Study committee on use and investment of Common School Fund to meet Thursday

The Legislative Council Study Committee on the Investment and Use of the School Trust Funds will hold its first meeting on Thursday (August 16) at 10:00 AM in Room 411 South, State Capitol.  The hearing will be broadcast live on Wisconsin Eye.  A panel of school leaders (school board members and school administrators) is scheduled to testify beginning at 2:40 p.m. (You can view the agenda here.)

The Study Committee’s work could have important implications for public schools, as it is directed to review the statutes governing the investment of the trust funds (including the Common School Fund) administered by the Board of Commissioners of Public Lands (BCPL), including the State Trust Fund Loan programs administered by BCPL.  The Study Committee is directed to assess whether current statutes adequately ensure the effective investment and appropriate use of the proceeds of the funds, and recommend legislation for necessary changes.

The Study Committee is an offshoot of debate over 2017 Senate Bill 713, which would have eliminated the authority of BCPL to make loans and would have broadened the ways school trust fund assets could be invested to include equities (stock), private investment, real estate and other investment vehicles, in addition to the fixed-income investments (bonds) in which fund assets may currently be invested.

The Common School Fund was established by Wisconsin’s original state Constitution in 1848 with the granting to the state of about 1.5 million acres of federal land for educational purposes. The vast majority of these lands were sold to create the principal for a permanent school fund, with the earnings (per the state Constitution) to be exclusively used to support and maintain common schools (now known as K-12 public schools) and the purchase of suitable libraries and apparatus therefor.

School districts receive an annual distribution of earnings from the Common School Fund in the form of Library Aid on or before May 1 each year.  These funds (which are received as a categorical aid outside revenue limits) are used by school districts for the purchase of library books, instructional materials from the Historical Society, and other instructional materials. This aid may also be used to purchase library-related computers and software to be housed in the school library, if the district consults with its library media coordinator.

As part of its role as trustee of these funds, the BCPL administers a State Trust Fund Loan Program under which it makes loans from moneys belonging to the trust funds to school districts, federated public library systems, local governments (including a city, village, or town acting on behalf of a municipal public library), and certain other public entities for certain public purposes.  The BCPL’s Trust Fund Loans make up the biggest share of the Common School Fund’s assets, followed by state and municipal bonds, other bonds and cash.  Public schools arguably benefit from the Common School Fund in two ways under current law–as recipients of Library Aid and as entities that can borrow from the State Trust Fund Loan program.  The interest on those loans helps to fund Library Aids.