Hearing held on bill to eliminate the Board of Commissioners of Public Lands’ loan authority

The state Senate Committee on Government Operations, Technology and Consumer Protection held a public hearing Wednesday, January 31 at 9:30 AM in Room 201 Southeast, State Capitol on Senate Bill 713.  (See hearing notice.)  The bill is authored by state Sen. Duey Stroebel (R-Saukville, pictured at left), who chairs the committee hearing the bill, and is also a former Cedarburg School Board member.

Critics of the bill are concerned that it would end the State Trust Fund Loan program, which supports schools, public libraries, technical colleges and local governments. This loan program is currently managed by the Board of Commissioners of Public Lands (BCPL).

There are also concerns that it would end the requirement that Common School Fund dollars be used for school libraries. The Common School Fund dates back to the state’s original constitution adopted in 1848 and it generates the funds used to pay state library aid–aid that often represents the only dollars available for school libraries and public libraries to purchase materials.

The plain language analysis of the bill prepared by the non-partisan Legislative Reference Bureau describes the bill’s provisions this way:

“Under current law, BCPL manages the common school fund, the normal school fund, the university fund, and the agricultural college fund (trust funds). BCPL also administers a state trust fund loan program under which it makes loans from moneys belonging to the trust funds to school districts, local governments, and certain other public entities for certain public purposes. This bill eliminates the authorization of BCPL to make these loans.

“Under current law, BCPL may delegate authority to the State of Wisconsin Investment Board (SWIB) to invest the moneys belonging to the trust funds, but SWIB may invest the moneys only in fixed income investments or funds that invest only in fixed income instruments. Under this bill, SWIB must invest BCPL delegated moneys in the manner SWIB invests the moneys belonging to the other funds SWIB manages.

“Also under current law, income from the common school fund is distributed to the school districts of the state and must be expended only for the purchase of instructional materials from the State Historical Society for use in teaching Wisconsin history, for the purchase of library books and other instructional materials for school libraries, and, under certain conditions, for the purchase of school library computers and related software. This bill removes these limitation regarding a school district’s expenditure of common school fund income moneys.”

Critics of the bill, which include school librarians, the Wisconsin Towns Association and the League of Wisconsin Municipalities, cite the following arguments in their opposition to the bill:

  • Common School Fund stakeholders want to maintain the current structure that has been working well since the founding of our State.
  • Over the past 10 years, the BCPL State Trust Fund Loan program has invested over $1 billion in communities throughout Wisconsin. Earnings from these loans are deposited into the Common School Fund. Ending the BCPL loan program would eliminate this important economic development funding from our communities and eliminate a major source of revenue for the Common School Fund.
  • With school districts across the state facing increased budget constraints, distributions from the Common School Fund are often the only dollars available for school libraries to purchase informational materials including books, newspapers and periodicals, web-based resources, and computer hardware and software. This bill would remove the requirement that the Common School Fund be used for libraries, putting school library funding in jeopardy.
  • The bill also gives the State of Wisconsin Investment Board (SWIB) more authority to invest BCPL trust fund dollars. According to the non-partisan Legislative Fiscal Bureau (LFB), if SWIB had been managing the Common School Fund dollars in the same way they manage their other investments during the financial crash of 2008, the Common School Fund would have suffered a devastating loss of between $195 million and $290 million. No funding would have been available for school libraries for several years following a loss of that magnitude.
  • While proponents say that SWIB would be able to get higher returns, the LFB suggests it is unlikely that SWIB would be able to do any better than the BCPL because it would need to adhere to the constitutional and statutory requirements of the trust fund.
  • The LFB issued a memo that stated “under the constraints of the trust funds, it would be reasonable to assume that SWIB would not take on significantly more risk than BCPL, if any, in investment of the funds” and SWIB would “be required to manage the trust funds prudently, and be subject to the same constitutional and statutory constraints as the BCPL.”

Read More:

Memo urging lawmakers not to sign onto the bill as co-sponsors from the Wisconsin Towns Association and the League of Wisconsin Municipalities

“Fact Checking” Memo from Opponents of SB 713