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Luna wants state investors to consider giving more to schools sooner

Luna wants state investors to consider giving more to schools sooner

Idaho Freedom Foundation staff
May 18, 2010

Idaho Superintendent of Public Instruction Tom Luna raised concerns during an Idaho Land Board meeting Tuesday that the state’s system of managing state lands and investments is not providing enough immediate support to public schools, universities, and other beneficiaries.  Luna asked the Endowment Fund Investment Board (EFIB), which manages money earned from state lands, to consider changing how it distributes money to beneficiaries and reserve funds.

EFIB investment manager Larry Johnson told Luna and the rest of the Land Board that it has an obligation to make sure that current and future beneficiaries of profits from state lands aren’t harmed.  He said the current state policy of building up five years’ worth of payments to beneficiaries in reserves is sound business practice.

The five-year-reserve policy is biased toward future payments for schools and other beneficiaries, according to Luna.  “It puts too much emphasis on future beneficiaries at the expense of … starving current beneficiaries,” he said.  Earlier this year, Luna wanted to move $52.8 million from the Public Schools Earnings Reserve Fund to the next public schools budget to limit spending reductions, though the Land Board approved $22 million.  The transfer leaves the fund with a likely two-year reserve at the end of 2012, according to Johnson.

Luna tied the issue to the proposed increases on lakefront cottage sites on Payette and Priest Lake.  Attorney General Lawrence Wasden and Controller Donna Jones, also Land Board members, support raising leases to 6 percent of their market value.  Luna said that move, which he, Gov. Butch Otter, and Secretary of State Ben Ysursa rejected but is now the subject of a lawsuit by Wasden, could bring in $3.4 million a year.  However, that money would go into reserves, and Luna said that payments to the public schools budget wouldn’t increase for 28 years.  “There are many people out there that think that if we can just ‘fix’ the cottage lease sites, that our schools would be receiving millions and millions of dollars starting next year,” he said.  “That’s just not the case.”  Luna told IdahoReporter.com that the $22 million transfer to schools for the next fiscal year extended the delay to 28 years by six or seven years.

Luna’s 28-year delay is based on state investments earning no return.  Johnson said that if endowment funds get extra income, like more revenue from lakefront leases, then they could be paid to schools and other beneficiaries within four years.  Otter said the likely date for a proposed payout to schools would be somewhere between Johnson and Luna’s estimates.

The EFIB will report back to the Land Board in July with its proposals to distribute earnings and will consider several recommendations for Luna.  During the meeting, Otter reminded everyone that public schools aren’t the lone beneficiaries of state lands, timber sales, and revenues from lakefront leases.  Other state agencies receiving revenue from state lands include the Idaho Capitol Commission, state hospitals and penitentiaries, and several public universities.

Wasden, who participated in the meeting by telephone, spoke briefly in favor of raising lease rates.  He said that if the Land Board had approve raising lease rates 28 years ago, public schools would start seeing the higher payments now.

In March, Otter, Ysursa, and Luna approved raising leases on state-owned lakefront land from less than 2.5 percent of current land value to 4 percent of a 10-year average of land value, phased in over five years.

The Land Board Tuesday also voted to meet next month in Boise, rather than its scheduled meeting in Sandpoint.  Three of the five board members would be unable to attend the June meeting in north Idaho in person, so the board voted to schedule a later meeting in Sandpoint.  Transportation for the meeting outside Boise would cost $5,000.

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