DNR says certified forest-management costs exceeded timber revenues for fiscal 2025

The Minnesota Department of Natural Resources told the Legislative Permanent School Fund Commission on May 26 that certified forest-management expenditures for fiscal 2025 totaled $19.9 million while qualifying revenues were $12.7 million, leaving no return to the permanent school fund corpus for that year.

"Certified expenditures tallied $19,900,000," said Andrew Aarons, deputy director of the DNR Division of Forestry, while summarizing the department's cost-certification report. He said $11.2 million of the qualifying revenue came from timber sales.

Aarons attributed the gap to a mix of market and expense factors: stagnant demand for paper and building materials, mill closures in nearby states, higher labor and contracting costs, and inflation-driven increases in fleet and fuel expenses. He also said DNR has altered cost accounting to “account for full costs that statute requires.” "We certified fiscal 25 costs based on current staff review and knowledge of statute," Aarons said.

Commission members asked about prospects for reducing expenditures and boosting returns to the fund. Aarons said DNR can pursue cost controls but that the larger lever is market demand: attracting additional forest-industry consumption, such as housing starts or new mills, would increase timber sales and improve returns. "We just need the economy to turn and for more demand for forest products," he said.

DNR provided context on the scale of its management: roughly 4.3 million acres of state forests, about 2.8 million acres of timberland, and approximately 2.5 million acres of trust lands, of which about 1.5 million acres are commercially productive timberland. In fiscal 25 the DNR offered 624,000 cords at public timber auctions and 425,300 cords were purchased to be harvested over five years.

Officials also explained which costs are excluded from certified expenditures. Bond funds allocated to DNR for reforestation and improvements to the state forest road network, the department said, are not included in the certified cost pool because those bond dollars are invested directly into projects such as tree planting and road maintenance.

Assistant Commissioner Bob Meyer and Sam Grover, the Division of Forestry's fiscal and administrative section manager, noted that the report preparation estimate required by statute is an accounting exercise and that the reported $14,900 estimate for this year's report reflected more staff time due to internal changes; past years' report estimates were lower.

The commission did not take formal action on the certification at the meeting beyond receiving the briefing. Members said they will continue to monitor markets and accounting practices and welcome further analysis of how changes in timber-processing capacity might affect returns to the trust.

Next steps: commission members asked DNR to provide modeling showing how additional mill capacity or different harvest volumes would change projected returns to the permanent school fund.