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Second Substitute H.B. 357
Representative Melvin R. Brown proposes to substitute the following bill:
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SCHOOL TRUST LANDS MODIFICATIONS
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2000 GENERAL SESSION
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STATE OF UTAH
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Sponsor: Melvin R. Brown
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AN ACT RELATING TO SCHOOL AND INSTITUTIONAL TRUST LANDS; PROVIDING
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THAT NO MORE THAN 80% OF THE PERMANENT LAND GRANT TRUST FUND ASSETS
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MAY BE INVESTED IN COMMON OR PREFERRED STOCKS; MODIFYING THE
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SELECTION PROCESS FOR THE SCHOOL AND INSTITUTIONAL TRUST LANDS BOARD
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OF TRUSTEES NOMINATING COMMITTEE; REMOVING ARCHAIC LANGUAGE
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REGARDING PERFORMANCE AUDITS; MODIFYING PROVISIONS RELATED TO LEGAL
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REPRESENTATION FOR THE ADMINISTRATION; AND PROVIDING THAT THE
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DIRECTOR OF THE ADMINISTRATION SHALL EFFICIENTLY MANAGE ALL RANGE
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RESOURCES ON TRUST LANDS CONSISTENT WITH THE DIRECTOR'S FIDUCIARY
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DUTIES TO THE BENEFICIARIES.
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This act affects sections of Utah Code Annotated 1953 as follows:
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AMENDS:
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51-7-12, as last amended by Chapter 270, Laws of Utah 1999
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53C-1-201, as last amended by Chapter 219, Laws of Utah 1998
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53C-1-203, as last amended by Chapter 243, Laws of Utah 1996
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53C-1-204, as last amended by Chapter 103, Laws of Utah 1996
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53C-1-305, as enacted by Chapter 294, Laws of Utah 1994
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53C-5-101, as enacted by Chapter 294, Laws of Utah 1994
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Be it enacted by the Legislature of the state of Utah:
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Section 1.
Section
51-7-12
is amended to read:
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51-7-12. Deposit or investment of permanent land grant trust funds -- Authorized
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deposits and investments -- Asset manager -- Investment Advisory Committee.
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(1) The principal of the permanent land grant trust funds established pursuant to the Utah
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Enabling Act and the Utah Constitution shall be deposited or invested only in the following:
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(a) any deposit or investment authorized by Section
51-7-11
;
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(b) equity securities, including common and preferred stock issued by corporations listed
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on a major securities exchange, in accordance with the following criteria applied at the time of
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investment:
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(i) the treasurer may not invest more than 5%, determined on a cost basis, of the total fund
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assets in the securities of any one issuer;
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(ii) the treasurer may not invest more than 25%, determined on a cost basis, of total fund
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assets in a particular industry;
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(iii) the treasurer may not invest more than 5%, determined on a cost basis, of the total
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fund assets in securities of corporations that have been in continuous operation for less than three
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years;
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(iv) the fund may not hold in excess of 5% of the outstanding voting securities of any one
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corporation; and
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(v) at least 75% of the corporations in which investments are made under Subsection (1)(b)
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must appear on the Standard and Poor's 500 Composite Stock Price Index;
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(c) fixed-income securities, including bonds, notes, mortgage securities, zero coupon
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securities and convertible securities issued by domestic corporations rated A or higher by Moody's
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Investor's Service, Inc. or by Standard and Poor's Corporation in accordance with the following
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criteria applied at the time of investment:
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(i) the treasurer may not invest more than 5%, determined on a cost basis, of the total fund
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assets in the securities of any one issuer;
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(ii) the treasurer may not invest more than 25%, determined on a cost basis, of the total
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fund assets in a particular industry;
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(iii) the treasurer may not invest more than 5%, determined on a cost basis, of the total
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fund assets in securities of corporations that have been in continuous operation for less than three
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years; and
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(iv) the dollar-weighted average maturity of fixed-income securities acquired under
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Subsection (1)(c) may not exceed ten years;
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(d) fixed-income securities issued by agencies of the United States and
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government-sponsored organizations, including mortgage-backed pass-through certificates and
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mortgage-backed bonds;
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(e) shares of an open-end diversified management investment company established under
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the Investment Companies Act of 1940; and
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(f) shares of or deposits in a pooled-investment program.
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(2) (a) No more than [65%] 80% of the total fund assets of any of these funds, on a cost
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basis, may be invested in common or preferred stocks at any one time.
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(b) At least [35%] 20% of the total assets of these funds shall be invested in fixed-income
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securities authorized by Subsections (1)(a), (c), and (d).
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(3) The state treasurer shall use appropriate investment strategies to protect the principal
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of the funds administered under this section during periods of financial market volatility.
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(4) (a) The state treasurer may employ professional asset managers to assist in the
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investment of assets of the permanent trust funds.
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(b) The treasurer may provide compensation to asset managers from earnings generated
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by the funds' investments.
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(5) This section applies only to permanent trust funds in which the principal is prudently
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invested and held by the state in perpetuity.
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(6) (a) There is established an advisory committee to give suggestions, advice, and
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opinions to the state treasurer in regard to this section.
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(b) The committee shall consist of the following:
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(i) one member appointed by the president of the University of Utah;
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(ii) one member appointed by the president of Utah State University;
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(iii) one member appointed by the state superintendent of public instruction;
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(iv) one member appointed by the president of the Utah Education Association;
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(v) one member appointed by the president of the Utah Parent Teachers Association; and
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(vi) one member appointed by the director of the Department of Human Services.
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(c) (i) Except as required by Subsection (6)(c)(ii), as terms of current committee members
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expire, the appointing authority shall appoint each new member or reappointed member to a
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four-year term.
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(ii) Notwithstanding the requirements of Subsection (6)(c)(i), the appointing authority
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shall, at the time of appointment or reappointment, adjust the length of terms to ensure that the
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terms of committee members are staggered so that approximately half of the committee is
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appointed every two years.
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(d) When a vacancy occurs in the membership for any reason, the replacement shall be
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appointed for the unexpired term.
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(e) The committee shall meet at least annually and review investment reports prepared by
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the state treasurer, including information on portfolio composition and investment performance.
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(7) (a) (i) Members who are not government employees shall receive no compensation or
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benefits for their services, but may receive per diem and expenses incurred in the performance of
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the member's official duties at the rates established by the Division of Finance under Sections
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63A-3-106
and
63A-3-107
.
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(ii) Members may decline to receive per diem and expenses for their service.
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(b) (i) State government officer and employee members who do not receive salary, per
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diem, or expenses from their agency for their service may receive per diem and expenses incurred
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in the performance of their official duties from the committee at the rates established by the
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Division of Finance under Sections
63A-3-106
and
63A-3-107
.
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(ii) A state government member who is a member because of their state government
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position may not receive per diem or expenses for their service.
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(iii) State government officer and employee members may decline to receive per diem and
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expenses for their service.
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(c) (i) Local government members who do not receive salary, per diem, or expenses from
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the entity that they represent for their service may receive per diem and expenses incurred in the
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performance of their official duties at the rates established by the Division of Finance under
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Sections
63A-3-106
and
63A-3-107
.
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(ii) Local government members may decline to receive per diem and expenses for their
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service.
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Section 2.
Section
53C-1-201
is amended to read:
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53C-1-201. Creation of administration -- Purpose -- Director.
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(1) (a) There is established within state government the School and Institutional Trust
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Lands Administration.
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(b) The administration shall manage all school and institutional trust lands and assets
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within the state, except as otherwise provided in Chapter 3 of this title and Section
51-7-12
.
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(2) The administration is an independent state agency and not a division of any other
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department.
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(3) (a) It is subject to the usual legislative and executive department controls except as
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follows:
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(i) (A) the director may make rules as approved by the board that allow the administration
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to classify a business proposal submitted to the administration as protected under Section
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63-2-304
, for as long as is necessary to evaluate the proposals;
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(B) the administration shall return the proposal to the party who submitted the proposal,
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and incur no further duties under Title 63, Chapter 2, Government Records Access and
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Management Act, if the administration determines not to proceed with the proposal;
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(C) the administration shall classify the proposal pursuant to law if it decides to proceed
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with the proposal; and
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(D) Section
63-2-403
does not apply during the review period;
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(ii) the director shall make rules in compliance with Title 63, Chapter 46a, Utah
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Administrative Rulemaking Act, except that the director, with the board's approval, may establish
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a procedure for the expedited approval of rules, based on written findings by the director showing:
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(A) the changes in business opportunities affecting the assets of the trust;
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(B) the specific business opportunity arising out of those changes which may be lost
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without the rule or changes to the rule;
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(C) the reasons the normal procedures under Section
63-46a-4
cannot be met without
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causing the loss of the specific opportunity;
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(D) approval by at least five board members; and
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(E) that the director has filed a copy of the rule and a rule analysis, stating the specific
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reasons and justifications for its findings, with the Division of Administrative Rules and notified
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interested parties as provided in Subsection
63-46a-4
(7); and
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(iii) the administration shall comply with Title 67, Chapter 19, Utah State Personnel
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Management Act, except as follows:
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(A) the board may approve, upon recommendation of the director, that exemption for
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specific positions under Subsections
67-19-12
(2) and
67-19-15
(1) is required in order to enable
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the administration to efficiently fulfill its responsibilities under the law. The director shall consult
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with the director of the Department of Human Resource Management prior to making such a
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recommendation. The positions of director, deputy director, assistant director, legal counsel
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appointed under Subsection
53C-1-305
(2), administrative assistant, and public affairs officer are
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exempt under Subsections
67-19-12
(2) and
67-19-15
(1);
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(B) salary for exempted positions, except for the director, shall be set by the director, after
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consultation with the director of the Department of Human Resource Management, within ranges
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approved by the board. The board and director shall consider salaries for similar positions in
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private enterprise and other public employment when setting salary ranges; and
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(C) the board may create an annual incentive and bonus plan for the director and other
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administration employees designated by the board, based upon the attainment of financial
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performance goals and other measurable criteria defined and budgeted in advance by the board;
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and
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(iv) the administration shall comply with Title 63, Chapter 56, Utah Procurement Code,
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except where the board approves, upon recommendation of the director, exemption [under Section
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63-56-3
] from the Utah Procurement Code, and simultaneous adoption of policies for procurement,
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which enable the administration to efficiently fulfill its responsibilities under the law.
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(b) (i) The board and director shall review the exceptions under Subsection (3)(a) and
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make recommendations for any modification, if required, which the Legislature would be asked
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to consider during its annual General Session.
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(ii) The board and director may include in their recommendations any other proposed
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exceptions from the usual executive and legislative controls the board and director consider
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necessary to accomplish the purpose of this title.
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(4) The administration is managed by a director of school and institutional trust lands
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appointed by a majority vote of the board of trustees with the consent of the governor.
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(5) (a) The board of trustees shall provide policies for the management of the
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administration and for the management of trust lands and assets.
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(b) The board shall provide policies for the ownership and control of Native American
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remains that are discovered or excavated on school and institutional trust lands in consultation with
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the Division of Indian Affairs and giving due consideration to Title 9, Chapter 9, Part 4, Native
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American [Graves] Grave Protection and Repatriation Act.
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(6) In connection with joint ventures for the development of trust lands and minerals
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approved by the board under Subsection
53C-1-303
(4)(c), the administration may become a
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member of a limited liability company under Title 48, Chapter 2b, Utah Limited Liability
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Company Act, and is considered a person under Subsection
48-2b-102
(6) for such purposes.
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Section 3.
Section
53C-1-203
is amended to read:
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53C-1-203. Board of trustees nominating committee -- Composition --
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Responsibilities -- Per diem and expenses.
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(1) There is established an 11 member board of trustees nominating committee.
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(2) (a) The State Board of Education shall appoint five members to the nominating
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committee from different geographical areas of the state.
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(b) The governor shall appoint five members to the nominating committee as follows:
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(i) one individual from a nomination list of at least two names of individuals
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knowledgeable about institutional trust lands submitted by the [commissioner of higher education
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after consultation with institutional trust land beneficiaries, other than the public school trust land
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beneficiaries] University of Utah and Utah State University on an alternating basis every four
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years;
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(ii) one individual from a nomination list of at least two names submitted by the livestock
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industry;
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(iii) one individual from a nomination list of at least two names submitted by the Utah
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Petroleum Association;
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(iv) one individual from a nomination list of at least two names submitted by the Utah
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Mining Association; and
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(v) one individual from a nomination list of at least two names submitted by the executive
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director of the Department of Natural Resources after consultation with statewide wildlife and
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conservation organizations.
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(c) The president of the Utah Association of Counties shall designate the chair of the
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Public Lands Steering Committee, who must be an elected county commissioner or councilor, to
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serve as the eleventh member of the nominating committee.
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(3) (a) Except as required by Subsection (3)(b), each member shall serve a four-year term.
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(b) Notwithstanding the requirements of Subsection (3)(a), the state board and the
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governor shall, at the time of appointment or reappointment, adjust the length of terms to ensure
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that the terms of committee members are staggered so that approximately half of the committee
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is appointed every two years.
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(c) When a vacancy occurs in the membership for any reason, the replacement shall be
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appointed for the unexpired term.
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(4) The nominating committee shall select a chair from its membership by majority vote.
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(5) (a) The nominating committee shall nominate at least two candidates for each position
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or vacancy which occurs on the board of trustees except for the governor's appointee under
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Subsection
53C-1-202
(5).
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(b) The nominations shall be by majority vote of the committee.
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(6) (a) (i) Members who are not government employees shall receive no compensation or
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benefits for their services, but may receive per diem and expenses incurred in the performance of
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the member's official duties at the rates established by the Division of Finance under Sections
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63A-3-106
and
63A-3-107
.
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(ii) Members may decline to receive per diem and expenses for their service.
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(b) (i) State government officer and employee members who do not receive salary, per
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diem, or expenses from their agency for their service may receive per diem and expenses incurred
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in the performance of their official duties from the committee at the rates established by the
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Division of Finance under Sections
63A-3-106
and
63A-3-107
.
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(ii) State government officer and employee members may decline to receive per diem and
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expenses for their service.
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(c) (i) Higher education members who do not receive salary, per diem, or expenses from
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the entity that they represent for their service may receive per diem and expenses incurred in the
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performance of their official duties from the committee at the rates established by the Division of
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Finance under Sections
63A-3-106
and
63A-3-107
.
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(ii) Higher education members may decline to receive per diem and expenses for their
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service.
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Section 4.
Section
53C-1-204
is amended to read:
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53C-1-204. Policies established by board -- Director.
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(1) (a) The board shall establish policies for the management of the School and
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Institutional Trust Lands Administration.
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(b) The policies shall:
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(i) be consistent with the Utah Enabling Act, the Utah Constitution, and state law;
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(ii) reflect undivided loyalty to the beneficiaries consistent with fiduciary duties;
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(iii) require the return of not less than fair market value for the use, sale, or exchange of
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school and institutional trust assets;
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(iv) seek to optimize trust land revenues and increase the value of trust land holdings
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consistent with the balancing of short and long-term interests, so that long-term benefits are not
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lost in an effort to maximize short-term gains;
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(v) maintain the integrity of the trust and prevent the misapplication of its lands and its
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revenues; and
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(vi) have regard for and seek General Fund appropriation compensation for the general
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public's use of natural and cultural resources consistent with the duties of the administration as
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trustee for the beneficiaries.
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(2) The board shall ensure that the administration is managed according to law.
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(3) The board shall establish due process procedures governing adjudicative proceedings
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conducted by the administration.
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(4) The board and the director shall recommend to the governor and the Legislature any
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necessary or desirable changes in statutes relating to the trust or their trust responsibilities.
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(5) Policies adopted by the Board of State Lands and Forestry prior to the effective date
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of this act regarding school and institutional trust lands, shall remain in effect until amended or
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repealed by the board.
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[(6) Prior to the 1995 General Session, the board shall determine and make
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recommendations to the governor and the Legislature regarding the feasibility of and necessity for
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performance audits of the administration by a certified public accounting firm on a regular basis
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of at least once every three years.]
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[(7)] (6) The board shall develop policies for the long-term benefit of the trust utilizing
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the broad discretion and power granted to it in this title.
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[(8)] (7) (a) (i) On at least three occasions during each calendar year and in cooperation
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with the director, the board shall consult with an advisory committee consisting of five county
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commissioners appointed by the Utah Association of Counties concerning the impact of trust land
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management practices on rural economies.
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(ii) The director shall notify the chair of the committee prior to any proposed board
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actions. At the request of the committee and prior to taking the proposed action, the board shall
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meet with the committee at the next scheduled board meeting.
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(b) The association shall appoint the commissioners from five different counties based on
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such factors as a county's total acreage of trust lands, the revenues generated from trust lands in
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the county, and the potential for economic development of trust lands within the county.
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(c) The advisory committee may request additional consultations it considers necessary
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or appropriate, to be scheduled within a reasonable time after receipt of the request by the
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administration.
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[(9)] (8) The board shall utilize the services of the attorney general as provided in Section
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53C-1-305
.
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[(10)] (9) The board may:
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(a) (i) establish advisory committees to advise the board, director, or administration on
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policies affecting the management of the trust, and pay the compensation and travel expenses in
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accordance with rules adopted by the Division of Finance; and
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(ii) after conferring with the director, hire consultants to advise the board, director, or
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administration on issues affecting the management of the trust, and pay compensation to the
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consultants from monies appropriated for that purpose;
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(b) with the consent of the state risk manager, authorize the director to manage lands or
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interests in lands held by any other public or private party, if:
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(i) all management costs are compensated by the parties;
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(ii) there is a commensurate return to the beneficiaries; and
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(iii) the additional responsibilities do not detract from the administration's responsibilities
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and its duty of undivided loyalty to the beneficiaries;
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(c) issue subpoenas or authorize a hearing officer to issue subpoenas, to compel the
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attendance of witnesses and the production of documents in adjudicative proceedings authorized
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by law and administer oaths in the performance of official duties; and
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(d) submit in writing to the director a request for responses, to be made within a reasonable
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time, to questions concerning policies and practices affecting the management of the trust.
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[(11)] (10) Board members shall be given access to all administration records and
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personnel consistent with law and as necessary to permit the board to accomplish its
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responsibilities to ensure that the administration is in full compliance with applicable policies and
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law.
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Section 5.
Section
53C-1-305
is amended to read:
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53C-1-305. Attorney general to represent administration.
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(1) The attorney general shall:
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(a) represent the board, director, or administration in any legal action relating to trust lands
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except as otherwise provided in Subsection (3);
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(b) review leases, contracts, and agreements submitted for review prior to execution; and
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(c) undertake suits for the collection of royalties, rental, and other damages in the name
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of the state.
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(2) The attorney general may institute actions against any party to enforce this title or to
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protect the interests of the trust beneficiaries.
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(3) The administration may, with the consent of the attorney general, employ inhouse legal
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counsel to perform the duties of the attorney general under Subsections (1) and (2).
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(4) In those instances where the interests of the trust beneficiaries conflict with those of
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state officers or executive department agencies for which the attorney general acts as legal advisor
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under Utah Constitution Article VII, Section 16, the board may, with the consent of the attorney
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general [shall appoint inhouse and], employ independent counsel[, when required, with the consent
321
of the board] to represent and protect those interests.
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Section 6.
Section
53C-5-101
is amended to read:
323
53C-5-101. Management of range resources.
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(1) The director is responsible for the efficient management of all range resources on lands
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under the director's administration, consistent with his fiduciary duties of financial support to the
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beneficiaries.
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(2) This management shall be based on sound resource management principles.
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