FY 2023 Annual Report 1

Utah School and Institutional Trust System

ANNUAL REPORT

FY 2023

A Note from the Director

A recent State audit outlined a dozen “critical” issues facing the state, including water, education, mental health, housing, energy policy and real property management. Notably, at statehood, 127 years ago, land was put in trust to support many of these same critical needs. Utah’s School and Institutional Trust System (Trust System) is proud to continue supporting its beneficiaries and in turn support several of the State’s most important public purposes.

A historic turning point for the Trust System as we know it today began with the creation of the Trust Lands Administration (TLA) in 1994. It was not an easy task convincing critics that a quasi-independent, self-funded entity would be the pathway to a brighter future in serving the Trust’s beneficiary institutions. The School Children’s Trust Section at the Utah State Board of Education (USBE), the School and Institutional Trust Funds Office (SITFO) and the Land Trusts Protection and Advocacy Office (Protection & Advocacy Office) have also become important components to the Trust’s success since 1994. Collectively, this Trust System has become one of the most respected in the nation.

The future of the Trust looks bright as the momentum of distributions to beneficiaries continues to grow. Today’s $3.2 billion combined permanent funds will be contributing $112 million to all beneficiaries in 2024, up 5% from 2023 distributions.

The highlighted accomplishments you’ll read about in this annual report are the result of teamwork and partnerships. I am proud to be part of a system with dedicated professionals committed to trust principles and sustaining maximum performance for Utah’s trust beneficiaries.

Kim Christy Director, Land Trusts Protection and Advocacy Office

Utah School and Institutional Trust System

WHO WE ARE

We are stewards of Utah’s trust land assets, responsible for ensuring the continued growth and integrity of Utah’s School and Institutional Trust (Trust). Our work benefits public schools and other important state institutions—now and for future generations. Land

The Trust Lands Administration manages trust lands throughout Utah and is responsible for generating all initial revenue through energy & mineral leases, real estate planning and develpment and surface resource use.

The School & Institutional Trust Funds Office (SITFO) manages and invests the money generated from Trust Lands Administration. Investment earnings are distributed to beneficiaries each year.

Nearly 95% of the trust distributions go to public schools.

The School Children’s Trust section under the Utah State Board of Education oversees the School LAND Trust Program distributions to K-12 schools and provides training on how funds can be used. The remaining 5% of the distributions go to the other 10 beneficiary institutions, including higher education, health and human services and other state institutions.

The Protection & Advocacy Office protects the beneficiaries’ interests, monitors the operations of the Trust System and is actively involved in public outreach to support the purposes of the Trust.

Why does this matter?

Revenue generated from trust lands and the associated investment portfolios provide lasting change in Utah by transforming trust land assets into greater economic benefits for our beneficiaries and local communities.

• Tens of millions of dollars annually support academic programs in public schools, while also serving the needs of universities, hospitals and other critical state programs.

• Trust lands contribute significantly to the economic viability of many communities throughout the state, through land, energy, and mineral development and other surface resource uses.

Making an Impact

MEET OUR BENEFICIARIES

We see a bright future for Utah with the revenue generated for our beneficiaries through strategic and evolving land management and investment of fund assets.

PUBLIC SCHOOLS

At each public K-12 school, a dedicated council assesses data to identify gaps in student learning. Utilizing the School LAND Trust Funds, plans are created to direct annual distributions toward enhancing learning and improving outcomes in those identified areas.

Utah’s schools receive 95% of all Trust distributions combined.

How Schools Have Used Funds

Ogden High School

Ogden High School hired a College and Career Specialist to guide students in college readiness and access, application processes, FAFSA support, scholarship outreach and ACT test preparation.

Duchesne High School

Duchesne High School purchased 3D printers and updated their science labs to promote enhanced hands-on learning experiences for their students.

Desert Canyons Elementary

Desert Canyons Elementary hired reading aides to improve student literacy and spark engagement with books.

Want to know how your school utilized their trust land funds? Check it out here.

UNIVERSITY OF UTAH

Trust fund distributions sent to University of Utah, one of Utah’s prestigious land grant higher education institutions, are used to help fund an academic environment in which the highest standards of intellectual integrity and scholarship are practiced.

UTAH SCHOOLS FOR THE DEAF AND BLIND

Utah’s School for the Deaf and Blind (USDB) trust fund distributions provide specialized programming and enriched learning opportunities beyond the normal scope of traditional school programs. Trust distributions provide funding for a variety of enrichment programs including assistive technology, study abroad trips and music therapy to name a few.

These enhanced education services benefit students enrolled in schools that specifically support the deaf, hard of hearing, blind, or deaf and blind students. USDB ranked #1 in the United States for high school completion and services as a model across the country and around the world.

COLLEGE OF MINES AND EARTH SCIENCES

Trust fund distributions sent to the College of Mines and Earth Sciences at the University of Utah help educate and prepare students for careers related to mining.

COLLEGES OF EDUCATION

Trust fund distributions provide colleges of education at public universities support and strengthen Utah’s teaching community. The Colleges of Education Trust consists of six universities throughout Utah who award teaching degrees

UTAH STATE HOSPITAL

Utah State Hospital trust fund distributions assist in its mission to provide excellent care in a safe and respectful environment to promote hope and quality of life for individuals with mental illness.

UTAH STATE UNIVERSITY

Trust fund distributions sent to Utah State University help support its distinction of being one of the nation’s premier student-centered land-grant universities.

MINERS HOSPITAL

Trust fund distributions sent to the Miners Hospital program at University of Utah Health provide funding to treat patients with mining related injuries and illnesses. Nearly 2,500 miners have been served over the last five years with 490 new members in FY 2023.

With the goal to enhance plan outreach and awareness, Miners Hospital program coordinators participated in several community gatherings and conventions throughout the year, including 2023 East Carbon County Community Daze.

JUVENILE JUSTICE AND YOUTH SERVICES

Trust fund distributions sent to Utah’s Division of Juvenile Justice and Youth Services help provide youth offenders a continuum of supervision, education and vocation training programs and rehabilitation.

PUBLIC BUILDINGS

In advance of the 2004-2008 renovation of the Utah State Capitol, trust lands that were managed for Utah’s public buildings were sold. The proceeds were used to help offset the costs of extensive renovation and restoration of this iconic building. The nominal balance remaining by this trust is administered by the Office of the State Treasurer and doesn’t receive an annual distribution.

UTAH DIVISION OF WATER RESOURCESRESERVOIRS

Distributions from the Reservoirs trust fund are carefully utilized by the Utah Division of Water Resources and are used to help fund new water construction projects, fund repairs of existing and aging projects and improve water efficiency across the state.

Over $1 billion dollars have been distributed to Utah’s beneficiaries since 1995.

FY 2023 Distributions

Trust distributions benefited nearly 1000 public schools during the 2022–2023 school year, impacting over 675,000 students.

The backstory:

When Utah became a state in 1896, Congress granted lands with the requirement that any revenue generated from the leases or land sales associated with the grant would go into a permanent endowment to support public schools.

Before the United States had a Constitution, elected officials at the time advocated for a national public education system on "equal footing for all".

To ensure that lands were reserved for the benefit of public education, land parcels were allocated

by dividing Utah into 36-square-mile townships, with four sections of land dedicated to Utah’s trust lands in each township.

Additionally, separate grants, known as quantity grant selections, were given to support higher education, health and human services and other state institutions.

Trust lands are not public lands and are managed to generate revenue for the designated beneficiaries—both now and for generations to come.

UTAH TRUST LANDS

Stewards of Utah's Trust Lands TRUST

LANDS ADMINISTRATION

The Trust Lands Administration is the steward of Utah’s trust lands and is responsible for generating revenue from the land for the benefit of public schools and other trust institutions both now and for future generations.

2023 Highlights

The Trust Lands Administration had its secondlargest revenue-generating year in FY 2023. The Administration grossed over $146 million from its operations:

• Real Estate Development earned over $43 million

• Energy and Minerals over $89 million

• Surface Resources over $14 million.

The Administration underwent a comprehensive rebranding effort led by the Communications Department, resulting in a new look and feel. The new brand, logo, and website have been highly successful, winning two international awards for the new brand identity and brand logo. We encourage all our beneficiaries to visit the site and get to know the new and improved Trust Lands Administration.

In addition to the new website, a robust social media outreach and education campaign began in the summer of 2023. The social media channels allow the Administration to engage with beneficiaries and their supporters to keep them informed on issues surrounding Trust Lands.

Energy and Minerals Group

Revenue generated from oil and gas, minerals, and renewable leases totaled almost $90M in FY 2023. Over 100 new oil and gas wells were drilled on trust lands, or lands pooled therewith. The agency saw a significant increase in interest in leasing its potash, lithium, and uranium resources, particularly in the southeast area of the State. On the renewable side, the agency entered into seven new solar leases, covering over 10,000 acres, as well as a new geothermal exploration agreement covering 3,580 acres.

The Energy and Minerals team began a new strategic mapping project with the GIS team, pursuant to the asset management goals set forth in the agency's Strategic Plan. The project began with the scanning and cataloging of all historical data and research regarding mineral resources on trust lands. The teams are now collaborating on a new platform that will link this information, as well as other relevant information regarding resources on trust lands and surrounding lands from sources such as the Bureau of Land Management, the Utah Geological Survey, and the Division of Oil, Gas and Mining, to specific lands and areas on the map.

Surface Group

The Surface team completed several land sales, one of which was a $2.1 million sale to Best Friends Animal Society in Kane County. This transaction was a true win-win, enabling Best Friends to continue to operate the largest no-kill sanctuary in the nation for years to come while providing funding for Utah’s public schools.

Remediation of lead-contaminated soil from a decades-old former youth camp site in the Tushar Mountains east of Beaver is now complete. Specialized equipment and technology were utilized to sift out lead fragments, treat, and dispose of contaminated soils. This was the first application of this specialized technology in the state and proved to be very effective, coming in at about 1/3 the cost of traditional cleanup techniques.

Thanks to a record-setting winter and wet summer, the wildfire season was relatively uneventful with no major fires affecting trust lands. Efforts were instead concentrated on forest enhancement projects such as a fuels reduction and a reforestation project near the Beaver Mountain Ski Resort in Cache County and aspen restoration on Tabby Mountain in Duchesne County.

Exchanges

The Administration continues to make strong progress on land exchange efforts with the federal government. Federal legislation was introduced by Senator Lee and Congressman Curtis, with support from the entire Utah delegation, to exchange the Trust’s inholdings within the Bears Ears National Monument for federal lands with greater revenue generating potential throughout the state. The bills have cleared their respective congressional committees with unanimous support and await action by the full House and Senate.

Real Estate Development Group

FY 2023 was another very productive year for the development portfolio of the Trust Lands Administration, totaling nearly $44 million. Although there was a softening in the

overall real estate market, projects continued to produce above average revenue because of forward-looking planning on the part of Trust Lands staff and partners.

The Desert Color master-planned community continues to be a strong driver in the portfolio as well as other continuing projects such as Coral Canyon, Sienna Hills and the Ft. Pierce Industrial Park in Washington County, Utah and Overland Trails in Eagle Mountain.

Trust Land development at the USU campus in Moab commenced and new master plans for communities in Saratoga Springs are underway and will be available soon..

Trust

Lands Administration Board of Trustees & Director

David Donegan Chair

Warren H. Peterson Vice Chair

Bryan Harris Trustee

Tiffany

James Trustee

Mike Nelson Trustee

Michael Mower Trustee

Dan Simons

Trustee

Michelle E. McConkie

Trust Lands Administration Director

Fund InvestmentGrowing the Trusts

SCHOOL & INSTITUTIONAL TRUST FUNDS OFFICE

All revenue the Trust Lands Administration generates (minus administrative and operating costs) is deposited into a permanent fund for each beneficiary. The School and Institutional Trust Funds Office (SITFO) was created to grow these funds and manage annual distributions.

SITFO’s long-term investment objective targets a return of CPI + 5%. This maintains the funds’ growth in perpetuity, while still being able to sustain and grow the annual distributions from year to year.

• The permanent funds have collectively grown by 61% in the last 10 years (FY 2014FY 2023).

• SITFO currently invests roughly $3.2 billion in a globally diversified investment portfolio.

• SITFO’s long-term investment objectives maintain the Trust funds in perpetuity, while focusing on sustaining and growing the annual distributions for trust beneficiaries.

SITFO Board of Trustees & Director

Marlo Oaks Utah State Treasurer, Chair

David R. Nixon Trustee

Jason Gull Trustee

David Zucker Trustee

Mark Siddoway Trustee

Peter Madsen SITFO Director

The permanent funds have collectively grown by 61% in the last 10 years (FY 2014-FY 2023).

SITFO invests roughly $3.2 billion in a globally-diversified investment portfolio.

61% $3.2 BILLION

SITFO’s long-term investment objectives maintain the trust fund in perpetuity, while focused on sustaining and growing the annual distributions to beneficiaries.

ASSET ALLOCATION

The Asset allocation is designed carefully to avoid undue risk concentrations in any single asset class or category, reducing risk to the overall portfolio and optimizing the expected return relative to the level or risk acceptable to the board of trustees.

2023 Highlights

The annual October SITFO Summit was a big success. This year’s Summit focused on SITFO’s five-year plan, investment of the corpus, barometer of the current market environment and investment opportunities in asset classes.

SITFO’s five-year plan focuses on the phrase “fit for purpose.”

THEY STRIVE TO:

• Create a great team culture

• Utilize technolgy to address portfolio risk

• Improve stakeholder communication

HJR 18 and HB421 unanimously passed the legislative session in 2023. Both measures create better distribution practices for public education and other trust beneficiaries today and in the future. HJR 18 will go before voters in Fall 2024 and proposes to raise the annual distribution cap from 4% up to 5%.

A transfer of nearly $161 million from the state's Public Education Economic Stabilization Account will be going to the Public Schools Trust Permanent Fund. This unprecedented and generous action by the legislature will benefit school children in Utah now and for years to come.

Former State Treasurer David Damschen was awarded the Friends of the Trust awarded by Marlo Oaks, Utah State Treasurer and Chair of the SITFO Board. Damschen was recognized for his instrumental efforts in enhancing the overall effectiveness of SITFO’s operations.

In addition to the great work of SITFO, the team also strives to give back to the community beyond the workplace. SITFO employees volunteered with For the Kids to combat food insecurity and created sweet moments with immigrant and refugee children at Guadalupe School through cookie decorating.

Trust Protection & Advocacy

LAND TRUSTS PROTECTION & ADVOCACY OFFICE

The Protection & Advocacy Office provides checks and balances to the Trust System ensuring undivided loyalty to current and future trust beneficiaries. Working with the education community, legislators and other key stakeholders, the office works to build awareness of and preserve this perpetual source of funding.

What We Do

Advocate for productive and optimal generation of Trust revenue and effective distributions

2023 Highlights

Facilitate public outreach and understanding of the Trust’s importance and relevance

Monitor the Trusts, stay informed, account and report

Represent beneficiary interests through political advocacy

Trust System video

The Protection & Advocacy Office, in collaboration with the other members of Trust System, continues to achieve success in its legislative outreach campaign, meeting oneon-one with every state legislator in the House and Senate. The emphasis of these meetings has been to thoroughly explain the structure and effectiveness of the Trust System to policy makers and address relevant legislation.

Voters in Fall 2024 will decide on increasing the current 4% annual distribution up to 5% in the Utah Constitution. This proposed amendment promotes fair and equitable distributions to both current and future school children and will provide more funding for today’s beneficiaries. The Protection & Advocacy Office will lead an education campaign to encourage public support for this change.

An updated training video was produced for Charter and School Community Councils and other stakeholders. The three-minute video explains the important work of the Trust System and highlights current initiatives.

A Communications Team has been formed to collaborate on Trust System outreach efforts. The team is comprised of select staff from the Protection & Advocacy Office, Trust Lands Administration, SITFO, the Treasurer’s Office and the School Children’s Trust. The collaborative effort has improved outcomes on shared communication projects.

Advocacy efforts were amplified this year as the Office participated in many conferences and conventions throughout the State. These activities included speaking engagements, workshops and a Trust System booth in exhibition halls. These efforts build positive community engagement and are the building blocks to creating a loyal community on and offline.

Protection & Advocacy Committee & Director

Richard Ellis Chair

Paula Plant Vice Chair

Louie Cononelos

Committee Member

Roger Barrus

Committee Member

Bradford Benz

Committee Member

Kim Christy

Land Trusts Protection & Advocacy Office Director

Financial Summary

FY 2023

The Trust Lands Administration had its secondlargest revenue-generating year in FY 2023, grossing over $146 from its operations. Trust Land Administration revenues were shared among three major categories: energy and mineral revenues (61%); development and planning revenues (29%); and surface resource use (10%).

SITFO saw a modest 4.7% positive return for FY 2023. SITFO’s 10-year returns of 6.7% are slightly below the long-term investment objectives. Inflation has been much higher than average in the last fiscal year, presenting significant benchmarking challenges. However, SITFO is wellprepared for a higher inflation and interest rate regime, should that macroenvironment persist.

The market values of the trusts are increasing as well, in part due to strong contributions from the Trust Lands Administration. Diversification continues to improve as the portfolio moves closer to its long-term policy targets.

Additionally, a transfer of nearly $161 million from the state's Public Education Economic Stabilization Account appropriated by the state legislature will be sent in quarterly installments in FY 2024. This unprecedented and generous action by the legislature will benefit school children in Utah now and for years to come.

Permanent Fund Investment Balances

ROLLING 10-YEAR INVESTMENT PERFORMANCE VS. INVESTMENT OBJECTIVE

Annualized Returns

Trust Acreage

Data was gathered from Trust Lands Administration and SITFO as of June 30, 2023

Public Schools Trust Net Income Summary 2019–2023

School for the Deaf Trust Net Income Summary

2019–2023

11,642

$3.90

School for the Blind Trust Net Income Summary

2019–2023

University of Utah Trust Net Income Summary 2019–2023

16,016 SURFACE ACRES

38,394 MINERAL ACRES $12.37 MILLION

College of Mines and Earth Sciences Trust Net Income Summary 2019–2023

6,901

Colleges of Education Trust Net Income Summary

2019–2023

4,612

Utah State University Trust Net Income Summary 2019–2023

27,228

Miners Hospital Trust Net Income Summary

2019–2023

4,998 SURFACE ACRES 53,479 MINERAL ACRES $81.84 MILLION PERMANENT FUND *Prior

Utah State Hospital Trust Net Income Summary

2019–2023

Juvenile Justice & Youth Services Trust Net Income Summary 2019–2023

Reservoirs Trust Net Income Summary

2019–2023

35,633 SURFACE ACRES

96,894 MINERAL ACRES $21.58

Kim S. Christy Director

801-201-7480

kschristy@utah.gov

Jessie Stuart

Assistant Director

385-315-1892

jpstuart@utah.gov

Ashton Hatch

Communications Specialist

385-480-6826

aehatch@utah.gov