One of the issues in the current governor’s race is the fact that Arizona owes about $300 million to the state’s schools. Where will that money come from? One possible source is the sale of some State Trust Land. When Arizona was organized as a territory and then a state, the federal government ceded land to be held in trust by Arizona for the specific purpose of funding education. Money is derived from outright sales and from leases for grazing, timber cutting, and mineral exploration. If a mine is developed on Trust land, the State receives production royalties.
There are now over 9 million acres of land in the Trust. While much of that land is rural, some of it is in the greater Phoenix metropolitan area and would be very valuable for development, and thus command a high sale price. See parcel viewer here. The screen shot below shows some of the Trust land available in the Phoenix area in blue.
State Trust Land must be sold at public auction to the highest bidder. History shows that when a Trust land parcel is valued for development, the winning bid is nearly twice its appraised value.
For some background on State Trust Land, here is a short history from the State Land Department.
“The Territory of Arizona was established on February 24, 1863, by an Act of Congress. This Act granted sections 16 and 36 of each township for the benefit of the Common Schools. Endowment of public lands for educational purposes was a practice established by the Northwest Ordinance in 1787. Congress quickly recognized the value of the land and the importance of public schools to a developing nation.
“The State Enabling Act, passed on June 20, 1910, allowed the Territory of Arizona to prepare for statehood. In addition to the previously designated sections of land, the Enabling Act assigned sections 2 and 32 of each township to be held in trust for the Common Schools. The needs of other public institutions were considered by Congress, and through the Enabling Act, more than two million additional acres were allocated for their use.
“In addition, a 1929 Act authorized an additional 50,000 acres for the Miners’ Hospital Trust. An 1881 Act had already granted the Territory of Arizona about 60,000 acres for the University of Arizona Trust. The total acreage was about 10,900,000. Today, State Trust Land is apportioned among 14 beneficiaries.”
If the sections of land mentioned above were not available for some reason, the State was allowed to choose other federal land in lieu of the designated sections.
The beneficiaries of income derived from Trust land are as follows:
By selling State Trust Land that is within or close to urban areas, the State could make up much of its $300 million educational deficit.
I have been informed by a friend and former employee of the State Land Department that proceeds from land sales cannot be disbursed directly to schools. He wrote: “To operate as you suggest would require an amendment to the state constitution on an issue that would require the prior approval of the Federal government. The proceeds from the sale of Trust land can not be disbursed directly but must be placed in the Permanent Fund managed by the state treasurer.” Only money earned as interest from the Permanent Fund can be disbursed.
However, money gained from leases can be directly disbursed. He wrote: “These days the largest segment of money going directly to the schools is from mineral revenues, both surface rent and production royalties. If an organization wanted to expand school revenues, the most productive thing would be to expand mineral development.”