Federal gift of land to schools went awry

Jill Tucker
San Francisco Chronicle

There was a time when California's schools were financially set for life - holding the rights to any profit and proceeds from 5.5 million acres, or 6 percent of the entire state.

The land was given in trust by Congress when California joined the union to support the education of children, then and forever more. Other states received similar "sacred, irrevocable" trusts for their schools.

In California, a state blessed with bountiful agricultural potential, veins of gold, power-producing rivers, a coastline full of commercial possibility and so much more, the school trust acreage should have produced riches beyond every teacher's wildest dreams.

It didn't.

As was the case in many states, most of the land was quickly sold off, mismanaged, used as chess pieces in backroom deals or neglected, according to Utah researchers who recently released the first analysis of school trust lands in more than 100 years.

"As you can imagine, there was probably a lot of good-old-boy stuff going on," said Margaret Bird, a school land trust specialist at the Utah State Office of Education. "It's money that belonged to someone else, namely schoolchildren, and it was just stolen."

There were 134 million total acres granted nationwide to support public education by 1959, with about a third currently remaining in the hands of state agencies to benefit schools.

Of the original California school trust land, less than 500,000 acres remain, generating about $6 million in royalties and revenue each year, with all proceeds deposited into the state teachers' pension fund.

Pot of cash raided

In addition, about $60 million was set aside from the trust's profit to be used for further investment. But that small pot of cash was raided to nearly nothing by Gov. Jerry Brown to help balance the budget.

The state must pay back $59 million to the trust by 2016.

Nearly two dozen states have nothing left of their school land trust.

"While we point sometimes at California - and to be honest there is, on the part of some people, snickering - California at least has some lands left," said Richard West, executive director of the Center for the School of the Future at Utah State University, author of the report.

Profits in other states

Other states, however, have a lot to show for the land.

Arizona, for example, still has all of the mineral and/or surface rights over its original 928,000 acres as well as $440 million in the bank. New Mexico has most of its initial 8.7 million acres and $10.7 billion in its fund.

As in other states, the land sold off in California was gone even before the start of the 20th century.

"In the old days, they sold off everything anybody wanted," said Jim Porter, public land management specialist in the California State Lands Commission.

A lot of what's left in California is in the desert.

Still, the Utah report questioned the ongoing management of the land and funds across the country, noting that some states, for example, don't make market rate on some leases or royalties.

In California, the school trust is overseen by the State Lands Commission, which comprises the lieutenant governor, state controller and finance director. West argues that education officials should be part of the conversation about how to use the trust.

Across the country, much of the revenue from state trust lands come from mineral, oil and gas rights; timber production; agriculture; and commercial or residential leasing.

Geothermal leases

In California, the vast majority of revenue is generated from geothermal leases at the Geysers along the border of Sonoma and Lake counties. A bit of oil, gold and other minerals also generate some revenue.

In a weird historical twist, California is still owed about 51,000 acres from the federal government for the land trust because some of the initial parcels designated for education support were already occupied. The federal program allowed for that, guaranteeing replacement land to make up for property already in use, but California has yet to receive that land.

The State Lands Commission is working with other states to pursue legislation that would push federal officials to fulfill their pledge to California and any other states owed acreage.

In the meantime, Porter said, the commission wants to expand solar and wind efforts, which could produce significantly more revenue for the school land trust.

But given current law, the money wouldn't make it into classrooms.

Teacher pensions

While other states use the land trust proceeds for libraries, technology, schools and other programs, California deposits all revenue into the teacher pension fund, as directed by the Legislature in the mid-1980s.

Why support the pension fund rather than schools directly?

"My guess is political muscle," Porter said, noting the pension fund needed financial help from the state. "You've got to get the money from somewhere."

The Utah researchers questioned California's use of the money and whether it met the intent of the Continental Congress when they established the school land trust.

"A retired teacher does not help the school at all," Bird said. "If I lived in California I'd be out right now looking for an attorney ... because somebody needs to speak up for the children."