A bill for an act relating to state government; proposing an amendment to the Minnesota Constitution, article XI, section 8; modifying the investment, management, and distribution policy for the permanent school fund; amending Minnesota Statutes 2024, sections 11A.16, subdivisions 5, 6; 127A.32.

BE IT ENACTED BY THE LEGISLATURE OF THE STATE OF MINNESOTA:

Section 1. CONSTITUTIONAL AMENDMENT PROPOSED.

An amendment to the Minnesota Constitution is proposed to the people. If the amendment
is adopted, article XI, section 8, will read:

Sec. 8. The permanent school fund of the state consists of (a) the proceeds of lands
granted by the United States for the use of schools within each township, (b) the proceeds
derived from swamp lands granted to the state, (c) all cash and investments credited to the
permanent school fund and to the swamp land fund, and (d) all cash and investments credited
to the internal improvement land fund and the lands therein. No portion of these lands shall
be sold otherwise than at public sale, and in the manner provided by law. All funds arising
from the sale or other disposition of the lands, or income accruing in any way before the
sale or disposition thereof, shall be credited to the permanent school fund. Within limitations
prescribed by law, the fund shall be invested and managed as a perpetual financial resource for the sole purpose of apportioning money to the different school districts of the state. Management of the fund shall be designed to provide annual distributions while preserving the purchasing power of the fund over time and balancing the needs of current and future beneficiaries. Reasonable and necessary administrative costs associated with managing the fund or school
trust lands may be paid from the fund in the manner prescribed by law. The distribution
policy shall be prescribed by law and consistent with the aforementioned principles.
Distributions from the fund shall be apportioned new text end to the different school districts of the state in a manner prescribed by law.

A board of investment consisting of the governor, the state auditor, the secretary of state,
and the attorney general is constituted for the purpose of administering and directing the
investment of all state funds. The board shall not permit state funds to be used for the
underwriting or direct purchase of municipal securities from the issuer or the issuer's agent.

Sec. 2. new text beginSUBMISSION TO VOTERS.
new text end
new text begin(a) The proposed amendment must be submitted to the people at the 2026 state general
election. The question submitted must be:
new text end

new text begin"Shall the Minnesota Constitution be amended to increase the funding going to all school
districts from the permanent school fund, which is a fund that supports school districts
without raising individual income or property taxes, effective July 1, 2027?
new text end "
Yes _____
No _____

(b) The title required under Minnesota Statutes, section 204D.15, subdivision 1, for the
question submitted to the people under paragraph (a) shall be: "Increasing funding to school
districts."

Sec. 3. Minnesota Statutes 2024, section 11A.16, subdivision 5, is amended to read:
Subd. 5. Calculation of distributable amount
(a)The state board shall calculate the distributable amount of the permanent school fund. The distributable amount shall equal 4.5 percent of the average net asset value of the permanent school fund as of the end of the preceding three fiscal years.
(b) The director shall report by August 15 the distributable amount to the Legislative
Permanent School Fund Commission established in section 127A.30 and the commissioner
of education.

Sec. 4. Minnesota Statutes 2024, section 11A.16, subdivision 6, is amended to read:
Subd. 6. Disposition of distributable amount
The commissioner of management and budget shall transfer the distributable amount of the permanent school fund as calculated pursuant to subdivision 5; to the school endowment
fund as needed for payments made pursuant to section 127A.32.

Sec. 5. Minnesota Statutes 2024, section 127A.32, is amended to read:
127A.32 SCHOOL ENDOWMENT FUND; DESIGNATION.
For the purpose of aid to public schools, a school endowment fund is established. The school endowment fund shall consist of the distributable amounts from the
permanent school fund. The commissioner may accept for and on behalf of the permanent
school fund a donation of cash, marketable securities, or other personal property. A noncash
donation, other than a donation of marketable securities, must be disposed of for cash as
soon as the commissioner can obtain fair market value for the donation. Marketable securities
may be disposed of at the discretion of the State Board of Investment consistent with sections
11A.16 and 11A.24. A cash donation and the cash receipts from a donation disposed of for
cash must be credited immediately to the permanent school fund. Earnings from marketable
securities are earnings of the permanent school fund.

Sec. 6. EFFECTIVE DATE.
Sections 3 to 5 are effective July 1, 2027, for aid payable in fiscal year 2028 if the constitutional amendment proposed in section 1 is adopted by the voters.