Subject: Fiduciary obligations regarding Nebraska school trust lands and LB1072.
Honorable Senators of the Nebraska Legislature: it is an honor to address you.
Our national board has been alerted to a matter of urgent concern, and this memorandum is offered in that capacity. Advocates for School Trust Lands is a national, federally-recognized nonprofit organization committed to the profitable, constitutionally mandated use of school trusts for the exclusive benefit of public schools.
The Nebraska Record, in Brief
Nebraska deserves to be applauded for the stewardship it has demonstrated since statehood in 1867. With over 1.25 million acres still held in trust and a market value for the Permanent School Fund exceeding $1 billion, the citizens of the Cornhusker State should feel immense pride in their servant-leaders' historic commitment to the grand endowment accepted at statehood.
Our Founders envisioned a new nation in which freedom would be upheld by an educated citizenry — a vision summarized by Thomas Jefferson's observation that the people are the only safe depositories of government, but that to render the next generation able to discharge the responsibilities of self-government, "their minds must be improved."
The Constitutional Wall
This vision of education as a prerequisite for self-government is enshrined directly in Nebraska's Constitution. Article VII, Section 7 unequivocally declares these assets to be "perpetual funds for common school purposes," dictating that the principal of this permanent fund cannot be diminished or diverted. This is consistent with the mandates of the Nebraska Enabling Act of April 19, 1864 (13 Stat. 47, § 7).
School Trust Lands constitute a binding federal-state compact, and any alteration of the terms of that trust implicates both the Contracts Clause (U.S. Const. art. I, § 10, cl. 1) and the Supremacy Clause (U.S. Const. art. VI, cl. 2) of our federal Constitution. The United States Supreme Court has repeatedly upheld the sanctity of these school trusts, recognizing that those designated to act as trustees act as strictly bound — and personally liable — fiduciaries.
LB1072 and the Statutory Boundary
It has come to the attention of our national board that pending budget legislation, specifically LB1072, appears to authorize transfers that conflict with these foundational trust obligations. While the legislative desire to balance budgets or fund alternative projects is a constant reality in every state capital, the principal of the Permanent School Fund is legally walled off from such legislative transfers.
As explicitly reflected in Neb. Rev. Stat. § 79-1035.01, and as thoroughly established in published Opinions of the Nebraska Attorney General, investment receipts allocable to principal (including premiums and capital gains) must be reinvested as principal. They are not distributable absent an amendment to the Constitution and affirmative and explicit federal acquiescence.
Although we are confident that recent developments in Nebraska are undertaken with the purest of motives, any attempt to bypass the Nebraska Constitution through a statutory budget bill is legally untenable.
A National Pattern Worth Watching
From a national advocacy perspective, we have observed that when legislative bodies attempt to hastily bypass constitutional trust protections under the guise of "routine budget transfers" or statutory amendments, it sometimes masks a secondary agenda. Such maneuvers are too often designed to loosen fiduciary oversight, paving the way for the liquidation of specific trust parcels at sub-market, "fire sale" prices to favored private interests. The constitutional wall around the principal is the structural defense against exactly that outcome.
ASTL stands firmly with the Nebraska Board of Educational Lands and Funds in its duty to defend the Permanent School Fund. We actively monitor and support best school-trust-lands practices across the country when state actors attempt to treat the sacred heritage of school trust lands as a slush fund.
The Ask
We respectfully encourage the Nebraska Legislature to honor the Nebraska Constitution, respect the fiduciary boundaries of the Permanent School Fund, and remove any provisions from LB1072 that threaten the principal of the trust.
Thank you for your time, your service to the people of Nebraska, and your ongoing commitment to the schoolchildren who are the sole, rightful beneficiaries of this trust.
Respectfully,
Daniel Zene Crowe
General Counsel, Advocates for School Trust Lands
(forwarded by Margaret Bird, ASTL Founder and President)