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Land Board lowers Luna's fund request from $52 million to $22 million

Land Board lowers Luna's fund request from $52 million to $22 million

Idaho Freedom Foundation staff
February 11, 2010
Idaho Freedom Foundation staff
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February 11, 2010

The next Idaho public schools budget, which begins July 1, will get an extra $22 million from a reserve fund, which is below the $52.8 million that schools superintendent Tom Luna was requesting. Luna got no support for the higher figure from members of the Land Board, but Gov. Butch Otter, Secretary of State Ben Ysursa, and Luna voted in favor of the smaller transfer that will create a bigger hole in the next schools budget, but leave money available for the following two years.

The $22 million will come from the Public Schools Earnings Reserve Fund. Schools are already set to receive $31 million from the fund controlled by the Land Board. Luna said getting some money for the next schools budget was better than nothing. “I’m not going to walk away from $22 million when schools are looking at the kind of cuts that they are facing,” Luna said. “But I was concerned that we were leaving money on the table.”

Ysursa proposed the smaller transfer after no Land Board members supported Luna’s higher request. “It’d be a band aid,” Ysursa said about the extra funds. “That amount of money seems very, very small. I think any amount of money is small in relation to the size of the problem that we have.” Ysursa put forward the $22 million figure because that would leave enough money in the reserve fund to cover regular transfers to school during the two state budgets after the one lawmakers are currently putting together.

With $30 million less funding that he had asked for, Luna’s plan for the next schools budget now includes a larger overall reduction. Luna has offered $25 million in targeted reductions. He also said Wednesday that schools could face a total reduction of up to $160 million , based on the revised budget number from a legislative panel last month. That means Idaho public schools could face an across-the-board reduction of $113 million. Luna did not offer any more targeted cuts or additional revenues after the Land Board decision.

During the Land Board meeting, Otter said not all those cuts come from the general fund. “Only $29 million of that did I have control over,” he said. “The rest was stimulus money and rainy day PESF (Public Education Stabilization Fund) money.” Last year, federal stimulus dollars backfilled a reduction in state spending for schools.

Luna tried to convince other Land Board members during the meeting that this year is the time to draw down the reserve fund. “Are we going to do what’s best and most comfortable for the bureaucracy or are we going to do what’s best for the beneficiaries, Idaho’s kids?” Luna asked. “I think we all know the answer. The fact is Idaho public schools will be cut in the next fiscal year, but we as (Land Board) trustees have the opportunity to minimize these cuts and make an unmanageable albeit impossible situation manageable for our students. I do not know why we would not seize this opportunity.”

Attorney General Lawrence Wasden and Controller Donna Jones, the two other members of the Land Board, voted against transferring any money. Wasden had suggested a counter-proposal to let investment managers for the Land Board spend more time determining the long-term impact of shifting more money now. “In order for us to fulfill our constitutional duty, we must obtain the analysis from experts at the Department of Lands and Endowment Fund Investment Board,” Wasden wrote in a statement he prepared before the Land Board meeting. “The earnings reserve fund is not a rainy day fund. A rainy day fund is like a bank account where you park money for a rainy day. This is a rainy day, but that is not what the earnings reserve fund is for.” Wasden explained that the funds’ investments fluctuate year-to-year but provide a stable amount to schools every year. “The reserve account is a stabilization fund or a shock absorber account, rather than a rainy day fund.”

Jones agreed with Wasden’s call for more analysis and said the Land Board should slow down its decision-making. “I heard no compelling information that justifies that we take this distribution this rapidly,” Jones said. “There would be nothing wrong with having us go to the experts, have a turnaround as soon as possible, and then make our decision.” She said that all economic analysts have had a tough time predicting the state’s fortunes in the past year. “We simply don’t know what’s ahead. I think there’s no reason why we can’t slow down, look the information over, get the experts in, and then make that decision.”

That analysis of a transfer to schools could have taken months, according to Larry Johnson, the manager of investments for the Endowment Fund Investment Board, which oversees the Land Board’s investments. If Wasden’s proposal had passed, it’s unclear if a Land Board decision would have been made in time for lawmakers writing the budget to include any extra transferred money in the next state spending plan.

Watch IdahoReporter's video of Luna's comments after the Land Board decision.

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