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Would better DNR management bring more money for schools?

Q: What's scarier to the Department of Natural Resources more than a state government shutdown during fishing season?

A: A gaggle of normally warring lawmakers who are all in lockstep agreement that your bean counters don't seem to be able to see the forest for the trees.

On Thursday, in a hearing room next door to the Capitol in St. Paul, a handful of lawmakers and other officials held the most recent in a series of meetings about the future of Minnesota's school trust lands. The consensus: The agency has a lot more explaining to do.

The logging, mining and sale of the land is managed by the DNR, with the proceeds earmarked for public education.  In 2009, they yielded gross revenue of $28.3 million, which translated to net income of $15 million for the school trust fund.

To put that in perspective, it's about $26 per student, or less than a percent of the state's education budget — not enough for anyone to trouble themselves about until the budgetary bucket ran so dry that thirsty policymakers were willing to scrap over a drop.

For a century, the agency's management of the lands was the subject of lax oversight and lukewarm debate. In the last five years, with school funding scarcer than bipartisan agreement, legislators have begun seriously questioning whether the DNR is managing the land, 2.5 million acres spread across northern Minnesota, as well as it should.

Questions, few answers
The answer, following a morning of testimony before the Permanent School Fund Advisory Committee peppered with such sexy phrases as "forest cost certification," "FTEs" and "forestry suspense account": Good luck figuring that out.

How much more revenue could schools be getting from the lands? Good luck with that, too.

And with questions like, is logging too economically depressed to be a good use of trust lands? Should the state consider allowing biomass facilities on the lands? Charge fees for hunting on them?

Is the real money in the 1 million acres where the state controls mining rights sought by industries the DNR is not cozy with?

And possibly most problematic, would removing the lands from the DNR's portfolio and handing them over to an entity prepared to exploit them more aggressively be in anyone's long-term interest?

A breakdown of the DNR's 5.5 million acres
Source: Minnesota DNR, MinnPost graphic
A breakdown of the DNR's 5.5 million acres

In 1858, the U.S. government took two parcels — nos. 16 and 36, to be precise — from each township in the territory poised to become Minnesota and gave them to the state to hold in a trust to be used to benefit schools. Over the next century and a half, many of the lands, including prime farmland in the south and industrial tracts in the cities, were sold.

The rest were turned over to the DNR, which administers a total of 5.5 million acres, including much of the land alongside the trust's parcels. A color-coded map of the agency's portfolio looks as if someone spilled a bottle of Mrs. Dash all over the Arrowhead.

Land-related expenses
Of course the land doesn't just generate income, it also costs money to maintain in the form of roads, bridges, fire protection and forest and mineral management. Accordingly, instead of having different bureaucracies attend to the various colored dots on the map, DNR staff is organized by function.

The agency employs the equivalent of 30.5 full time mineral-rights managers, for example. Each works on state mineral rights on any DNR lands, but because 45 percent are trust fund lands, the trust is charged 45 percent of the cost of employing the managers.

So where's the problem? There are several, in the eyes of the lawmakers who have taken up the issue.

For starters, pro-rating costs would be fine if the purpose of holding the lands in trust were to balance their preservation and commercial exploitation, like the other 55 percent of the DNR's portfolio. But the land is being held in trust specifically for schools, whose interests differ.

Second, when the agency balances the books — that is, subtracts its costs from revenues before depositing the profit in the trust fund — it uses a round-number estimate of how much that average employee costs.

And it does not pro-rate costs equally on all of the land it manages. Tax-forfeited land, for instance, is not charged for fire protection, which might drive up the share of the overall cost borne by the trust fund.

And finally, there are questions about the value of the agency's administration of logging on the lands. During Thursday's hearing, Rep. Denise Dittrich, the Champlin DFLer who has been pushing the issue for years, added the DNR's cost of forestry staff assigned to trust lands up to $10 million.

"Never in 10 years have we grossed more than $10 million from forestry," she said. "I have some real questions whether this is the right management model."

Low margin
According to materials submitted to the panel by the DNR, in 2009, the forestry industry as a whole ran nearly 10 percent in the red.

"The reality is that forestry is a low-margin business," countered Rep. Denny McNamara, a Hastings Republican who periodically reminded his colleagues that land management is both complicated and beyond most lawmakers' pay grades.

By way of example he told a story about having some of his own ideas about "efficiencies" debunked on a tour of a plantation forest of 60-year-old red pines hosted by the DNR. A third of the trees were due to be harvested, and after walking through the plantation and hearing why the forester tagged the trees he did, McNamara changed his tune.

DNR managers came to the hearing armed with a PowerPoint showing that an internal review suggested that by "stratifying" costs differently, they would have a much more accurate picture of the trust lands' revenue. This accounting change could increase the funds deposited in the trust account by 45 percent, according to the presentation.

"I have a little bit of seething rage in me now about the comment you just made," said Patty Phillips, superintendent of schools in North St. Paul-Maplewood-Oakdale and one of the non-lawmakers on the trust oversight committee. "The school trust fund has been subsidizing the DNR for 100 years."

"When we put pressure on you, it's, ‘Well, maybe we can reduce the fire protection fee, maybe we can reduce this," Dittrich added. "Even in 2009"—the height of the recession for forestry--"we still got $10 million in forestry logging and we spent every dime."

Sale or exchange land
Complicating the picture is a parallel controversy before the committee involving trust lands that ended up inside the Boundary Waters Canoe Area when it was created in 1978. Those parcels have not been generating revenue ever since, and some lawmakers would like to either sell them to the U.S. Forest Service or swap them for economically productive lands outside the BWCA.

DNR officials and their federal counterparts have identified 41,000 parcels within the BWCA that might be good candidates for a sale or exchange. Either scenario would require congressional action, which panel members have raised with Rep. Chip Cravaack and Sen. Amy Klobuchar.

A trade could open large tracts of land to controversial commercial exploitation. A sale, the more palatable scenario to environmental groups, could net $60 million to $100 million for the trust fund.

Committee members asked the DNR managers who testified to submit an array of data explaining everything from the proposed changes to "stratification" to the reasons for their increased costs over the last four years. They also want to look at the list of BWCA parcels.

In the meantime, the agency might want to revisit that whole forest vs. trees equation.

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Comments (1)

"Clear-cuts for Kids", what a lesson that would be in conservation. This is another attempt by the pulp and chip industry to lower their input costs to increase the profits they export out of Minnesota. Not to mention the legacy of perpetual pollution that will flow from the proposed copper-nickel mines on these lands. Selling out our natural heritage to keep taxes low for the rich is not something I can support.