School Land Trust CEO objects to LB3 interest transfer, warns of constitutional issue

Kelly Sudbeck, chief executive officer of the Board of Educational Lands and Funds (commonly called the School Land Trust), told the Appropriations Committee that the board’s income is constitutionally dedicated to support K–12 public schools and asked the committee to consider amending LB3 to remove the board’s operating account from that bill.

“We are a constitutional agency,” Sudbeck said, describing the land grant under the Enabling Act and noting the board still holds about 1,250,000 acres. She said the trust paid $120,000,000 into the public school system “for their support” this year and that the board is self-funded — “no tax money is used by us, and all income, rent and interest goes to the schools per the constitution.”

Sudbeck said LB3 was originally not intended to include accounts held by the Board of Educational Lands and Funds but that a floor amendment last summer added the board’s operating fund to the bill and diverted interest from that account into the state general fund. She told the committee that, as she reads the law, the change takes money intended for schools and moves it into the general fund and that “as it applies to us, [LB3] is unconstitutional.”

On questioning, Sudbeck provided committee members a month‑by‑month accounting of amounts taken under LB3 since October 2024, saying the total taken so far is $366,193 and listing October 2024 through February 2025 amounts. She said the interest amounts are declining as the operating account is spent down.

Senators asked how the trust’s payments to schools are calculated. Sudbeck said the trust’s payments are divided per pupil that lives in a district (K–12), and she said the total distribution this year is about $120 million, split between land-derived income and the permanent fund’s investment income; she described the funds as managed by the Nebraska Investment Council and the land income as flowing through the temporary fund administered by the Department of Education.

Sudbeck said the board continues to manage and sell land to maximize income and currently has about 158,000 acres listed for sale. She described long‑term average returns and cash returns for land and invested funds, characterizing total return around 10% and cash returns in the 3–4% range, while attributing specific investment return figures to the Nebraska Investment Council when discussing the permanent fund.

Sudbeck asked the committee to consider restoring interest on the board’s operating account to school support and thanked members for their attention.