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HF 3900

Permanent school fund investment, management, and distribution policy modified; and constitutional amendment proposed.

2025-2026 Regular Session Introduced by Ben Bakeberg and 21 co-sponsors

The bill would create a constitutional framework for the Permanent School Fund to provide annual, inflation-adjusted distributions to all Minnesota school districts via a new Board

Secretary of State Chapter 114 05/26/26
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Bill Summary · HF 3900

Summary of HF 3900 (2025-2026) – Minnesota

Aims to modify the management and distribution of the permanent school fund and place a constitutional amendment before voters to change how funding from the fund is distributed to school districts.

1) Purpose and intent

  • Proposes a constitutional amendment to alter the long-standing framework for the Permanent School Fund (PSF) in Minnesota.
  • Seeks to define the PSF as a perpetual, inviolate principal with a formal, law-based distribution policy designed to provide annual distributions to all Minnesota school districts while preserving purchasing power over time.
  • Establishes a governance structure (a Board of Investment) to manage state funds and directs how distributions are calculated and allocated to school districts.

2) Key provisions and changes

Constitutional amendment (Sec. 1 and Sec. 2)

  • The PSF consists of:
    • Lands granted by the U.S. for schools (township lands) and swamp lands.
    • All cash/investments credited to the PSF and to the swamp land fund.
    • All cash/investments credited to the internal improvement land fund and lands therein.
  • The principal of the PSF is perpetual and inviolate.
  • The amendment emphasizes:
    • Investment policies aimed at providing annual distributions to school districts.
    • Maintaining purchasing power over time.
    • Administrative spending governed by law.
    • Distributions to school districts as prescribed by law.
  • A Board of Investment (Governor, State Auditor, Secretary of State, Attorney General) is created to administer/direct investment of all state funds (with a restriction: no state funds may be used to underwrite or directly purchase municipal securities from issuers or their agents).

Administrative and statutory changes (Sec. 3–Sec. 5)

  • Subd. 5 (Sec. 3): Replaces previous language about “investment income” with “distributable amount” for PSF. Requires:
    • Calculation methodology for distributable amount, with updates to reflect the new framing.
    • A reporting requirement by August 15 to the Legislative Permanent School Fund Commission and the Commissioner of Education.
  • Subd. 6 (Sec. 4): Directs that the distributable amount, as calculated, shall be credited to the PSF and transferred to the School Endowment Fund as needed for payments under section 127A.32.
  • Sec. 5 (Sec. 5): Amends the School Endowment Fund provisions to designate the distributable amounts from the PSF as the source for the endowment fund. Allows acceptance of donations (cash, marketable securities, or other property). Noncash donations must be converted to cash promptly; marketable securities may be managed/disposed of per investment policy. Earnings from marketable securities remain earnings of the PSF.

Effective date (Sec. 6)

  • Sections 1-5 become effective July 1, 2027, for aid payable in fiscal year 2028 if the constitutional amendment is approved by voters.

Additional notes

  • The text specifies that the distribution policy must be consistent with the principles of providing annual distributions while preserving purchasing power and balancing current vs. future needs.
  • The amendment explicitly ties the constitutional change to the 2026 general election in Minnesota.

3) Who/what would be affected

  • Minnesota school districts: potential changes in funding streams and distribution timing/amounts via the PSF.
  • Permanent School Fund: governance and investment policy reform, with a focus on sustaining a perpetual fund and predictable distributions.
  • State governance and investment oversight: creation and empowerment of a Board of Investment to manage state funds (excluding underwriting municipal securities).
  • School Endowment Fund: funding source and administration would be aligned with PSF distributable amounts; ability to receive and manage donations designated for the PSF.

4) Procedural and timeline aspects

  • Constitutional amendment proposed language submitted to voters at the 2026 general election.
  • If approved, Sections 1-5 would take effect July 1, 2027, for aid payable in fiscal year 2028.
  • Administrative reporting: the Director (likely of the PSF) must report distributable amounts to the Legislative Permanent School Fund Commission and the Commissioner of Education by August 15 of each year, per Sec. 3.

5) Notable details

  • Emphasizes avoiding use of state funds to underwrite or directly purchase municipal securities.
  • Keeps principal inviolate but allows sales with losses/gains to be handled over time to preserve fund integrity.
  • Uses language shifting from “investment income” to “distributable amount,” signaling a focus on ongoing distributions rather than solely investment performance.

If you’d like, I can provide a section-by-section comparison with current law or a plain-language FAQ for voters.

Compiled from official sources — confirm details with the bill’s official record.

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