Senators voted 33-0  Thursday to support the creation of the Higher Education Stabilization Fund, or HESF as it is called by its sponsors, which, many believe, will help state-funded colleges and universities avoid drastic cuts in funding during future times of economic downturn.

The reserve account features a three-pronged approach to reserve funding for the state’s colleges and universities.  HESF will create three accounts that, in future times of economic hardship, can be drawn upon by schools, with approval from the Idaho State Board of Education, to fill funding gaps.

The first account relies solely on interest earned by the state on fees and tuition paid by students.  The interest is currently sent to the general fund, which, sponsors say, might prevent it from finding its way back to the schools that provided the money.  The plan would have the money go into a separate reserve account that would annually grow with interest.  Schools participating in the program, Boise State University, Lewis-Clark State College, Idaho State University, and Eastern Idaho Technical College, would be paid out during economic downturns based on the proportion each school contributed to the fund.  All requests for funding would go through the state board, which would be required to give the nod for fund payouts.  Bedke estimates this fund would receive $114,000 in its first year.

The University of Idaho would not participate in the first account because it typically invests the interest earned off its student fees and tuition on its own.

The second reserve account created under HESF would be an appropriations-based account that would need legislators to divert excess or surplus money from the general fund.   Until legislators have the resources to do so, the account would remain empty.  This account would serve the state’s four-year colleges and universities, BSU, ISU, LCSC, EITC, and UI.

The third account would be similar in makeup to the second account, but would serve as a safety net for the state’s community colleges, including North Idaho College in Coeur D’Alene, College of Southern Idaho in Twin Falls, and College of Western Idaho in Nampa.  Contributions for this account would also be based on legislative appropriations.

Payments to schools out of the second and third reserve accounts, once they receive money, would, like the first account, go through the state board, though the payout formula would likely be different.  The board would be allowed to distribute money from the second and third accounts based on its own formula, which is determined largely by enrollment numbers.

The measure had already passed the House and now heads to Gov. Butch Otter for his signature.  Otter is co-sponsoring the legislation with Rep. Scott Bedke, R-Oakley, and Sen. Joe Stegner, R-Lewiston.