7:22] Director, a few quick slides on

[7:25] just the background and

[7:26] history. A school trust lands.

[7:27] I recognize that I gave a

[7:29] similar presentation to a

[7:30] policy last week, but some of

[7:31] you are my committee. So

[7:33] as Andrew said, we received

[7:35] these lands from the federal

[7:36] government and 18 58 its

[7:38] statehood. We ended up with 4

[7:41] successive federal grants that

[7:43] total about 8.1 million acres

[7:46] to cede the fund its statehood.

[7:49] We sold off the majority of

[7:50] those lands in southern

[7:51] Minnesota.

[7:53] We have 2.5 million or 2.5 of

[7:56] the 8.1 million acres left of

[7:58] those 2.0. 5, 2, 0.2 are in 10

[8:01] northern counties.

[8:03] You can see on this map where

[8:05] they are. We do have a Landen,

[8:08] some reservation boundaries.

[8:09] We recognize that.

[8:11] But most of those lands

[8:13] generate revenue from and you

[8:15] can switch.

[8:16] Thanks, John

[8:19] Revenue from minerals,

[8:22] royalties, and rents timber

[8:23] sales. And then real estate

[8:25] transactions likely says sales

[8:28] easements and things of that

[8:28] nature. So if you look at the

[8:30] permanent school fund right

[8:31] now, the value of that funding

[8:34] and really get into this a

[8:35] little bit later is 2.3 billion

[8:37] dollars. That value has come

[8:39] mainly from mineral resources.

[8:42] About 80% of our historic

[8:44] revenue has come from our

[8:45] middle rents and royalties.

[8:47] There's this small breakdown

[8:49] between real estate and timber

[8:53] receipts,

[8:54] roughly 9, 7%, of that balance

[8:56] and then 4% for some of the

[8:58] investment income from not to

[9:01] work at SBI does. But some of

[9:03] the investments that we have

[9:05] internally with some of the

[9:07] funds that are managed by DNR.

[9:10] So

[9:12] the next slide, please just

[9:13] real quick. What happens when

[9:15] those funds are deposited into

[9:17] the state board investments and

[9:18] are set? They spin off that

[9:19] revenue. This is the revenue

[9:21] that's Pence distributed to the

[9:24] school district. So it's the

[9:26] beneficiaries of this trust are

[9:27] the 380 plus school districts

[9:29] and all of the charter schools

[9:31] in the state.

[9:32] That's who we see our

[9:33] beneficiaries. As and so over

[9:35] the last 10 years, we've

[9:37] distributed over what it's over

[9:39] 300, something like that.

[9:41] And it's 58 million last year.

[9:44] The work of this task force

[9:46] really looked at how we make

[9:48] these changes. And Andrew,

[9:49] we'll get into that here

[9:50] shortly. We're trying to do is

[9:53] more or less provide of 30 to

[9:55] 40% increase to the annual

[9:57] distributions with these

[9:58] changes. So I'll turn it back

[9:59] over to Andrew. Thank you.

[10:02] Thank you, Aaron.

[10:03] So chair Commissioner, I'd like

[10:04] to proceed now and talk a

[10:06] little bit about the work of

[10:07] the task force over the months

[10:09] that we were together

[10:11] early on in the task force

[10:13] meetings, we started to

[10:14] coalesce and reach consensus

[10:17] around some guiding principles

[10:19] and these guiding principles we

[10:21] determined should be aligned

[10:23] with whatever recommendation

[10:25] comes out of the task force and

[10:26] therefore principles that we

[10:28] identified early on. The first

[10:30] is that the permanent school

[10:31] fund must be maintained as a

[10:32] perpetual financial resource.

[10:35] And what that means is that

[10:36] distributions from the fund

[10:38] must not and often duly draw

[10:39] down the funds, balance or

[10:41] otherwise impair its ability to

[10:43] serve its purpose as a lasting

[10:45] source of educational funding.

[10:49] The task force determined that

[10:51] our objective should be to

[10:52] establish a distribution policy

[10:54] that balances the needs of

[10:56] current and future

[10:58] beneficiaries.

[10:59] That means that the fund must

[11:01] grow in a way that preserves

[11:02] its purchasing power for the

[11:04] benefit of future generations

[11:06] while also providing consistent

[11:08] support to current

[11:09] beneficiaries. Today,

[11:12] we also sought to ensure

[11:14] consistent annual

[11:15] distributions.

[11:17] Our recommendations sought to

[11:18] minimize significant year to

[11:20] year variability in

[11:21] distributions in an effort to

[11:23] support stability and the

[11:25] ability of school districts to

[11:27] plan their budgets, which we

[11:28] know is very important.

[11:30] And lastly,

[11:31] we sought to allow for

[11:32] adaptability and investment

[11:34] management

[11:35] so that our recommendations

[11:36] would provide the state Board

[11:37] of investment with the

[11:39] necessary flexibility to manage

[11:41] the fund, according to

[11:42] industry, best practices so

[11:44] that we can seek to manage to

[11:45] maximize the long-term value of

[11:47] the fund without taking undue

[11:48] risk.

[11:53] The task force also spent a lot

[11:55] of time discussing debating

[11:58] thinking about the scope of our

[12:00] activities. The task force was

[12:02] specifically mandated to review

[12:04] the fund's current legal

[12:05] framework and investment in

[12:06] distribution practices. And

[12:08] over the course of that work,

[12:10] we identified several issues

[12:11] which I believe all 9 of us

[12:12] felt very important and they,

[12:14] in fact, are deserve additional

[12:16] consideration and discussion.

[12:18] But that were out of the scope

[12:20] that the legislature provided

[12:21] to the Permanent School Fund

[12:22] task force.

[12:23] And those other issues include

[12:25] but are not limited to some of

[12:26] the following questions having

[12:28] to do with the management of

[12:29] school trust lands.

[12:31] Those are decisions that are

[12:33] made under the purview of the

[12:35] DNR. And we're outside the

[12:37] scope of the Permanent School

[12:38] Fund Task Force

[12:40] Review. Our analysis of

[12:42] apportionment of distributions

[12:43] from the fund put another way,

[12:46] the questions about which

[12:48] districts received, how much

[12:49] money and why we also felt that

[12:52] those discussions were outside

[12:53] the purview of the task force.

[12:55] Apportionment is separately

[12:56] addressed in Minnesota

[12:57] statutes, one, 27 8.33,

[13:02] if you review the

[13:02] constitutional language,

[13:03] you'll see that the

[13:04] Constitution makes reference to

[13:06] the school districts of the

[13:07] state.

[13:09] We felt that the task force it

[13:11] was outside the scope of the

[13:12] task force to attempt to define

[13:14] or redefine what is or is not a

[13:15] school district in the state of

[13:17] Minnesota.

[13:19] We also determined it was

[13:20] outside the scope of the task

[13:21] force to address any

[13:23] restrictions on the use of

[13:24] funds that were distributed for

[13:26] the use of dollars distributed

[13:28] from the fund's 2 school

[13:29] districts.

[13:30] And then finally, the fund's

[13:31] investment policy and asset

[13:33] allocation decisions. The court

[13:35] investment questions are the

[13:37] purview of the state Board of

[13:38] Investment. And that's where

[13:39] outside of the scope of the

[13:40] Permanent School Fund task

[13:41] force.

[13:47] So consistent with our

[13:48] legislative charge of the task

[13:50] force and proceeded to review

[13:51] the current legal framework,

[13:53] both constitutional and

[13:55] statutory that governs the

[13:56] permanent school fund.

[13:59] And we identified that the

[14:00] current constitutional

[14:01] framework imposes to

[14:03] significant constraints on

[14:04] distributions from the

[14:05] permanent school front. First

[14:08] distributions from the fund are

[14:09] limited to net interest and

[14:11] dividend income and excludes

[14:13] capital gains from asset

[14:14] appreciation. So what that

[14:16] means is if the fund owns a

[14:18] stock or a bond that increases

[14:19] in value over time, there is no

[14:21] mechanism for that value to be

[14:23] realized and monetized and the

[14:24] proceeds from that gain in

[14:26] value to be distributed to

[14:27] students.

[14:29] Secondly,

[14:30] capital gains and if necessary,

[14:32] interest and dividend income

[14:33] must be used for the

[14:35] Constitution to offset losses

[14:37] prior losses,

[14:39] this could have the effect of

[14:40] reducing or eliminating

[14:41] distributions from the fund in

[14:43] Los recovery years.

[14:45] It was the conclusion of the

[14:46] task force that there are.

[14:48] There are several issues with

[14:49] this constitutional framework.

[14:51] First,

[14:52] we concluded that this

[14:53] framework unduly restricts

[14:55] distributions from the fund.

[14:57] The fund grows at of substance

[15:00] to grow significantly, which

[15:01] we're going to dress in a few

[15:02] moments. But only a small

[15:03] portion of that growth can be

[15:05] distributed to districts due to

[15:07] the restriction 2 net interest

[15:10] and dividend income.

[15:12] We also identified that these

[15:13] restrictions create an

[15:14] imbalance between the interests

[15:16] of current and future

[15:17] beneficiaries, because the

[15:19] front grows at a healthy rate.

[15:20] But only a small portion of

[15:21] that growth can be distributed

[15:23] to students.

[15:25] Imbalances created that favors

[15:27] thought the students of future

[15:28] generations at the expense of

[15:30] students. Today,

[15:33] these restrictions can result

[15:34] in inconsistent nearly

[15:36] distribution amounts to

[15:37] districts.

[15:38] And lastly, because these

[15:39] restrictions, art specified in

[15:41] the state constitution, it is

[15:43] very difficult to adapt to

[15:45] changing circumstances or the

[15:46] current best practices.

[15:53] Next consistent with the

[15:54] legislative mandate, the task

[15:56] force to examine the historical

[15:57] returns of the fund. And what

[15:59] we found was good news, which

[16:00] is that the performance of the

[16:02] fund has been very strong

[16:03] overtime on both an absolute

[16:04] basis and on a relative basis,

[16:07] the average annual investment

[16:09] return of the fund over the

[16:09] last decade has been 8% and

[16:11] it's been even higher than that

[16:12] and more recent periods as

[16:14] you'll see in the chart on the

[16:15] right side of your page, the

[16:17] fund has performed well,

[16:18] again, an absolute sense.

[16:19] It's also outperformed its

[16:21] benchmark overall. Those

[16:22] measure time periods

[16:23] for those who are not familiar

[16:25] with how the permanent school

[16:26] fund is invested, it is

[16:28] invested according to an asset

[16:29] allocation. That is 50% common

[16:31] stocks. 48 1% bonds and 2%

[16:34] cash. And from the perspective

[16:36] of the SBI, we would call that

[16:37] a very vanilla down the fairway

[16:39] asset allocation that is

[16:41] implemented with institutional

[16:43] quality external investment

[16:45] managers investing in broadly

[16:46] diversified portfolios of

[16:48] stocks and bonds. And the SBI

[16:50] is able to use our scale to

[16:52] drive the cost of that

[16:53] investment management as low as

[16:54] we possibly can.

[17:01] The result of that strong

[17:02] performance has been that the

[17:03] fund has grown substantially

[17:05] strong investment returns in

[17:06] addition to revenues coming

[17:08] into the fund through land

[17:09] management have resulted in the

[17:10] fund doubling in value over the

[17:12] last 10 years and more than

[17:13] tripling in value over the last

[17:14] 15 years

[17:17] because the Constitution limits

[17:19] distributions to interest and

[17:20] dividends. Distributions from

[17:22] the fund have averaged only 2

[17:23] and a half percent of the

[17:24] fund's value over that period.

[17:26] So again,

[17:28] the vast majority of the growth

[17:29] of the fund is constantly

[17:31] compounding accruing for the

[17:32] benefit of future generations

[17:34] and doesn't serve the purposes

[17:35] of the generations in the here.

[17:37] And now

[17:43] next to the task force began

[17:45] its the process of engaging in

[17:47] some research and analysis

[17:49] looking at best practices in

[17:51] common practices at other

[17:53] similar institutions and

[17:55] interests around the country.

[17:58] Broadly speaking, we examined

[17:59] distribution policies from 3

[18:01] different groups of trust in

[18:02] down its first is in Dallas and

[18:05] higher education and

[18:06] institutions. So think college

[18:08] and university endowments.

[18:09] These are different from the

[18:11] permanent school fund and that

[18:12] these are typically not

[18:13] government-sponsored to trust

[18:15] that are typically not funded

[18:16] by natural resource revenue.

[18:18] But we would observe that they

[18:19] do serve a very similar purpose

[18:21] to the permanent school fund

[18:23] that educational endowments

[18:25] exist to provide permanent

[18:27] funding, to serve the

[18:28] educational mission of the

[18:29] institution, that they're

[18:30] associated with it in that way.

[18:32] They're very similar to the

[18:33] permanent school fund.

[18:35] We also looked at similar

[18:37] educational trust in other

[18:39] states. Other states have

[18:40] permanent school funds that are

[18:41] quite similar to Minnesota's

[18:43] Permanent School fund, although

[18:44] that is a much smaller sample,

[18:45] which we'll discuss in a

[18:46] moment. And we we observed best

[18:48] practices amongst that cohort.

[18:50] And then finally we looked at

[18:51] policies about related to other

[18:53] trust funds in the state of

[18:55] Minnesota. These are trust

[18:56] funds that do not have an

[18:57] explicitly educational mandate,

[19:00] but they do have some

[19:00] commonalities with the

[19:01] permanent school fund.

[19:04] We were assisted in our

[19:05] research by information and

[19:09] data that was provided to us by

[19:10] Nikita Investment Group,

[19:12] which is a nationally

[19:12] recognized independent

[19:14] investment consultant that

[19:16] works regularly with the State

[19:17] Board of Investment. They

[19:19] helped us fight with the study

[19:21] evaluated that first group

[19:22] endowments and higher education

[19:24] institutions around the country

[19:26] with a very broad sample size

[19:27] of institutions to help us

[19:29] identify best practices.

[19:31] We also then started to

[19:33] evaluate the suitability of

[19:35] different potential

[19:35] distribution policies for this

[19:37] fund for the Minnesota's

[19:38] Permanent School Fund. The task

[19:41] force worked with both SBI

[19:43] staff, not just myself, but

[19:44] that but a broader set of the

[19:46] SBI staff to help create models

[19:48] based on historical data and

[19:50] the FBI's forwardlooking market

[19:51] expectations. We also built on

[19:54] work from an investments which

[19:56] is another nationally

[19:57] recognized independent

[19:58] investment consultant that

[19:59] works regularly with the state

[20:01] Board of Investment.

[20:07] As we looked at the broad

[20:11] sample of other institutional

[20:13] other educational trust around

[20:15] the country, we were able to

[20:17] observe several commonalities.

[20:20] There were there were a wide

[20:21] variety of distribution

[20:22] policies across these

[20:23] institutions. And you can see

[20:24] some of those different

[20:26] distribution policies in the

[20:28] box on the right side of this

[20:29] page. I'm not gonna go through

[20:30] everyone. But what you'll

[20:33] observe is that almost all of

[20:35] these distribution methods that

[20:36] we use on all the ones that you

[20:37] see on the page here are based

[20:39] on a calculation related to the

[20:41] market value of their

[20:43] respective fund,

[20:44] most commonly institutions

[20:46] distribute some percentage of

[20:48] their market value over a

[20:49] rolling over a rolling average

[20:52] of prior years. These

[20:54] distribution policies typically

[20:56] apply a fixed percentage to the

[20:57] average market value over over

[20:59] a a sample of prior years,

[21:01] sometimes adjusting for

[21:02] inflation. Sometime some sort

[21:04] of hybrid between a fixed

[21:05] percentage and an inflation

[21:07] adjustment. But what we

[21:08] observed is that the a

[21:10] percentage of market value

[21:12] calculated on a rolling average

[21:13] was the most common practice.

[21:21] Further research indicated that

[21:23] when most endowments just in

[21:25] this sample distribute between

[21:27] 4 and 5% of their average value

[21:30] annually and in fact, the

[21:31] single most common and

[21:33] percentage that these

[21:34] institutions are right, that is

[21:35] 4 and a half percent. It's the

[21:36] midpoint of that range.

[21:38] Those institutions which again

[21:40] have a similar purpose to the

[21:42] permanent school fund and in up

[21:43] to help supporting their

[21:45] educational mission in

[21:46] perpetuity, considered

[21:48] distribution amounts in this

[21:49] range to be sustainable for

[21:51] their institutions needs

[21:52] balancing current funding needs

[21:54] with the long-term preservation

[21:55] of their funds purchasing

[21:57] power.

[21:59] We reviewed a range of options

[22:00] for calculating annual

[22:01] distributions to Minnesota

[22:03] school districts. And the task

[22:04] force concluded that

[22:05] distributing 4 and a half

[22:06] percent of the average market

[22:08] value of the fund over the

[22:09] previous 3 years aligns with

[22:11] common practices among

[22:13] educational trust funds and

[22:14] endowments and is also

[22:15] consistent with our funds

[22:17] objectives. 4 and a half

[22:18] percent and three-year rolling

[22:20] average were the most common

[22:22] solutions that other similar

[22:24] trust funds had arrived at

[22:25] independently.

[22:32] We evaluated distribution

[22:33] policies of similar school

[22:35] funds in other states. This is

[22:37] admittedly a much smaller

[22:38] sample size than the prior

[22:40] cohort of which there are many

[22:41] hundreds of educational

[22:42] endowments to look at and

[22:44] assess best practices. There

[22:46] are fewer permanent school

[22:47] funds around the country.

[22:48] There are only 50 states.

[22:49] Many of them do not have

[22:50] permanent school funds. So

[22:52] while the sample was not large,

[22:54] are robust enough to

[22:55] necessarily kindest to that,

[22:56] the quote, right answer.

[22:58] We were able to observe some

[22:59] common practices that we think

[23:01] are applicable to our research.

[23:03] What we observed is that

[23:06] most of these similar school

[23:07] funds around the country also

[23:09] similar to educational

[23:10] endowments based their annual

[23:12] distributions on a rolling

[23:13] average calculation. And they

[23:15] do this to moderate the impact

[23:16] of market volatility and none

[23:18] of them limited distributions

[23:20] to interest and dividend income

[23:22] as the state of Minnesota

[23:23] debts.

[23:24] We also observed that Minnesota

[23:25] is unusual in having the

[23:27] distribution policy for its

[23:29] permanent school fund spelled

[23:30] out explicitly in the

[23:31] Constitution

[23:33] other permanent school funds.

[23:34] Typically we observe that their

[23:36] distribution policy is

[23:38] articulated in statute foreign

[23:40] policy.

[23:42] Finally, we looked at other

[23:43] state trusts in Minnesota.

[23:45] It's an example of this would

[23:46] be the Environmental Trust Fund

[23:48] which is managed by the state

[23:49] Board of Investment. Again,

[23:50] these do not these trust funds

[23:52] do not have an educational

[23:53] mandate per se, but there are

[23:54] some similarities that we could

[23:56] observe. What we saw is that

[23:59] distributions from these funds

[24:01] once again, typically do not

[24:02] have their distribution policy,

[24:03] spelled out restrictions on

[24:05] distributions, articulated in

[24:06] the state constitution.

[24:08] And they also commonly

[24:10] determine distributions based

[24:11] on some concept of a percentage

[24:13] of the fund's value not tied to

[24:16] interest and dividend income.

[24:25] The task force members worked

[24:26] with SBI staff to start a model

[24:28] out some different scenarios

[24:29] and assess whether the

[24:31] implementation of this type of

[24:33] distribution policy would be

[24:34] appropriate for the Minnesota

[24:35] Permanent School Fund.

[24:37] We put together a variety of

[24:40] different scenarios and models

[24:42] guided by an evaluation of

[24:44] historical returns and revenue

[24:46] patterns forwardlooking return

[24:48] expectations that are

[24:49] consistent with the way that

[24:51] the SBI assesses asset

[24:52] allocation decisions and thinks

[24:54] about forward looking return

[24:55] expectations across all of the

[24:56] funds that we manage.

[24:58] We modeled scenarios that

[25:00] included periods of higher

[25:02] returns than history with it

[25:03] would suggest some that

[25:05] included negatives returns.

[25:06] Some highly volatile

[25:07] conditions, a wide variety of

[25:09] scenarios. We look at scenarios

[25:10] where the funds would

[25:11] distribute 3% of assets,

[25:13] 4% of assets, 5% of assets.

[25:15] We looked at scenarios where

[25:17] think calculation was based on

[25:19] a point in time for its based

[25:21] on a rolling three-year average

[25:22] of the prior periods market

[25:23] value on a rolling five-year

[25:25] average. So we look to put a

[25:27] matrix of different potential

[25:28] scenarios. Not all of those

[25:30] appear on the screen in front

[25:31] of you. What we're attempting

[25:33] to show you here as it is a

[25:34] simplified representation of

[25:35] that analysis.

[25:37] What you'll see in the chart on

[25:38] the bottom left of your page

[25:40] out is a couple different

[25:42] scenarios, assuming that the

[25:44] permanent school fund did, in

[25:45] fact to distribute 4 and a half

[25:47] percent of the prior 3 years

[25:49] average market value. The

[25:51] middle line of those 3

[25:52] represents are kind of base

[25:54] case representing our best

[25:57] guess at forwardlooking return

[25:59] expectations in the market.

[26:00] And what you'll see is that the

[26:02] value of the permanent school

[26:03] fund after distributing 4 and a

[26:05] half percent per year to

[26:07] districts continues to increase

[26:09] over time. In that base case,

[26:11] the higher line indicates what

[26:14] could happen if returns are

[26:15] more favorable than our current

[26:17] expectations. So if the market,

[26:19] the roof, if the market is

[26:20] favorable, that obviously the

[26:22] the value of the trust fund

[26:23] would would increase even more

[26:24] over time. But more

[26:26] importantly, what we observe is

[26:27] that even in scenarios where

[26:29] returns are not as robust as

[26:31] our current expectations of the

[26:32] market works against us,

[26:33] we see that the value of the

[26:35] permanent school fund

[26:37] more lest stays stable. It does

[26:39] not decline over time.

[26:42] The right charge. Second, go

[26:44] back inside the chart on the

[26:45] right side is attempting to

[26:46] show what is happening to

[26:48] distributions coming out of the

[26:49] fund.

[26:51] So the first 2 sets a bar

[26:52] charts that you see there for

[26:54] years, 2020 for 2025. Those

[26:56] reflect the reality. Those are

[26:58] the actual dollars that were

[26:59] distributed from the permanent

[27:00] School fund in those years.

[27:02] Starting in 2026, were modeling

[27:04] out what the distributions

[27:05] would look like in dollar

[27:07] terms. If the the fund adopted

[27:10] of 4 and a half percent

[27:11] distribution rate calculated

[27:12] over rolling 3 years and you'll

[27:13] see that immediately. The

[27:15] distribution distributions from

[27:17] the fund Trump significantly,

[27:18] they nearly double and in our

[27:20] base case, which would

[27:21] represent the middle bar in

[27:23] each of those 2 in each of

[27:24] those years. The distributions

[27:26] grow moderately over time as

[27:28] the value of the fund increases

[27:30] in more favorable scenarios

[27:32] where the markets work in our

[27:33] favor than the value of those

[27:35] distributions increases even

[27:36] more so. But again,

[27:38] importantly, in the scenarios

[27:39] where returns in the market are

[27:41] less favorable and are negative

[27:43] scenario.

[27:44] We would observe the

[27:45] distributions while they what a

[27:47] moderate and in some cases can

[27:49] decline moderate somewhat over

[27:50] time. They're all higher than

[27:52] the distribution amount that's

[27:53] coming out of the funds today

[27:54] under the current legal

[27:56] framework

[28:02] as we evaluated these potential

[28:04] changes. The task force had

[28:05] several observations that we

[28:06] want to communicate first is

[28:09] that choosing a distribution

[28:10] rate does represent a tradeoff

[28:13] between current payouts to the

[28:15] students in here and districts

[28:17] in the here and now and

[28:19] long-term growth of the fund.

[28:23] We observed that it a potential

[28:25] distribution rate of 4 and a

[28:26] half percent can be expected to

[28:28] nearly double distributions

[28:29] from the fund in the near term

[28:31] while also achieving our

[28:32] objective of allowing the fund

[28:34] to grow over the long term and

[28:35] preserve its purchasing power.

[28:39] The fun value can certainly

[28:40] decline. That is the case today

[28:42] and would continue to be the

[28:43] case and in the adopting a new

[28:46] distribution policy. But we

[28:48] deserve the fun value will

[28:49] decline. Only women. The

[28:50] distribution rate exceeds the

[28:52] combined value of investment

[28:54] returns. Coming from the

[28:55] invest, the funds investment

[28:57] portfolio

[28:58] and revenues entering the fun

[29:00] from land management.

[29:03] We observed that using a

[29:04] three-year rolling average

[29:05] reduces the year to year

[29:07] volatility of distributions,

[29:08] which is consistent with one of

[29:10] the principles that the task

[29:11] force identified early on

[29:13] while also remaining responsive

[29:15] to prolonged market downturns.

[29:17] So in a scenario where the

[29:18] stock market goes down

[29:19] substantially

[29:20] this year, next year or the

[29:22] year after that many years in a

[29:23] row, the average market value

[29:25] of the fund on a rolling

[29:26] three-year basis decrease.

[29:28] And that's the funds

[29:29] distributed from the fund would

[29:31] also decrease. And that's a

[29:32] mechanism that protects on

[29:34] dueling drawing down the

[29:35] balance of the fund over time.

[29:38] Finally, we observed that the 4

[29:39] and a half percent distribution

[29:40] rate and a three-year rolling

[29:42] average period are aligned with

[29:44] industry best practices.

[29:46] And the task force feels that

[29:47] they that this proposal

[29:48] achieves an effective balance

[29:50] between providing stable

[29:52] distributions and preserving

[29:53] the purchasing power of the

[29:54] fund for future generations.

[30:00] So now we come to the specific

[30:01] recommendations that the task

[30:03] force has in our report.

[30:05] And there are 3 components to

[30:07] this recommendation. First,

[30:10] the task force recommends

[30:12] amending the state constitution

[30:14] and statutes to manage the

[30:16] funds in accordance with the

[30:17] guiding principles that we

[30:18] articulated and identified

[30:20] early on our work.

[30:23] The task force recommends that

[30:25] the Constitution should state

[30:26] the enduring principles and

[30:28] objectives of the fund. But

[30:30] that specific operating

[30:31] details, including the

[30:33] distribution policy,

[30:35] governance and investment

[30:36] management policies should be

[30:37] established in statute and not

[30:39] in the state constitution to

[30:41] allow for adaptability in the

[30:42] future.

[30:45] The task force recommends

[30:46] adopting the 4 and a half

[30:48] percent distribution rate

[30:49] calculated using a three-year

[30:51] rolling average of the fund's

[30:52] value.

[30:59] >> Chair Kunesh. I'd like to

[31:00] talk for a moment just about

[31:02] the changes in how we

[31:03] translated those to the to the

[31:05] bill in front of the committee.

[31:06] >> Thank you, Israel. If you

[31:08] introduce yourself for the

[31:09] committee and then you can

[31:10] begin.

[31:11] >> Thank you, chair and good

[31:12] morning members. My name is

[31:13] John. The last time the general

[31:14] counsel of the Minnesota State

[31:15] Board of Investment. And I'm

[31:17] going take a minute just to

[31:18] talk about how we take all

[31:20] those concepts that Mr.

[31:22] Correct. Just reporting on as

[31:25] part of the task force work and

[31:26] translated that to the language

[31:29] in the bill that you see in

[31:30] front of you so has Mr. Craig

[31:33] noted there were several

[31:34] principles that the task force

[31:36] offered very important that

[31:37] should be captured in the

[31:38] Constitution.

[31:40] One of those and perhaps the

[31:42] most important is that the fund

[31:44] remainder perpetual resource.

[31:46] That is how it is envisioned

[31:49] right now in the Constitution.

[31:50] We thought that concept should

[31:51] be captured in the Constitution

[31:53] going forward. So you will see

[31:55] that in the language proposed

[31:58] for the constitutional

[31:59] amendment.

[32:00] Another principle is that the

[32:02] sole purpose of the fund should

[32:04] be to make distributions to

[32:06] school districts for the

[32:07] benefit of students and should

[32:08] not be used for any other

[32:10] purpose. And so that concept is

[32:12] also captured in the language

[32:15] in the bill, noting that the

[32:17] sole purpose of the fund is to

[32:18] make those annual

[32:19] distributions.

[32:23] The next concept that the task

[32:24] force that was very important

[32:26] is that you need to balance the

[32:28] interests of current and future

[32:30] generations. And you talked

[32:31] about the current distribution

[32:33] formula occurring potential

[32:35] benefits to future generations

[32:36] more than current generations.

[32:38] And so what we captured the

[32:40] concept of balancing those

[32:43] interest in the language that

[32:45] also includes preserving the

[32:48] purchase power. So how you

[32:49] invest the dollars needs to be

[32:51] done in a way that preserves

[32:52] the purchasing power, keep the

[32:54] fund a perpetual resource and

[32:57] balance those interests.

[32:59] And finally going back to the

[33:01] original issue of how how funds

[33:03] are distributed to the school

[33:04] districts in the amount that

[33:06] goes out, which you will note

[33:07] in the constitutional language

[33:09] is that there is not a specific

[33:11] distribution formula in that

[33:13] language and that the

[33:14] Constitution notes that that

[33:16] should be established by law.

[33:18] So we're removing that

[33:19] restriction right on

[33:20] distributions to only interest

[33:22] and dividends to allow for the

[33:24] 4.5% distribution rate on an

[33:28] annual basis. And you will know

[33:31] in the statutory language on

[33:34] the distributions from the

[33:35] fund, you will see that the

[33:36] 4.5% distribution rate rolling

[33:40] average ending on the end of

[33:42] the fiscal year is captured in

[33:44] the statutory amendment and

[33:46] could be addressed in the

[33:47] future more easily if the

[33:50] legislature determines that

[33:51] this formula needs to be

[33:53] changed.

[33:54] So that is the basic overview

[33:56] of how the task force meeting

[33:59] specific recommendation for

[34:00] changes to the constitution and

[34:03] statutes noting that in order

[34:06] to solve the initial problem of

[34:09] the Constitution's restriction,

[34:10] a constitutional amendment is

[34:12] necessary for that. I'll turn

[34:14] it back over to Andrew to wrap

[34:15] things up

[34:19] before the next slide.

[34:21] >> But to conclude

[34:25] the task force identified that

[34:27] the fund has grown

[34:29] significantly due to a

[34:30] combination of investment

[34:31] returns and land management

[34:32] revenues.

[34:33] But that outdated

[34:34] constitutional and statutory

[34:36] restrictions have limited the

[34:38] ability of the funds to serve

[34:39] its purpose of balancing the

[34:41] needs of current and future

[34:42] beneficiaries.

[34:44] Our recommendations identified

[34:46] that a modern market value

[34:48] based distribution model would

[34:49] better align the fund with best

[34:51] practices used by Pierre States

[34:54] and other educational

[34:55] endowments.

[34:57] We recommend that of 4 and a

[34:58] half percent distribution rate

[34:59] based on a three-year rolling

[35:00] average can provide more stable

[35:02] and predictable funding for

[35:03] schools to current and current

[35:04] beneficiaries, while preserving

[35:06] the fund's long-term purchasing

[35:08] power for the benefit of future

[35:09] generations.

[35:11] And finally, I'll just point

[35:12] out that the 9 members of the

[35:13] Permanent School Fund Task

[35:14] Force spent close to a year and

[35:16] a half together it in and over

[35:20] the course of our work engaged

[35:21] in a lot of conversation,

[35:22] research, analysis and careful

[35:23] consideration and all 9 members

[35:25] unanimously endorsed the

[35:26] recommendations of that report.

[35:30] With that, we'll conclude and

[35:31] taking questions that you on.

[35:33] Thank you.

[35:33] >> Thank you all for this.

[35:36] Extremely interesting and

[35:38] informative review of the task

[35:42] force and members.

[35:46] I know it's a lot to take in

[35:48] some going to give you a second

[35:49] to think about it. But I just

[35:51] want to welcome some of the

[35:53] folks in the audience. I know

[35:55] that today is full service

[35:56] community school day. So thank

[35:58] you for all of you who are

[35:59] coming here to the Capitol to

[36:01] talk about your programs and

[36:04] help us understand your needs

[36:06] and your success is a little

[36:07] bit better. And also it is

[36:10] Minnesota's administrator for

[36:11] Special Education Day. So we

[36:15] really want to acknowledge the

[36:16] hard work that our special ed

[36:18] folks too, and administrating

[36:21] anything is is not an easy job.

[36:23] So thank you for being here.

[36:24] And I think Senator Clark had

[36:26] something to say.

[36:27] >> Thank you, chair. And as

[36:28] long as we're acknowledging

[36:29] people, I want to be in this

[36:30] litany of acknowledgements.

[36:33] Yeah. Plus public schools, the

[36:35] citywide student leadership

[36:36] group is in the house. So

[36:37] welcome. Glad you're here and

[36:40] keep doing the good work and

[36:41] represent the students. Why

[36:43] you're here.

[36:45] >> All right. We will move on

[36:46] to member questions or comments

[36:48] and Senator, find sort.

[36:52] Thank you. Madam Chair,

[36:55] Mr. Van One knows where I'm

[36:56] going with this because I love

[36:57] talking about mining. Every

[36:58] time that permanent school

[37:00] trust fund comes up.

[37:02] This is one of the things I'm

[37:03] most proud of. 90 1% of the

[37:05] funds in the permanent School

[37:07] Trust fund came from my

[37:08] district from the man tapped

[37:10] mine, which is the largest mine

[37:11] in North America,

[37:14] which which means that with the

[37:16] distribution of about 72 and a

[37:18] half dollars per student,

[37:20] the people of mountain Iron

[37:21] Fuel, which is about 2000,

[37:22] people have contributed $65 per

[37:25] student to every student in the

[37:27] state of Minnesota.

[37:29] And so I love to talk about

[37:30] that. I you know, I'm the son

[37:31] of a minor

[37:32] and I but Mr. Van, what I am

[37:35] wondering, we're talking about

[37:37] trying to get more money to our

[37:39] students and this is one

[37:41] mechanism and I'm a coauthor of

[37:42] the bill. Thank you. Chair

[37:44] commissioner allowing me to

[37:45] sign on

[37:47] but other ways to possibly girl

[37:49] the fund that could get more

[37:50] money to our schools. And so my

[37:54] question is on school, trust

[37:56] land, are there other minerals

[37:57] that could be used?

[38:00] That would grow the school

[38:02] trust fund? And what's the

[38:04] estimate on how much that could

[38:07] increase the school trust fund,

[38:10] Mr. Van Dillen.

[38:12] >> Madam Chair, Senator

[38:13] Farnsworth members. Yes,

[38:15] there are Minnesota has

[38:17] considerable mineral wealth and

[38:20] not just from our our hard-rock

[38:22] minerals, like iron ore.

[38:23] But we do have

[38:25] deposits of non ferrous

[38:26] minerals,

[38:28] copper nickel, gold, platinum,

[38:30] palladium.

[38:31] And as you know, senator and

[38:33] other senators, we also have a

[38:36] helium deposit in Minnesota.

[38:38] Now that has the potential to

[38:40] produce a significant amount of

[38:41] revenue for not only tax

[38:44] working at Land's but school

[38:45] cross as well.

[38:48] I can't speak to the value of

[38:51] oil and gas

[38:53] reserves, if you will. I don't

[38:55] know what our interests are.

[38:56] I

[38:57] from a non ferrous standpoint,

[38:59] the known deposits have the

[39:01] potential of

[39:02] increasing the school trust by

[39:04] 3 billion dollars if we could

[39:08] mind those bundles.

[39:12] Yes, thank you, Madam Chair.

[39:13] So

[39:15] >> it would more than double

[39:16] the size of the permanent

[39:18] school fund. And even with this

[39:19] increased distribution coming

[39:21] from the fund, that would

[39:22] pretty much guarantee

[39:23] that the fund would never fall

[39:25] back. And so I think that's

[39:28] another good way that we should

[39:29] look at

[39:31] growing this pond. We have the

[39:34] minerals. We can. We can do it

[39:35] cleanly so we should we should

[39:37] do it to help all of the

[39:38] students in Minnesota. Thank

[39:40] you, Madam Chair.

[39:41] >> Thank you. And we do have to

[39:42] acknowledge the

[39:45] the legacy of mining in

[39:47] Minnesota and the investment

[39:49] that that has created for our

[39:51] students

[39:52] into perpetuity. And so I think

[39:55] it was a good mention to

[39:58] acknowledge that that

[39:59] investment continues to this

[40:01] day. It's interesting to note

[40:04] that we have never amended this

[40:06] part of the Constitution around

[40:09] school, trust lands. And so I'm

[40:11] really excited that we took the

[40:13] time to do that and use the

[40:15] brains out there. And the the

[40:17] experience to, you know,

[40:20] begin to look at how we can

[40:22] best use those those dollars in

[40:24] this time and in the near

[40:27] future. So I think what it will

[40:29] do is also open up with the

[40:31] idea of how we can perhaps look

[40:34] to the future and and use these

[40:36] dollars in the best way

[40:37] possible. And so I would

[40:39] imagine that down the road

[40:40] there would be some other

[40:41] conversations are adjustments

[40:43] to this. This school trust

[40:45] land, whether it's a

[40:46] constitutional amendment or

[40:47] not.

[40:49] So thank you, Senator Le Cerro.

[40:51] You had something to say.

[40:52] >> Thank you, Madam Chair.

[40:54] I do have a comment but a

[40:55] question first and I appreciate

[40:57] the test fires and this this

[40:58] very thorough presentation

[41:00] in the presentation there will

[41:02] serve. There was several

[41:04] references to the SBI. Some

[41:07] wonder if you could briefly

[41:08] describe the relationship

[41:09] between the trust fund and the

[41:11] SBI.

[41:13] Yes, Madam Chair, Senator

[41:14] Cerro.

[41:17] If you buy me, refer back

[41:19] to our slide for hopefully this

[41:23] helps illustrative. The SBI is

[41:26] responsible for investment

[41:28] management decisions

[41:31] regarding the assets of the

[41:32] permanent school fund. Once

[41:34] dollars have been deposited in

[41:36] the fund

[41:37] from land management

[41:39] activities. So the FBI has no

[41:40] involvement with really any of

[41:43] the things that aren't just

[41:44] describing our decisions having

[41:45] to do with how the lands are

[41:46] managed, how revenues are

[41:47] generated asset sales, mining

[41:50] leases, that all lives within

[41:52] the school trust lands and

[41:53] within the DNR, those

[41:54] activities generate revenues.

[41:57] And so those revenues net of

[41:58] the expenses of administering

[41:59] and managing the land or

[42:00] transferred to the permanent

[42:02] school fund where we invest it

[42:05] according to asset allocation,

[42:07] that is determined by the SBI

[42:09] be in it in a way to be

[42:11] consistent with the objectives

[42:12] of the fund. And so we manage

[42:13] the fund the same way that we

[42:14] would manage basically any

[42:16] other trust fund that's under

[42:17] our administration, most of the

[42:19] assets that the SBI manages

[42:21] have to do with the fairies

[42:22] pension systems. But we also

[42:23] manage many non retirement

[42:25] assets, including other state

[42:27] trust funds and the permanent

[42:28] school fund that we take a

[42:30] similar investment approach to

[42:31] the permanent school fund as we

[42:33] went to other state trust

[42:34] funds. So the FBI is

[42:35] responsible for

[42:37] overseeing managing the

[42:38] investments of the fund in

[42:40] financial instruments during

[42:42] the period of time that the

[42:43] those dollars live within the

[42:45] fund,

[42:47] according to the current legal

[42:48] framework meeting

[42:50] calculating net interest and

[42:52] dividends, the SBI is

[42:53] responsible for determining

[42:54] which dollars need to be

[42:56] distributed from the fund to be

[42:58] in accordance with the current

[42:59] legal framework.

[43:00] And then we then have those

[43:01] dollars off and ultimately they

[43:04] end up with the Department of

[43:04] Education

[43:06] who's responsible for making

[43:07] sure those dollars and up with

[43:08] school districts around the

[43:09] state.

[43:11] Does that answer your question?

[43:15] Go ahead. Give it the question.

[43:17] Thank you, Madam Chair, and

[43:18] thank you for that.

[43:21] The concern I have with the SBI

[43:23] is one that I've had for many

[43:24] years and for those who may not

[43:25] be familiar just and over there

[43:27] and I couldn't hear FBI's

[43:29] answer State Board of

[43:30] Investments, the and the 4

[43:32] people the for individuals that

[43:34] make up the SBI are the 4

[43:36] constitutional officers here in

[43:37] the state of Minnesota, the

[43:38] governor, attorney general,

[43:40] secretary of state and state

[43:41] auditor. And over the years,

[43:44] there have been multiple

[43:45] attempts to to leverage the

[43:47] state assets in the SBI for

[43:50] purposes that I think many will

[43:51] find alarming. So just this

[43:53] morning, I want to confirm it

[43:54] was still there express

[43:55] purpose. And for those

[43:56] listening to this conversation,

[43:58] this is right from the Web site

[43:59] this morning, SBI investment

[44:01] staff with the external

[44:03] investment managers work with

[44:05] external and doesn't managers

[44:06] to addressed.

[44:07] >> Esg related risks within the

[44:09] managers, investment portfolios

[44:11] and within the managers

[44:12] organizations themselves.

[44:14] Most managers have documented

[44:15] esg integration approach with

[44:17] dei policy and then go on to

[44:20] and I can recall back multiple

[44:21] times. One of those actors is

[44:23] the state auditor, as I

[44:24] mentioned, and she is expressly

[44:26] stated that she uses her

[44:29] position on the SBI to further

[44:32] advance these causes here.

[44:33] She says through actions like

[44:35] proxy vote at these companies,

[44:37] more meetings importing with

[44:38] other institutional investors,

[44:40] weekend influence corporate

[44:41] decisions.

[44:42] I'm very concerned.

[44:45] Esg clearly has an anti mine

[44:49] philosophy in many aspects and

[44:51] with assets that are in the

[44:53] control or decisions made by

[44:54] the SBI. They may be working

[44:57] against some of the very things

[44:58] that we're trying to do in

[44:59] terms of maximizing revenue are

[45:01] why, which which returns to our

[45:03] students just throwing that out

[45:04] there as part of the

[45:05] consideration? Not necessarily

[45:07] for this group at all, but the

[45:08] reality that any influence or

[45:11] involvement by SBI can have a

[45:13] counterproductive outcome with

[45:15] what's trying to be chief of

[45:16] Maxim Mising the dollars from

[45:18] the resources in some of the

[45:20] great parts of our state.

[45:22] So thank you, Madam Chair.

[45:24] >> And I see that the director

[45:27] of SBI has joined us miss

[45:30] shirts. If you'd like to

[45:33] state your name for the record

[45:34] and if you'd like to respond.

[45:36] >> Thank you, Madam Chair.

[45:37] My name is Joe Shirts. It's my

[45:39] honor and privilege to serve as

[45:40] the executive director and the

[45:42] chief investment officer of the

[45:44] Minnesota State Board of

[45:45] Investment. Sarah, Sarah, I I

[45:47] appreciate your question.

[45:48] It's an important one. And

[45:51] frankly, we don't have many

[45:52] opportunities to address your

[45:54] question head-on. So thank you.

[45:57] First of all, I appreciate all

[45:59] of you. Your service public

[46:01] service is an incredibly

[46:02] important thing. Personally.

[46:03] I've been very lucky to observe

[46:05] public service through most of

[46:06] my professional career,

[46:07] starting with the military and

[46:10] now over the last 14 years in

[46:12] service, both in a local level.

[46:14] And now at a state level.

[46:16] I want to assure you that

[46:17] although our governance

[46:19] structure certainly

[46:20] interesting, as you look across

[46:21] the country, there are not that

[46:23] many that have a

[46:25] constitutionally mandated

[46:27] approach for elected official

[46:29] serving as the port

[46:30] that's been enshrined in the

[46:31] Constitution since 18. 85

[46:34] also want to assure you that as

[46:36] I thought about taking this

[46:37] role, I thought about that

[46:39] governance structure. I can

[46:41] tell you. And I think there is

[46:42] a fair body of evidence to

[46:45] support crew about to say

[46:47] that throughout many

[46:48] administrations, the for

[46:50] members of the State Board of

[46:51] Investment have been unified in

[46:53] placing their fiduciary duty

[46:56] front and center

[46:57] notwithstanding any political

[46:58] believes they may or may not

[46:59] have. And that includes the

[47:01] issues you've identified.

[47:04] Our fiduciary duty is our first

[47:07] and foremost responsibility,

[47:09] followed closely with respect

[47:11] to particularly the combined

[47:12] funds, the public pension plans

[47:14] that we make sure that our only

[47:16] focus

[47:18] Britt generating a sufficient

[47:19] return to support the

[47:20] retirement. And I would say the

[47:21] same is absolutely true with

[47:23] respect to the permanent school

[47:25] fund.

[47:26] The issue you've identified has

[47:27] been in our national ones for

[47:30] quite a while. It's the object

[47:31] of significant political focus

[47:34] at the state Board of

[47:35] Investment. We spent an

[47:36] enormous amount of time making

[47:38] sure that we communicate anyone

[47:40] who wishes to hear us that we

[47:42] are distinctly a political and

[47:44] that profoundly impacts how we

[47:46] think about every portfolio we

[47:48] manage

[47:49] and we're very fortunate.

[47:51] Sarah Board has exhibited that

[47:53] exact approach.

[47:54] To that end. They were actually

[47:57] willing to enshrine that in

[48:00] policy. Recently

[48:02] at the October board meeting,

[48:04] we made a presentation, I would

[48:05] say as detailed as the one you

[48:06] see now about best practices

[48:09] across the country when it

[48:10] comes to large institutional

[48:12] investors such as ourselves.

[48:14] And again, we manage around

[48:15] 160 billion dollars of assets

[48:17] across many pools capital.

[48:19] In that presentation, we poured

[48:22] put forth the premise that

[48:23] delegated authority,

[48:25] in other words, placing

[48:26] investment authority in the

[48:27] hands of the staff of the state

[48:29] board. And I'm very lucky to

[48:31] have a deep pool of incredibly

[48:33] dedicated and talented people

[48:35] that investment decision should

[48:37] reside with us.

[48:39] That doesn't mean that they're

[48:40] trying to in my seat only we

[48:42] have extensive internal

[48:43] policies practices. I'm very

[48:46] senior internal policy group

[48:49] to make sure that we are always

[48:51] balancing our approach.

[48:53] We do not place any one

[48:55] particular approach above any

[48:56] other.

[48:57] What we have said and I I think

[49:00] given his on this body would

[49:02] resonate, I would help

[49:04] is that we maintain the

[49:05] absolute importance of

[49:07] considering all material risks

[49:10] and opportunities when make

[49:12] investment decisions.

[49:15] We have been very proactive and

[49:17] stated publicly on a number of

[49:19] occasions, for example, we do

[49:21] not support divestment

[49:22] initiatives. We don't think

[49:24] that's in the best interest of

[49:25] our portfolio. We've been vocal

[49:27] about that.

[49:28] If you look at our portfolio,

[49:30] it's representative of the

[49:31] broader market.

[49:32] So I do understand and

[49:34] appreciate your concern.

[49:36] But I want to assure you that

[49:38] our focus is very clear when we

[49:40] are fiduciaries first

[49:43] middle and last.

[49:46] >> Thank you so much. Any other

[49:48] questions where we would really

[49:50] like to narrow our focus here

[49:51] on the school trust lands and

[49:53] if you have broader questions

[49:55] for the the department, maybe

[49:58] you could take that offline.

[50:05] I recognize we. Yes, thank you.

[50:07] >> I I appreciate those those

[50:09] words and I have the upmost

[50:11] respect for or the staff.

[50:14] My concern is the 4th, the top

[50:16] and obviously the staff are

[50:17] following the directives of

[50:19] those that are the 4

[50:21] constitutional officers.

[50:22] But again, I appreciate your

[50:24] words and I appreciate your

[50:25] professionalism. What I am

[50:28] concerned about against those

[50:29] directors at the top. I'm

[50:31] looking at the website here.

[50:33] There's 6 press desire and

[50:35] purpose from resolutions that

[50:37] have been passed by the 4

[50:38] members

[50:39] with the intent of a directive.

[50:41] How those are being carried out

[50:43] by the staff will be determined

[50:46] opportunity by day basis.

[50:47] But it's very clear the

[50:49] direction that the for members

[50:51] are attempting to to leverage

[50:54] the incredible assets. But

[50:55] again, I appreciate that.

[50:56] Thank you, Madam Chair.

[50:58] >> Thank you. And thank you

[51:00] executive director for stepping

[51:01] up.

[51:02] Senator, make I think that

[51:04] chair I the first I want to say

[51:06] that anyone of this is like the

[51:07] largest audience they've had

[51:08] all year. And committee

[51:09] hearings are usually not this

[51:10] dense.

[51:13] But my question is really

[51:14] specific on slide 9. You just

[51:16] identified things that were

[51:17] outside of the scope of the

[51:19] legislative mandate. And one of

[51:21] them is defining what is and is

[51:22] not a school district

[51:25] can use a little bit more.

[51:26] I might have missed it, but

[51:27] it's a little bit more about

[51:28] that. And do does the

[51:29] legislature have some work to

[51:30] do to define that?

[51:32] Madam Chair? Yes.

[51:33] >> Senator, make weight.

[51:34] I respond to that may be asked

[51:36] John to chime in as well.

[51:38] So we identified that in

[51:43] in the scope of the legislative

[51:44] framework, constitutional and

[51:46] statutory that directly

[51:47] addresses the permanent school

[51:49] fund.

[51:50] The word district is is used a

[51:51] few times and it's not clearly

[51:53] defined in that specific set

[51:55] legal framework. I think is we

[51:57] engaged with John in our legal

[51:59] counsel to say what what what

[52:01] does that what does that word

[52:02] intended to mean? As we look

[52:03] across a broader legal

[52:05] framework in across statutes in

[52:07] the state, what we observed is

[52:09] that it it's it's perhaps

[52:10] somewhat ambiguous where and

[52:12] how and exactly what that were

[52:14] district means. And we

[52:16] determined that the the best

[52:18] folks to us to really clearly

[52:20] defined that term, probably not

[52:22] the 9 members of the Permanent

[52:23] School Fund task force. So

[52:25] that's why we reached the

[52:25] conclusion that it's outside of

[52:27] our scope trying to do if you

[52:28] have any additional come.

[52:30] >> Thank thank you for that

[52:31] explanation. And I think there

[52:33] was a reason for that

[52:34] conversation. And I'm just

[52:36] going to ask our

[52:41] non-partisan to be on to talk

[52:44] about that, Mr. Innocent.

[52:49] >> Madam Chair,

[52:51] prior to

[52:53] change made by the Legislature

[52:55] in in the 2011 session, the

[52:58] permanent school fund

[53:01] distribution was apportioned

[53:02] among

[53:04] school districts, only

[53:05] independent and special school

[53:07] districts

[53:08] in the last 2011. And that

[53:11] previous apartment was on the

[53:12] basis of resident ATM or

[53:15] average daily membership.

[53:16] Select a count of the number of

[53:19] students living in that school

[53:21] district

[53:22] under laws. 2011, the

[53:24] Legislature

[53:26] made to charter schools

[53:27] eligible also for the

[53:28] apportionment

[53:30] and in that act switch the

[53:34] apportionment basis from

[53:36] resident ATM to adjust adiam

[53:39] court or pupils actually

[53:41] enrolled in in those schools.

[53:43] And those consider because

[53:45] because definition of the

[53:46] charter schools don't have

[53:47] residents students.

[53:50] More recently, there have been

[53:51] conversations about whether to

[53:53] include

[53:55] students enrolled at trouble,

[53:57] contract schools and the

[53:58] apportionment from the fund.

[54:01] But under current law, the and

[54:03] it is eligible for receipt of a

[54:06] portion dating include school

[54:07] districts and charter schools.

[54:10] Any follow-up?

[54:12] >> Senator helped post you had

[54:14] a question or comment for.

[54:16] Thank you, Madam Chair.

[54:18] >> So on slide number 17, you

[54:20] guys have these really helpful

[54:21] a graph showing what your

[54:24] projected that the projected

[54:25] growth of the fund would be

[54:27] if we took the 4 and a half

[54:28] percent, if we kept that the 2

[54:30] and a half of work, if we fail

[54:31] to changes at all, what is a

[54:33] fun look like stretching out

[54:35] over 10 years? What is the

[54:36] growth like?

[54:38] >> Yes, Madam Chair, Senator

[54:40] Dole's from

[54:42] if you imagine that chart and

[54:45] distributions remains limited

[54:46] to net interest and dividend

[54:49] income, which over the last,

[54:50] you know, 10 or so years has

[54:52] been about 2 and a half percent

[54:53] of fund assets. I would point

[54:55] out it's

[54:58] there's no particular reason to

[54:59] believe that it would be

[54:59] exactly that percentage of fund

[55:01] assets going forward. It could

[55:02] change, according to all kinds

[55:04] of things, including prevailing

[55:06] interest rate environment,

[55:07] corporate decisions that

[55:08] corporations make about how

[55:10] much of their earnings to

[55:11] distribute and dividends, so

[55:13] that so that I want to be clear

[55:14] that we don't we don't assume

[55:16] that the state is the status

[55:18] quo remaining in place would

[55:20] somehow guarantee a 2 and a

[55:21] half percent distribution about

[55:22] that could be variable. But for

[55:25] the sake of argument, if it did

[55:26] remain the same, but you'd

[55:28] likely see is that the growth

[55:30] of the left side of that chart,

[55:33] the value of the fund would

[55:35] increase at a rate that's

[55:35] higher. That's that's a steeper

[55:37] than the highest wind that you

[55:38] see on that chart today

[55:41] and that you would likely see

[55:42] on the right side of that chart

[55:43] that the distribution profile,

[55:45] those bars would be much more

[55:47] similar to what you see for the

[55:48] years 2024 2025 which reflect

[55:50] the reality of the current

[55:51] legal framework.

[55:56] >> Any other questions or

[55:57] comments? Senator Clark,

[55:59] thank you, chair condition and

[56:01] thank you all as someone who

[56:03] manages a much, much smaller

[56:05] endowment. I'm

[56:06] really impressed with the

[56:08] consistent returns that you you

[56:10] have have on the permanent

[56:12] school fund. One piece that I

[56:14] needed just a little bit more

[56:15] information on and I'm glad

[56:18] Senator Farnsworth is back

[56:19] because not just great folks of

[56:21] honor in Buhl of contribute

[56:22] this. What else has country?

[56:24] I know it's 90% from that.

[56:25] I or that

[56:27] the the mine in which my great

[56:29] uncle Clayton worked in the

[56:31] 60's.

[56:34] What what were the other pieces

[56:35] that fall under the land

[56:36] management in revenues

[56:37] understand enforced and such.

[56:39] But if you could just to remind

[56:41] me on that.

[56:42] >> Okay. We will invite

[56:45] director the office of the

[56:47] School Trust Lands. Erin Van

[56:49] Dillen back and if you'd like

[56:50] to respond.

[56:52] >> Thank you, Madam Chair

[56:53] members, senator clerk,

[56:57] the breakdown. And

[56:59] so just want to back up a

[57:00] little bit. We we've talked

[57:01] about the fund its value right

[57:03] now is 2.3 billion dollars.

[57:05] When I talk about land

[57:06] management revenue,

[57:09] the cash basis that that's

[57:11] generated is 1.1 billion

[57:13] dollars. So the value of the

[57:15] fund it 2.3,

[57:18] half investment about that.

[57:20] But that 1.1 cash basis to 80%

[57:24] minerals,

[57:25] 7% real estate, 9%. Amber,

[57:29] 4% investment returns on the

[57:32] land management. So

[57:35] investment on land management.

[57:37] So we sold the land under

[57:38] contract for deed.

[57:40] Got interest payments on that

[57:41] things of that nature. So

[57:44] it's the foreperson investment

[57:46] that I talk about has nothing

[57:47] to do with SBA. They they do

[57:50] entirely sure credibly better

[57:51] than that.

[57:53] Any follow-up question.

[57:55] >> Thank You, Chair Commission

[57:56] and thank you for that to the

[57:58] obviously you want to grow both

[58:00] the base and so the so the

[58:01] income as well as the return.

[58:03] So thank you on that. My

[58:05] general comment is I know what

[58:07] they said on

[58:09] on Page 12 following the best

[58:10] practices

[58:12] that that matches my

[58:14] understanding that Page 18,

[58:16] sorry, the 8, 4, and a half

[58:18] distribution rate and

[58:19] three-year-old rolling average

[58:21] that matches what what I do.

[58:22] So

[58:23] you must be wonderful.

[58:25] Thank you.

[58:27] >> I think we've had we've had

[58:28] good people looking out for.

[58:31] Well, it has to say, but I

[58:33] think I think the the school

[58:35] chess signs have been in good

[58:36] hands and they've done their

[58:37] due diligence. And now we just

[58:40] need to let them do a little

[58:41] bit better. Any other questions

[58:43] or comments?

[58:47] Well, we're gonna move along

[58:48] because we have a couple of

[58:49] bills to be heard in the next

[58:51] one is going to be my bill on

[58:54] making the changes of the

[58:55] Reccomendation. So thank you,

[58:57] gentlemen, for joining us

[58:58] today. And thank you, executive

[59:00] director for stepping in and

[59:03] maybe just stick around in case

[59:04] there's a question or 2.

[59:05] Thank you.

[59:54] >> All right, Senator C****,

[59:55] when you're ready, you can make

[59:56] a motion to move SF 3, 6, 2, 5,

[59:59] be recommended to

[1:00:01] certainly the wrong tree.

[1:00:03] Stand by.

[1:00:09] Let's try that again. Senator,

[1:00:11] could this will hear a SF 3,

[1:00:14] 5, 9, threes when you're ready.

[1:00:16] >> Thank you so much, Madam

[1:00:18] chair and members. This next

[1:00:21] part is is the proposal for a

[1:00:24] constitutional amendment to

[1:00:25] make the recommended changes

[1:00:28] that we just discussed in order

[1:00:31] to make those chains. We do

[1:00:32] have to go through the

[1:00:33] Constitution,

[1:00:35] a constitutional amendment

[1:00:37] process, which means that we

[1:00:38] would take those

[1:00:40] recommendations to the voters.

[1:00:43] And I'm just going to read what

[1:00:45] that might sound like on on the

[1:00:48] ballot in November. The

[1:00:50] submission to of the voters and

[1:00:52] you'll see this on Page 2 of

[1:00:53] the bill. Section 2. The

[1:00:56] proposed amendment must be

[1:00:57] submitted to the people at the

[1:00:59] 2026 state general election.

[1:01:02] And the questions submitted

[1:01:03] must be shell. The Minnesota

[1:01:05] Constitution be amended to

[1:01:07] modify the permanent school

[1:01:08] fund to calculate the

[1:01:10] distributable amount and to

[1:01:12] maintain the fund has a

[1:01:13] perpetual financial resource

[1:01:16] for Minnesota schools and that

[1:01:18] would go into effect July Force

[1:01:20] first excuse me of 2027.

[1:01:25] I think at this time I will ask

[1:01:28] our legislative analysis of the

[1:01:31] are innocent to maybe walk

[1:01:33] through the bill. It's not a

[1:01:34] big bill, but I think it would

[1:01:37] be helpful for him to just go

[1:01:38] through. And if you have any

[1:01:39] questions, happy to answer

[1:01:41] those Senator, Chris, to want

[1:01:42] to move your a one amendment

[1:01:43] for your side.

[1:01:53] >> All those in favor of

[1:01:54] adopting a one amendment say

[1:01:56] aye.

[1:01:57] Any opposed

[1:02:03] amendment adopted. You can

[1:02:04] begin. Thank you, Mr. Innocent

[1:02:06] if you are ready to.

[1:02:11] >> Madam Chair members, all all

[1:02:12] walk through the one delete

[1:02:14] everything amendment

[1:02:17] as

[1:02:18] Sir Commission to to the the

[1:02:20] amendment is

[1:02:24] implements the recommendations

[1:02:27] from the task force itself

[1:02:29] because this is the the first

[1:02:31] bill proposing a constitutional

[1:02:32] amendment. Some of the

[1:02:33] committee this year just note

[1:02:35] that under the joint rules cost

[1:02:37] Bill proposing Constitution

[1:02:38] amendment must include the

[1:02:40] amendment language itself and

[1:02:43] anything

[1:02:44] relevant. Statutory changes

[1:02:46] required by the amendment.

[1:02:47] So the Constitution Amendment

[1:02:50] is an article.

[1:02:51] One of the

[1:02:54] of the bill and the structural

[1:02:56] changes are contained in

[1:02:58] Article 2 of the bill.

[1:03:04] The previous presentation

[1:03:05] described it to some degree the

[1:03:07] proposed constitutional

[1:03:08] language change the new

[1:03:10] language. This list of the 1.1,

[1:03:13] 9 through 1.0, 2, 5, of the a

[1:03:16] one Amendment.

[1:03:19] It includes

[1:03:23] describing the principles

[1:03:25] overarching principles for the

[1:03:27] permanent school fund. It

[1:03:29] strikes language that Mr.

[1:03:31] Kirk and others describe

[1:03:32] limited in limiting the amounts

[1:03:34] available for apportionment

[1:03:36] from the fund.

[1:03:37] It requires that the fund

[1:03:39] it designs to provide annual

[1:03:41] distributions and preserve the

[1:03:42] purchasing power and further

[1:03:44] bet balance needs of current

[1:03:45] and future

[1:03:47] and the fish areas.

[1:03:48] It requires that administrative

[1:03:50] spending from the fund,

[1:03:52] the item in the manner

[1:03:53] prescribed by law

[1:03:56] and continues the current

[1:03:59] practice. The distributions

[1:04:01] must be a portion in the in the

[1:04:03] manner described prescribed by

[1:04:04] law,

[1:04:06] sir, could just describe the

[1:04:08] the way that the question would

[1:04:09] be submitted to the voters.

[1:04:11] The task force itself to make

[1:04:12] recommendations about this belt

[1:04:14] language. But it's presented

[1:04:15] here for

[1:04:16] further consideration by the

[1:04:18] Legislature

[1:04:20] beginning at 2.0, 6 would begin

[1:04:23] article 2 of the bill which

[1:04:26] features the statutory changes.

[1:04:30] Section one is the section

[1:04:33] requiring that 4.5% of the

[1:04:35] Rolling 3 year average.

[1:04:37] That's the value of the fund to

[1:04:38] be the available for

[1:04:39] distribution.

[1:04:41] And the stricken language in

[1:04:44] Section one

[1:04:45] is stricken because it would be

[1:04:47] obsolete of this under this new

[1:04:50] distribution method

[1:04:53] paragraph. The beginning of

[1:04:54] 2.0, 2, 3, requires the

[1:04:56] director of SPI to any other

[1:04:59] report. This to strip it along

[1:05:01] to the Legislator Permanent

[1:05:02] School Fund Commission and to

[1:05:03] the Commissioner of Education.

[1:05:06] Section 2

[1:05:10] is modified to such a conform

[1:05:12] with the requirements of

[1:05:13] section one. There's some

[1:05:14] language their stricken that

[1:05:16] would be again made obsolete by

[1:05:18] this alternative

[1:05:19] calculation of the

[1:05:20] distributable amount and

[1:05:22] clarifies that it's the

[1:05:24] commissioner management and

[1:05:25] budget transfers. This district

[1:05:26] will mount

[1:05:28] 2 from the permit school fund

[1:05:29] to the school Endowment fund

[1:05:30] has needed to make the payments

[1:05:32] from the school in a month and

[1:05:36] Section 3 upped its a term

[1:05:39] to conform with the changes

[1:05:41] under Section one, section 4

[1:05:44] status as the effective date

[1:05:45] for all of Article 2

[1:05:47] to align with the effective

[1:05:49] date indicated in the in the

[1:05:51] Constitutional question.

[1:05:53] And so if the if the question

[1:05:56] were adopted by the people

[1:05:59] at the 2026 election, the the

[1:06:03] first impacted apportionment

[1:06:06] would be the apportionment in

[1:06:08] September of

[1:06:10] 20 20th.

[1:06:14] I think as mentioned earlier,

[1:06:15] the apportionment among school

[1:06:17] districts happens twice a year

[1:06:18] in September and March Beach,

[1:06:20] fiscal year.

[1:06:21] And so the whole the whole

[1:06:22] proposal would be effective,

[1:06:23] beginning July 1st, 20.0, 7

[1:06:26] for fiscal year, 2028 and

[1:06:28] therefore the first impact of

[1:06:29] the portion that would be the

[1:06:30] September

[1:06:32] 2027 portion,

[1:06:34] Madam Chair. That's

[1:06:36] pretty quick overview of them.

[1:06:42] >> All right. Senator

[1:06:42] commissioners, any of the

[1:06:43] testifier?

[1:06:46] Yes, we have Kirk.

[1:06:49] She when the wing, the

[1:06:50] executive director of the men

[1:06:52] in both Minnesota School Boards

[1:06:53] Association.

[1:06:56] >> Welcome to the committee.

[1:06:57] If you could say your name for

[1:06:58] the record of the begin when

[1:06:59] you're ready. Yes, Madam Chair,

[1:07:00] my name is Kirk Snyder when

[1:07:01] executive director for the

[1:07:02] Minnesota School Boards

[1:07:03] Association first.

[1:07:05] >> I want to thank you. And the

[1:07:07] chair coup niche on the and the

[1:07:09] permanent task force for their

[1:07:10] serious bipartisan work on this

[1:07:12] proposal.

[1:07:14] The recommendations are

[1:07:15] thoughtful, data-driven,

[1:07:16] and grounded in long-term

[1:07:18] fiduciary responsibility.

[1:07:20] As I shared my name, I

[1:07:22] represent the school Boards

[1:07:23] Association, but I'm also

[1:07:24] speaking on behalf of the MSD

[1:07:26] school districts, the Minnesota

[1:07:28] Rural Education Association and

[1:07:30] that secondary and Alamo

[1:07:32] Elementary principals as well

[1:07:33] as the Superintendents

[1:07:34] Association.

[1:07:36] The Permanent School Fund is

[1:07:37] Minnesota Students Trust Fund.

[1:07:39] It was created to support

[1:07:41] public education in perpetuity,

[1:07:44] but the constitutional

[1:07:45] framework governing

[1:07:46] distribution limits our ability

[1:07:48] to modernize how earnings are

[1:07:50] calculated and distribute it.

[1:07:53] Today. The fun distributes only

[1:07:54] what it earns an annual

[1:07:56] interest and dividends in most

[1:07:58] years. The rich, that results

[1:08:00] in distributions below what a

[1:08:01] professionally managed

[1:08:03] endowment of this size could

[1:08:04] sustainably provide

[1:08:07] in practical terms? We are

[1:08:08] managing a modern investment

[1:08:10] portfolio under an outdated

[1:08:12] formula.

[1:08:13] After extensive study, the task

[1:08:15] force recommends moving to a

[1:08:16] percentage of market value or P

[1:08:18] O and B

[1:08:20] model. Under that approach, the

[1:08:22] state would distribute a fixed

[1:08:23] percentage typically between 4

[1:08:25] and 5% based on a multi year

[1:08:27] average of the fund's market

[1:08:29] value.

[1:08:30] That rings reflects best

[1:08:32] practice for large endowment

[1:08:33] funds.

[1:08:35] It is designed to balance 2

[1:08:36] responsibilities as shared by

[1:08:38] the Testifiers earler meeting.

[1:08:40] Current needs while preserving

[1:08:42] long term purchasing power

[1:08:45] at 4 and a half percent

[1:08:46] calculated on a three-year

[1:08:48] rolling average as outlined in

[1:08:49] the bill.

[1:08:51] It strikes the right balance.

[1:08:53] It would provide more stable

[1:08:54] and predictable funding for

[1:08:56] schools while predicting law

[1:08:58] protecting the integrity of the

[1:08:59] fund for future generations.

[1:09:03] Predictability matters to our

[1:09:04] school district. Right now.

[1:09:05] School districts across

[1:09:06] Minnesota are making difficult

[1:09:08] budget adjustments, boards

[1:09:10] right-sizing programs,

[1:09:11] adjusting staff and delaying

[1:09:13] investment in that environment,

[1:09:15] stable and reliable revenue is

[1:09:17] critical.

[1:09:19] School boards adopt annual

[1:09:20] budget and with an eye on the

[1:09:21] future negotiate contract to

[1:09:24] make long-term commitments.

[1:09:26] Volatility makes that work

[1:09:27] harder. Stability strengthens

[1:09:30] our governance, moving from the

[1:09:32] interest and dividends only

[1:09:34] model to a modern peel and the

[1:09:36] framework is responsible

[1:09:37] endowment management. It aligns

[1:09:40] Minnesota with the net, the

[1:09:42] national best practice and

[1:09:44] improves distribution

[1:09:46] reliability without raising

[1:09:48] taxes or creating new ongoing

[1:09:50] spending

[1:09:51] on behalf of the school boards

[1:09:53] in our urban suburban in

[1:09:55] greater Minnesota. We strongly

[1:09:57] support House and we strongly

[1:09:59] support the center found

[1:10:00] respectfully, ask for your

[1:10:01] support.

[1:10:03] Thank you, Madam Chair

[1:10:06] members, any questions.

[1:10:09] >> Senator Le Cerro.

[1:10:12] Yes, thank you, Madam Chair and

[1:10:14] a question. But I'd like to

[1:10:15] offer the a 2 amendment to the

[1:10:19] a one Amendment.

[1:10:26] Those are being distributed.

[1:10:30] >> If you want to speak a

[1:10:30] little bit about your amendment

[1:10:32] center Lou, Sarah, before,

[1:10:33] well, world getting copies.

[1:10:36] >> So the thank you, Madam

[1:10:37] Chair. So the this amendment

[1:10:39] would modify if you look at the

[1:10:41] amendment on the one that was

[1:10:42] already offered, if you look on

[1:10:43] my 1.2 6,

[1:10:46] it says that the funds, if the

[1:10:48] const, the propose constitute a

[1:10:50] constitutional amendment were

[1:10:52] to be adopted,

[1:10:53] the funds would be distributed

[1:10:56] in a manner prescribed by law.

[1:10:58] I am seeking to modify that the

[1:11:01] funds will be distributed in an

[1:11:04] equal amount per pupil.

[1:11:08] And the reason I am seeking to

[1:11:10] do that as we know, we've been

[1:11:12] having a conversation in this

[1:11:14] committee on equity, in

[1:11:16] education funding.

[1:11:17] And there is a an incredible

[1:11:19] inequity right now with the

[1:11:20] current

[1:11:21] funding formula seeks to

[1:11:24] provide some fairness and

[1:11:25] certainty

[1:11:27] in the Constitution

[1:11:30] that our students

[1:11:32] don't have different

[1:11:33] opportunities based on their

[1:11:34] zip code but instead makes it

[1:11:36] equal across the board. So I

[1:11:38] would encourage support for

[1:11:39] those with a yes vote. Thank

[1:11:41] you.

[1:11:43] >> Madam Chair, Start will

[1:11:45] Madam Chair and Senator Kurdish

[1:11:47] any response the a one

[1:11:48] Amendment.

[1:11:49] >> Thank you so much. You know,

[1:11:50] I I first want to just say that

[1:11:53] this amendment are this

[1:11:56] legislation was very

[1:11:57] painstakingly looked at.

[1:12:00] I mean, literally every word

[1:12:02] and every reference in this in

[1:12:06] this legislation to ensure that

[1:12:08] there aren't any real

[1:12:11] complications. But I'm

[1:12:13] wondering if perhaps

[1:12:18] or a square foot would be able

[1:12:21] to

[1:12:23] help us better understand how

[1:12:25] this language

[1:12:27] might make a difference or

[1:12:30] might change the bill in a way

[1:12:32] that

[1:12:33] I'm not quite sure up

[1:12:40] because if I'm not mistaken, we

[1:12:43] we do distribute that amount

[1:12:46] per pupil

[1:12:48] at this time. And is that what

[1:12:50] the law actually is stating?

[1:12:56] >> Madam Chair, the a 2

[1:12:58] amendment would

[1:13:00] require constitutionally, but

[1:13:03] the

[1:13:04] the apportionment be in an

[1:13:06] equal per pupil amount under

[1:13:08] current statutory law. The

[1:13:10] apportionment is unequal per

[1:13:13] pupil amount. And as I

[1:13:15] indicated earlier, that that

[1:13:16] that per pupil measure is the

[1:13:18] adjusted average daily

[1:13:19] membership. So so the

[1:13:20] constitutional that the

[1:13:22] amendment would would not

[1:13:24] wouldn't change in practice how

[1:13:27] the

[1:13:27] amount is a portion now, it

[1:13:29] would it would

[1:13:32] in trying to the Constitution

[1:13:34] that that portion of method or

[1:13:36] the the apportionment amount.

[1:13:41] >> Senator Commission.

[1:13:43] So based on the fact that we

[1:13:45] did go through this and looked

[1:13:47] at all of the different

[1:13:48] elements and I'm very

[1:13:51] comfortable that our present

[1:13:53] constitution and the present

[1:13:54] language that we have will

[1:13:56] ensure that those students

[1:13:58] continue to receive equal per

[1:14:01] pupil amount. I am going to

[1:14:06] respectfully not accept this

[1:14:08] amendment.

[1:14:12] >> All those in favor of the so

[1:14:14] sorry. Senator Mike Lee,

[1:14:16] thank you after and I would

[1:14:17] also respectfully ask for a no

[1:14:19] vote for for 2 reasons. One,

[1:14:22] even though we currently

[1:14:23] distributed on equal per people

[1:14:25] out, there might be a time and

[1:14:26] this is the diversity

[1:14:27] inequality inequity, right

[1:14:28] qualities. Everyone gets the

[1:14:29] same thing equity is that

[1:14:30] everybody gets what they need,

[1:14:32] even if it's different amounts.

[1:14:33] And so I could see it maybe in

[1:14:34] a time in the future where we

[1:14:35] want to send more money to

[1:14:37] schools because the CA fixed

[1:14:38] costs of running a school

[1:14:39] doesn't go down regardless of

[1:14:40] how many students you have in

[1:14:41] that. And so if we wanted to

[1:14:42] say we want to keep this small

[1:14:45] district from losing an

[1:14:46] elementary school were going

[1:14:47] up, the amount we're going to

[1:14:48] give to the school or these

[1:14:50] types of school districts

[1:14:51] instead of having it be a, you

[1:14:53] know, people amount we wouldn't

[1:14:54] be able to do that without

[1:14:55] changing the Constitution

[1:14:57] instead. Right now, what we can

[1:14:58] do is we can change in line.

[1:14:59] So I think reserving the

[1:15:00] ability to make those decisions

[1:15:03] in law for the legislature to

[1:15:04] debate instead of having to put

[1:15:06] it in the constitution and then

[1:15:07] being bound by not being able

[1:15:09] to change it based on our

[1:15:11] changing state in our student

[1:15:12] needs. That is why I think we'd

[1:15:14] be better off just leaving it

[1:15:16] and law and not in the

[1:15:17] constitution.

[1:15:18] Senator Eric, thank you, Madam

[1:15:20] Chair.

[1:15:22] >> I'm gonna speak in favor of

[1:15:23] the amendment. I think.

[1:15:24] >> As was just talked about the

[1:15:27] needs that would come a rise or

[1:15:29] come up. We have that ability

[1:15:31] through the general fund and

[1:15:33] what we deal with in this

[1:15:34] committee all the time. But

[1:15:35] this is the permanent

[1:15:37] trust fund for all of

[1:15:39] Minnesota.

[1:15:41] And so this piece is a small

[1:15:44] piece should be equal to every

[1:15:47] student throughout the state

[1:15:49] for this particular fund.

[1:15:50] And that's what this amendment

[1:15:51] is getting at for this fund,

[1:15:54] which comes from

[1:15:56] around the state. Although most

[1:15:58] of it comes from one particular

[1:16:00] area of the state, this should

[1:16:02] be distributed equally to every

[1:16:05] student in the state. Again, we

[1:16:07] have that ability for special

[1:16:08] needs that arise. We have that

[1:16:11] through the funding formulas to

[1:16:13] address those other needs.

[1:16:14] But for this particular fund,

[1:16:16] we should absolutely be

[1:16:18] treating every student around

[1:16:20] the state the same and keep

[1:16:22] this and not allow for a future

[1:16:25] legislature to change that and

[1:16:26] put this money into a funding

[1:16:28] formula. We should put this

[1:16:30] language in this. This money

[1:16:32] will always go

[1:16:34] per pupil. Exactly the same

[1:16:36] around the state. So I would

[1:16:37] ask people to vote. Yes.

[1:16:40] >> Senator home certain.

[1:16:43] >> Thank you. Madam Chair.

[1:16:43] I would speak in favor of this

[1:16:45] amendment as well. The people

[1:16:46] of Minnesota have supported

[1:16:48] this this constitutionally

[1:16:49] required fund for 150 plus

[1:16:52] years specifically because we

[1:16:54] believe that that that

[1:16:57] investing in education is

[1:16:58] important for all students.

[1:17:01] The idea that we may choose to

[1:17:04] insert politics into that and

[1:17:05] favor some students over of or

[1:17:07] others on this particular

[1:17:09] program makes no sense to me.

[1:17:11] I think that we need to be true

[1:17:12] and honest with the people of

[1:17:13] Minnesota, but what our plans

[1:17:14] are and this does that it makes

[1:17:16] clear what our intentions are

[1:17:18] with this fund. Thank you.

[1:17:21] >> Thank you. Anyone else,

[1:17:23] Senator West London.

[1:17:24] I have a quick question either

[1:17:27] for Senator Le Cerro or perhaps

[1:17:29] the task force members. And I'm

[1:17:30] wondering if if this particular

[1:17:32] issue

[1:17:34] was brought up with the task

[1:17:35] force

[1:17:37] members in their consideration

[1:17:39] of recommendations made because

[1:17:41] I would prefer to have

[1:17:44] a little more vetting

[1:17:47] before putting something into

[1:17:49] the Constitution that I think

[1:17:50] has not been fully vetted

[1:17:52] and the challenge with putting

[1:17:53] things into the Constitution

[1:17:54] and Senate,

[1:17:55] if there is a problem with its

[1:17:56] going to be much, much harder

[1:17:58] to change. So I guess maybe my

[1:18:00] question is to Senator Cerro

[1:18:02] Hat. Did you run your amendment

[1:18:05] passed

[1:18:06] the Working Group Task Force.

[1:18:09] >> Senator the Sarah, thank

[1:18:11] you. Madam Chair. I was not

[1:18:13] part of the task force. I was

[1:18:14] involved in it at all.

[1:18:16] This amendment is the result of

[1:18:18] a conversation I had yesterday

[1:18:20] in preparing for this bill that

[1:18:22] would be in committee today.

[1:18:23] So we're as a task force of

[1:18:25] Glee provides recommendations

[1:18:27] to the legislature. It's this

[1:18:28] committee that starts the

[1:18:29] vetting process for the policy

[1:18:32] for the education of our

[1:18:33] students. So that's why I think

[1:18:35] it is most appropriate now for

[1:18:37] us to have this conversation

[1:18:38] and make a decision. Thank you.

[1:18:40] >> Senator was a Madam Chairman

[1:18:41] Sen. I don't think this is the

[1:18:43] last stop for this bill, but

[1:18:45] I'm wondering if you are

[1:18:47] willing to have that

[1:18:48] conversation with the members

[1:18:50] of the task force,

[1:18:53] I maybe we don't have a sight

[1:18:55] line into where an issue might

[1:18:57] arise here. I certainly don't

[1:18:58] necessarily. And I

[1:19:00] I don't feel comfortable

[1:19:01] accepting this kind of on the

[1:19:02] fly. Know you said you just

[1:19:04] kind of came up yesterday and

[1:19:05] that's fine. That's how things

[1:19:06] work or is sometimes things

[1:19:08] come up the last minute.

[1:19:10] But my question to you is, are

[1:19:11] you willing to

[1:19:14] actually have conversations

[1:19:15] with the task force

[1:19:17] to walk through this or even

[1:19:19] with

[1:19:20] nonpartisan staff? But I'm not

[1:19:22] comfortable voting for this

[1:19:23] today. And I do understand that

[1:19:26] this will have other stops.

[1:19:28] So I'm a no vote. But again,

[1:19:29] I'm just curious to know if

[1:19:30] you'd be willing to has some

[1:19:32] additional conversations.

[1:19:35] >> Thank you, Senator. Wasn't.

[1:19:36] We do have another question

[1:19:38] from a member, but we are

[1:19:39] deciding that it might be

[1:19:40] helpful to bring up the task

[1:19:41] force. Whether members choose

[1:19:43] to ask them questions or not.

[1:19:44] It might be helpful to come to

[1:19:45] the table,

[1:19:47] Mr. Craig should help him

[1:19:49] saying it correctly

[1:19:52] and Mr. Mule and yes, all of

[1:19:54] you and Senator Eric.

[1:19:58] >> Thank you, Madam Chair.

[1:19:59] And I think in response to

[1:20:00] Senator West Linn is question.

[1:20:02] You know, I believe that

[1:20:03] happened. They me answer this

[1:20:04] better. The task force was put

[1:20:06] in place, talk about how we're

[1:20:07] going to distribute the moneys

[1:20:09] based on

[1:20:11] the investments themselves.

[1:20:13] This is talking about in

[1:20:15] particular how it will go out.

[1:20:17] That was not what the task

[1:20:18] force was looking into. That is

[1:20:21] something for this committee to

[1:20:23] talk about. And, yes, it just

[1:20:26] kind of came up yesterday

[1:20:27] because in our discussion we

[1:20:29] were saying, hey, this is this

[1:20:31] is a fund that small, but it's

[1:20:33] not something that should be

[1:20:35] limited are open to formulas.

[1:20:38] This is something that should

[1:20:39] be equally distributed to all

[1:20:41] schools. But I think the task

[1:20:43] force can probably answer, but

[1:20:44] that was not part of what they

[1:20:46] were asked to look at. That

[1:20:47] would be a conversation for the

[1:20:49] legislature.

[1:20:50] >> Senator Wilson, Madam Chair,

[1:20:52] I have to pull my papers back

[1:20:54] out again. But I thought that

[1:20:55] the recommendations included

[1:20:58] recommended changes to the

[1:21:00] Constitution, recommended

[1:21:01] statutory changes. And so

[1:21:04] I just curious to know of they

[1:21:06] have any opinion about this and

[1:21:07] any potential implications and

[1:21:10] maybe they don't. But I'd at

[1:21:12] least like to get some input

[1:21:13] from them.

[1:21:19] >> Ok, don't know if we have

[1:21:20] any other members who want to

[1:21:21] talk if the task force enter

[1:21:23] commish. If you want to invite

[1:21:24] that has forced to answer bres

[1:21:26] any of those before we go to

[1:21:27] Senator Le Cerro to close out

[1:21:28] the amendment.

[1:21:31] >> And do you have a is there a

[1:21:33] response that you'd like to

[1:21:34] share? Okay. Yes, we have

[1:21:36] executive director here.

[1:21:38] >> Thank you. Madam Chair,

[1:21:39] executive directors say Joe

[1:21:41] Shirts. Thank you for the

[1:21:42] question. I appreciated the

[1:21:44] task force actually did

[1:21:45] consider questions very similar

[1:21:48] to this. I would answer this

[1:21:50] into parts of the night as my

[1:21:51] colleagues to provide

[1:21:54] additional information.

[1:21:55] First and foremost, we thought

[1:21:57] one of the most important

[1:21:57] things consistent as we discuss

[1:21:59] our fiduciary duty was to

[1:22:00] really dig into the scope of

[1:22:02] the task force mission.

[1:22:04] And to be very clear about

[1:22:05] those questions that are within

[1:22:07] the scope of the task force and

[1:22:09] those that are better left to

[1:22:10] the legislator Legislature,

[1:22:12] these particular policy

[1:22:13] questions I we believe the task

[1:22:17] force, but a lot of time

[1:22:18] talking about this in voting on

[1:22:19] it

[1:22:20] was that these particular

[1:22:21] questions were more appropriate

[1:22:22] for statute as their policy

[1:22:25] driven decisions for the

[1:22:26] legislature

[1:22:28] and that they were specifically

[1:22:29] outside of the scope of the

[1:22:30] statute. The second part of the

[1:22:32] answer that question an

[1:22:33] enormous amount of time and

[1:22:35] energy, one into the research.

[1:22:36] What do other similarly

[1:22:38] situated institutional

[1:22:39] educational focused funds do?

[1:22:42] And that research was very

[1:22:43] clear that these types of

[1:22:44] issues are answered in statute,

[1:22:46] not in the constitution.

[1:22:48] And that also guided the

[1:22:49] approach of the task force.

[1:22:51] I would stop and defer to my

[1:22:54] colleagues percent.

[1:23:01] >> Thank you. Madam Chair, Erin

[1:23:03] Ban on School trust lands

[1:23:04] director getting Senator Le

[1:23:05] Cerro. If you do bring up the

[1:23:07] next one point, the history of

[1:23:09] school trust lands and I've

[1:23:10] gone back and read the debates.

[1:23:12] Its statement when we were

[1:23:14] becoming a state on these

[1:23:16] lands,

[1:23:18] the debates were were

[1:23:21] link me to say the least and a

[1:23:23] hard to read. But

[1:23:25] what they be,

[1:23:27] what they determined at the

[1:23:28] time was that these lands as

[1:23:30] they are across the state

[1:23:32] aren't going to be held for a

[1:23:33] specific community. They're

[1:23:35] going to be held for the entire

[1:23:36] state.

[1:23:37] That was the decision in 18,

[1:23:39] 58. We have maintained that

[1:23:42] throughout

[1:23:43] to your point about equal

[1:23:46] receipts or payments to the

[1:23:48] pupils, that's

[1:23:51] the task force is the executive

[1:23:53] director said we felt that

[1:23:54] those decisions were policy

[1:23:57] better situated to be held in

[1:23:59] dealt with in statute.

[1:24:01] And just to give us a specific

[1:24:03] example of why we did that,

[1:24:05] Utah, the state of Utah

[1:24:08] has a permanent school fund.

[1:24:09] It's managed by the U.S.

[1:24:11] institutional investment in

[1:24:13] Utah.

[1:24:15] They passed

[1:24:17] 3, 4, years ago and

[1:24:18] constitutional amendment very

[1:24:20] similar to this. They put their

[1:24:23] amounts their distribution

[1:24:25] amounts in the Constitution.

[1:24:28] 2 years later, they are going

[1:24:30] back and amending their

[1:24:31] constitution

[1:24:33] because they couldn't

[1:24:34] distribute as much as they

[1:24:36] could because they limited it

[1:24:38] in the Constitution.

[1:24:39] So they limited the

[1:24:40] constitution at 4 and a half

[1:24:42] percent in,

[1:24:43] you know, for 5 years ago,

[1:24:45] they have the ability because

[1:24:47] of the oil and gas revenues to

[1:24:48] distribute over 7 and a half

[1:24:50] percent of their permanent

[1:24:52] fund. And they had to leave

[1:24:53] that 3% in their funded,

[1:24:55] not distributed because it was

[1:24:57] in the Constitution.

[1:24:58] So we took that

[1:25:01] to heart when we were making

[1:25:02] our recommendations of what

[1:25:04] should be in the Constitution

[1:25:05] and what should be in statute.

[1:25:07] And that was

[1:25:10] months of discussion and our

[1:25:11] task force.

[1:25:14] >> Madam Chair members not just

[1:25:16] add in and directly respond to

[1:25:18] the question of was this a

[1:25:19] topic that the task force

[1:25:20] discussed? The answer is yes.

[1:25:22] I think we ultimately reached a

[1:25:24] conclusion that chill

[1:25:26] articulated that this was

[1:25:27] outside the scope of what we

[1:25:29] were tasked with and that our

[1:25:30] focus should be on the

[1:25:32] investment areas of the caught

[1:25:35] the legal framework that

[1:25:35] addresses the investments of

[1:25:37] the permanent school fund to

[1:25:38] not apportionment.

[1:25:39] However, in reaching that

[1:25:41] conclusion, we did discuss

[1:25:43] amongst each other,

[1:25:45] what is the basis for

[1:25:46] apportionment and there?

[1:25:47] And just amongst the 9 of us,

[1:25:49] there were differing opinions.

[1:25:51] There were some folks who felt

[1:25:52] very strongly that people

[1:25:54] apportionment policy was the

[1:25:55] correct policy.

[1:25:57] There are some folks who

[1:25:58] pointed out that I think

[1:25:59] Senator equated that the fixed

[1:26:01] costs of running schools are

[1:26:02] not dependent on the number of

[1:26:04] students in that school.

[1:26:05] And so perhaps apportionment

[1:26:07] should be thought about in that

[1:26:08] context. There are members that

[1:26:10] observed that most of the

[1:26:11] revenues coming into the

[1:26:12] permanent school fund stem from

[1:26:14] certain areas of the state and

[1:26:15] not others. And so I just point

[1:26:17] that out to say just within

[1:26:18] this group of 9 people who

[1:26:19] spent a lot of time discussing

[1:26:21] and thinking about this,

[1:26:22] we did not reach a conclusion.

[1:26:24] We did not all reached the same

[1:26:25] conclusion on this question.

[1:26:27] That's part of what got us to

[1:26:28] think that this is best left

[1:26:29] with the Legislature.

[1:26:31] >> Thank you, Senator Cruz.

[1:26:33] Thank you. Madam Chair, just

[1:26:35] chiming in on a couple of

[1:26:36] comments on this amendment

[1:26:38] isn't

[1:26:40] related to what happened in

[1:26:41] Utah. That totally makes sense

[1:26:43] to not have a distribution

[1:26:44] about in the Constitution.

[1:26:45] But that's not what this is.

[1:26:48] This is and you said it

[1:26:49] yourself. The intent of the

[1:26:50] legislators back to the state's

[1:26:52] founding

[1:26:53] was for this trust to be held

[1:26:55] for the entire state. And

[1:26:56] that's exactly what this

[1:26:58] amendment seeks to do.

[1:27:00] I don't think the founders of

[1:27:02] this state, those legislators

[1:27:03] that were voting on this

[1:27:05] back in the 18 50's could have

[1:27:07] possibly imagine the

[1:27:09] complicated funding formula

[1:27:11] that the state would end up

[1:27:12] with

[1:27:14] for its general fund, but of

[1:27:15] when even be within their

[1:27:16] comprehension

[1:27:18] and so or or the legislature's

[1:27:20] willingness

[1:27:23] to come up with all of these

[1:27:24] different compensatory funds

[1:27:26] and all of these different ways

[1:27:27] that we fund our schools.

[1:27:29] This fund is different.

[1:27:31] This fund is in the

[1:27:31] Constitution and should benefit

[1:27:33] the entire state. Senator, the

[1:27:35] Sarah's Amendment does exactly

[1:27:36] that.

[1:27:37] I personally don't trust future

[1:27:39] legislatures to not take her

[1:27:40] with this.

[1:27:41] Once they they have this pot of

[1:27:43] money. It's just prescribed by

[1:27:45] law. It's not in the

[1:27:46] constitution. Then it just

[1:27:47] becomes another fun that they

[1:27:49] can

[1:27:50] take and make a complicated

[1:27:52] formula out of. I think the

[1:27:54] people of Minnesota deserve

[1:27:55] simplicity

[1:27:57] on this particular farm.

[1:27:59] There are plenty of other funds

[1:28:00] from the general Fund for

[1:28:01] compensatory funding to address

[1:28:04] particular needs about

[1:28:06] declining enrollment for other

[1:28:07] compensatory funding factors.

[1:28:09] But this fund is different.

[1:28:11] This fund should have the

[1:28:12] confidence of the people

[1:28:14] when they're voting on this

[1:28:15] constitutional amendment that

[1:28:17] it is going to be distributed

[1:28:18] on a per pupil basis. Thank

[1:28:20] you.

[1:28:21] >> Senator homes from.

[1:28:23] >> Madam Chair. I will add to

[1:28:25] that that the executive

[1:28:27] director of the Middle School

[1:28:28] Board Association just

[1:28:29] testified to us that the school

[1:28:31] board's need to have stability.

[1:28:33] They need to know long term

[1:28:36] what to expect. This amendment

[1:28:38] does just that. It tells them

[1:28:39] exactly what to expect where

[1:28:40] these dollars are going to be

[1:28:41] spent long into the future.

[1:28:43] Thank you.

[1:28:48] >> Senator commissioning

[1:28:49] closing thoughts will go to

[1:28:50] Senator the Cerro. Okay.

[1:28:52] >> Yeah. I mean, this has been

[1:28:53] a really good discussion.

[1:28:55] And I wish even though you kind

[1:28:56] of came up with this yesterday,

[1:28:58] had to given the a little heads

[1:29:00] up so that I could kind of wrap

[1:29:02] my head around it and ask a lot

[1:29:03] of other questions. I wasn't

[1:29:05] surely have appreciated that.

[1:29:08] But again, at this time because

[1:29:10] I feel like I now need to

[1:29:13] talk about it. Think about it,

[1:29:15] perhaps meet with any of you

[1:29:17] around this before we make a

[1:29:20] decision on this. I think I I

[1:29:22] need to think a little bit more

[1:29:24] as senator said, this has other

[1:29:29] stops and perhaps on one of

[1:29:32] those other stops, having done

[1:29:34] better review and reflection on

[1:29:36] this and having more

[1:29:37] information about what the

[1:29:39] cause and effect of something

[1:29:40] like this might be, how it

[1:29:42] might make the fund more

[1:29:43] vulnerable. And as we're

[1:29:46] talking about future

[1:29:48] legislators being able to tap

[1:29:50] into this, we want to make sure

[1:29:52] that we are being very

[1:29:53] protective and what those kind

[1:29:56] of consequences would be.

[1:29:57] So I'm willing to work with you

[1:29:59] on this. I just need more time

[1:30:01] and I need a better

[1:30:02] understanding before I could

[1:30:04] accept a an amendment such as

[1:30:07] this.

[1:30:08] >> Senator Louis, Errol, thank

[1:30:10] you. Madam Chair members,

[1:30:12] the Minnesota Constitution,

[1:30:14] states

[1:30:15] general and uniform system of

[1:30:18] public schools,

[1:30:19] that is the objective.

[1:30:22] The school trust lands were to

[1:30:24] benefit all students. So in the

[1:30:27] spirit of benefiting all

[1:30:29] students

[1:30:30] and his spirit of having a

[1:30:32] uniform system,

[1:30:34] I encourage members to vote in

[1:30:36] support of this to ensure that

[1:30:38] those funds are distributed

[1:30:40] uniformly for the benefit of

[1:30:43] all students equally. That's

[1:30:45] what our Constitution should

[1:30:47] reflect.

[1:30:48] A green vote is too support

[1:30:51] that philosophy and support all

[1:30:53] students equally.

[1:30:54] If you don't agree with that

[1:30:56] vote. No. Thank you, Madam

[1:30:57] Chair.

[1:30:59] >> Thank you. Senator Le Cerro.

[1:31:00] We will vote on the B 2 on the

[1:31:04] to all those in favor say Aye,

[1:31:06] aye. All those opposed say no,

[1:31:08] no

[1:31:10] to does not pass

[1:31:14] any other discussion.

[1:31:16] >> Closing remarks, Senator

[1:31:17] could inch. Thank you. This has

[1:31:19] been a really good discussion

[1:31:21] and I appreciate everybody

[1:31:22] bringing their perspective to

[1:31:24] this conversation as a

[1:31:26] constitutional amendment.

[1:31:27] It's really vital that we get

[1:31:29] this. You know, right before we

[1:31:33] take it to the voters and at

[1:31:35] the end of the day, it will be

[1:31:36] the voters that are going to

[1:31:39] make that decision for our

[1:31:40] students. And so with that,

[1:31:42] I would ask you all to on vote

[1:31:45] Green to move this bill on its

[1:31:47] way.

[1:31:50] >> All right. As amended will

[1:31:53] vote now to move this to state

[1:31:54] local governor. All those in

[1:31:55] favor say aye on all those

[1:31:58] opposed say no

[1:32:01] motion carries

[1:32:08] next. We'll hear some file.

[1:32:10] 1, 2, 0, 1, Senator commish,

[1:32:12] you are up again. I believe

[1:32:14] it's your attention to Saint

[1:32:15] SF. 1, 2, 0, 1, to the

[1:32:17] committee on commerce. Yes,

[1:32:19] it is.

[1:32:21] Would you like to make that

[1:32:21] motion? Yes, I make so moved

[1:32:25] perfect. All right. You've been

[1:32:26] a 3 amendment. Would you like

[1:32:28] to move the a 3 amendment and

[1:32:29] introduce it?

[1:32:30] >> Yes, the a 3 Amendment is is

[1:32:33] an amendment to delete all and

[1:32:35] then add the language that you

[1:32:37] will find on in Bill 12.

[1:32:39] 0, 1,

[1:32:43] >> All right. All those in

[1:32:43] favor of adopting the a 3

[1:32:45] amendments. I I all those

[1:32:47] opposed. All right. Seeing it

[1:32:49] here. Bill, thank you so much

[1:32:52] members. This is a.

[1:32:53] >> This is another really

[1:32:54] curious bill. And it is a bill

[1:32:58] that would require school

[1:33:01] health insurance annual

[1:33:02] reports. The goal with this

[1:33:05] report is to give the state a

[1:33:07] clear picture of what districts

[1:33:08] are paying for health insurance

[1:33:10] under the current system and

[1:33:12] how many potential employees

[1:33:14] would be eligible to be an and

[1:33:18] eg IP, which is a statewide

[1:33:20] health insurance pool for

[1:33:22] educators.

[1:33:24] And as we know, one of the

[1:33:27] probably the largest budgetary

[1:33:31] issue is health care for not

[1:33:34] only our teachers but

[1:33:35] administrators and parents and

[1:33:37] those sort of things. And so we

[1:33:40] are this report is tasked with

[1:33:44] getting the did the district's

[1:33:46] to share with us what the

[1:33:49] insurance is so that they have

[1:33:50] a really important. They have a

[1:33:52] very clear picture of how and

[1:33:55] what we are paying for in the

[1:33:56] insurance world. And it also is

[1:34:02] requiring a each student just

[1:34:05] or each district and charter

[1:34:07] school to complete an annual

[1:34:10] survey survey by September 4,

[1:34:12] excuse me, first, using data

[1:34:14] from the most recent fiscal

[1:34:16] year so that we can kind of

[1:34:19] wrap our head around what

[1:34:21] really is the cost of this

[1:34:24] health insurance and how we

[1:34:25] might be able to create a

[1:34:27] better system for that.

[1:34:28] And with that, I have a few a

[1:34:31] few test fires.

[1:34:34] >> Thank you, Senator Kunesh.

[1:34:35] If we could bring the

[1:34:36] testifiers to the table and

[1:34:38] just want to remind you that we

[1:34:40] are sort of limited on time.

[1:34:42] So if both of you

[1:34:44] testifiers who come to the

[1:34:45] table,

[1:34:49] I'm gonna let you all decide

[1:34:50] who goes first and just

[1:34:51] identify yourself for the

[1:34:53] record and you can begin when

[1:34:54] you're ready.

[1:34:58] >> Hello Committee members.

[1:34:59] My name is John Wachter.

[1:35:01] And I'm the president of know,

[1:35:02] kind of an education,

[1:35:03] Minnesota, the union

[1:35:05] representing the teachers and

[1:35:06] license staff and, you know,

[1:35:07] kind of in school district.

[1:35:09] I'm here to to speak in favor

[1:35:11] of Senate file 12. 0, 1,

[1:35:13] a bill that would direct the

[1:35:14] state to study the health

[1:35:15] insurance plans. School

[1:35:17] districts offer to employees.

[1:35:20] 2 months ago. We were on the

[1:35:21] precipice of a strike,

[1:35:23] a crisis largely driven by the

[1:35:25] struggle to address a crushing

[1:35:28] increases in health care costs

[1:35:31] for the 2025 26 school year.

[1:35:34] The self insured premiums for

[1:35:35] our health plans increased an

[1:35:37] average of 22%.

[1:35:39] This resulted in 400 to $700

[1:35:42] increases per month in premiums

[1:35:45] for family coverage this year.

[1:35:47] Given that 82% salary increase

[1:35:50] equates to between 1002 $1000

[1:35:52] for educators for the entire

[1:35:54] year, you can see the problem.

[1:35:57] I know get up and is currently

[1:35:58] in the process of setting rates

[1:36:00] for next year. And we have been

[1:36:01] told to, again expect

[1:36:02] double-digit percentage

[1:36:04] increases

[1:36:06] during bargaining educators.

[1:36:08] Find ourselves trying to put

[1:36:09] money, shaped Band-Aid on a

[1:36:11] gaping flesh wound.

[1:36:13] It has been implied publicly

[1:36:14] that we have actively chosen

[1:36:16] our current trade off between

[1:36:17] salary and benefits

[1:36:19] rather than it being the result

[1:36:21] of insurance costs rapidly

[1:36:23] outpacing inflation.

[1:36:25] We have often raised the idea

[1:36:27] of making our district's

[1:36:28] contributions towards our

[1:36:29] health insurance, a percentage

[1:36:30] of premiums and have been

[1:36:31] rebuffed every time

[1:36:34] this continues to put the onus

[1:36:36] of cost increase is largely an

[1:36:38] educators.

[1:36:39] Due to this many question,

[1:36:41] whether a career serving the

[1:36:43] students of an account of bin

[1:36:44] is one that will allow them to

[1:36:45] continue to support their own

[1:36:47] families.

[1:36:49] Already, the cost increases

[1:36:50] this year caused at least 900

[1:36:53] individuals and dependents to

[1:36:55] leave our district health and

[1:36:57] insurance plans and moved to

[1:36:58] other coverage.

[1:37:00] Right now. Hundreds of

[1:37:02] districts across the state are

[1:37:04] replicating the same work

[1:37:05] requesting in analyzing bids

[1:37:07] for health insurance.

[1:37:08] Each one of those districts is

[1:37:11] one bad claims year from their

[1:37:13] carefully constructed plans

[1:37:15] falling apart.

[1:37:17] This bill does not represent a

[1:37:19] burden to districts as 95% of

[1:37:21] the information being requested

[1:37:22] is already being gathered for

[1:37:24] bargaining and insurance

[1:37:26] bidding processes.

[1:37:27] Important aspect of this bill

[1:37:29] is too,

[1:37:30] is the opportunity to gather

[1:37:32] vital information about how

[1:37:35] much districts are spending on

[1:37:36] health insurance across the

[1:37:37] entire state to help inform a

[1:37:39] statewide solution as

[1:37:41] envisioned in Senate file 29.

[1:37:43] 0, 9,

[1:37:44] We cannot solve this problem

[1:37:45] until you have a true sense of

[1:37:47] the scope of the issue. I urge

[1:37:49] you to support Senate file 12

[1:37:51] on.

[1:37:53] Thank you, Miss Goff.

[1:37:55] >> Thank you, chair and

[1:37:57] members. My name is Lori Goff

[1:37:58] and I'm a special education

[1:38:00] para for the Saint. Michael,

[1:38:01] a Purple School district.

[1:38:02] I provide academic support in

[1:38:04] general education, classrooms

[1:38:06] and Iran are resource room

[1:38:07] where students can come and get

[1:38:08] extra help.

[1:38:10] There was a time when education

[1:38:11] support professional jobs were

[1:38:12] side after because of the good

[1:38:14] paying great benefits. But

[1:38:16] after 25 years of underfunding

[1:38:18] by the state of Minnesota are

[1:38:20] wages and benefits have not

[1:38:21] kept up and positions like mine

[1:38:23] are hard to fill

[1:38:25] when bargaining the district

[1:38:26] comes to the table says this is

[1:38:28] your budget

[1:38:29] wages, our health health

[1:38:30] insurance, not everyone takes

[1:38:32] the insurance, but everyone

[1:38:33] takes the wages. So the

[1:38:35] insurance gets more expensive.

[1:38:36] And the plans get worse.

[1:38:39] After decades of disinvestment,

[1:38:40] my insurance is well bat.

[1:38:44] I'd like to tell you about my

[1:38:45] son. One day he woke up in can

[1:38:48] see out his right eye

[1:38:49] after many appointments with

[1:38:51] many doctors and specialists

[1:38:52] and patiently also known as a

[1:38:55] gun eyes only waiting for test

[1:38:57] results. And numerous summarize

[1:38:59] we found out he has a rare eye

[1:39:00] disease.

[1:39:02] It took a year, but the doctors

[1:39:03] found a way to stabilize it.

[1:39:05] Unfortunately, our insurance

[1:39:07] will not cover the medication

[1:39:08] the doctor prescribed.

[1:39:10] Instead, we're forced to use

[1:39:12] the medication that is for

[1:39:13] children with cancer who are

[1:39:15] waiting to have a bone marrow

[1:39:16] transplant.

[1:39:18] It suppresses the immune system

[1:39:19] and has possibly devastating

[1:39:21] and irreversible longtime

[1:39:23] certify side effects. Some of

[1:39:25] this part makes me emotional.

[1:39:27] He needs to be on this for at

[1:39:28] least 3 years and possibly

[1:39:30] forever.

[1:39:31] This medication isn't covered

[1:39:32] by insurance either, but it's

[1:39:34] $168 a month out of pocket

[1:39:37] rather than 7,000.

[1:39:39] I worked 3 jobs to pay for

[1:39:41] medical expenses and mice and

[1:39:43] we still lose his sight.

[1:39:45] Imagine telling your child that

[1:39:47] you can't afford to keep them

[1:39:49] healthy.

[1:39:50] I don't want to be just one was

[1:39:52] that story.

[1:39:53] But I do want to put a face to

[1:39:54] a statewide problem.

[1:39:56] Eu's peas and every district in

[1:39:58] our state are struggling to

[1:40:00] care for families.

[1:40:02] This is a statewide problem and

[1:40:04] it needs a statewide solution.

[1:40:06] >> This report will help us

[1:40:07] understand the full scope of

[1:40:09] the problem and what it would

[1:40:10] take to provide us with the

[1:40:12] kind of health insurance that

[1:40:13] would allow us to care for our

[1:40:14] kids at school and their

[1:40:16] families at home.

[1:40:18] I encourage you to support this

[1:40:19] Bill. Thank you so much for

[1:40:21] your time.

[1:40:23] >> Thank you, members. Any

[1:40:24] questions or comments,

[1:40:30] senator condition to closing

[1:40:31] thoughts words?

[1:40:33] >> No, but thank you for

[1:40:34] listening. And I hope that that

[1:40:37] we get some really good

[1:40:38] information out of this report.

[1:40:41] Should it pass into law this

[1:40:42] year so that we do have a

[1:40:44] better and fuller understanding

[1:40:46] of the costs of insurance,

[1:40:49] not only in, you know, the

[1:40:51] individual districts but across

[1:40:52] the state and perhaps provide

[1:40:55] an opportunity for us to really

[1:40:57] address this in a real way.

[1:40:58] So appreciate a green vote on

[1:41:00] this bill.

[1:41:02] >> Thank you, Senator. With

[1:41:03] that. Senator Cruz renews her

[1:41:04] motion that SF 1, 2, 0, 1, as

[1:41:06] amended be recommended to pass

[1:41:08] and referred to the committee

[1:41:09] on Commerce. All those in favor

[1:41:11] say Aye. Aye. Any opposed

[1:41:14] seeing none. This bill as

[1:41:15] amended has moved to the

[1:41:16] committee and state local

[1:41:17] government,

[1:41:18] commerce, commerce. This thing

[1:41:23] members, we will not have

[1:41:24] education finance hearing on

[1:41:26] Thursday this week. It is 10,

[1:41:28] 20 and we are adjourned

Committee on Education Finance

Agenda

Transcript