Regents to consider suing state over lost land income

HELENA - The Legislature has unconstitutionally taken millions of dollars belonging to the Montana university system over the past four decades, and the Board of Regents ought to do something about it, the regents' attorney said Thursday.

LeRoy Schramm said some of the money raised through leasing of certain state lands has been diverted to cover administrative costs of managing the land, in violation of federal law and the Montana Constitution.

''We have to deal with this,'' he said. ''It's a problem you can't ignore.

''If we can get this practice stopped in the future, that in itself would be quite a positive step,'' Schramm said. ''You would have a little larger part of our income guaranteed, one little piece of the pie that the university system would not have to fight over.''

The land at issue was given by the federal government to the Montana when it became a state in 1889. The law awarding the 386,000 acres of land grants, and the Montana Constitution, require all income from the holdings go to the colleges and universities, Schramm said. That amounts to about $4 million a year, he said.

Beginning in 1963, the Legislature began passing laws that skimmed off some of the money as administrative fees for what is now called the Department of Natural Resources and Conservation.

Schramm estimated that $5 million has been taken in that fashion over the 41 years and that amounts to $11 million to $12 million by today's values.

Tom Schultz, administrator of the agency's Trust Land Management Division, said the department believes use of the money to help pay administrative costs is legal.

While the department is willing to discuss the issue with higher education officials, he said, ''We like the way we're currently funded. We think it makes sense to fund ourselves out of our receipts.''

He said the agency used $375,000 in university land grant income last year, which represented about 5 percent of total administrative costs.

Schramm first raised this issue to the regents two years ago, and brought it up again in 2003. The board delayed any decision a year ago, suggesting legislative leaders seek a ruling from their legal staff.

Greg Petesch, chief attorney for the Legislature, concluded in February that the question raises a ''serious legal issue'' but did not take a position on whether the diversion of money is illegal.

In a report prepared for next week's regents meeting in Havre, Schramm said the board could file a lawsuit to stop the practice and recover money, seek an attorney general's ruling, request law changes to halt questionable use of the money or negotiate an agreement involving some mix of options.

Whatever route is taken, he said, ''it seems that the board has some duty to take some action to either correct the practice or get a definitive legal answer to the propriety of the practice.''

Regents Chairman John Mercer of Polson said legal action would be a last resort.

''I'm trying to avoid government entities suing each other at government expense,'' he said. ''It drives citizens crazy to be paying for both sides in a lawsuit.''

Even if the university system sued and recovered the disputed money, Schramm said, that could be a hollow victory if lawmakers merely reduced the regular funding for higher education by a comparable amount.