Hardly a week goes by when Idahoans are not subject to reminders that our per-pupil K-12 funding is the lowest or close to the lowest nationally. Every election cycle, it seems, there is a vote somewhere in the state to raise additional funds.
Two aspects of the funding puzzle that do not get enough attention are state endowment lands and the permanent fund. The lands were granted to the state back in 1890 to support public schools and other designated beneficiary institutions.
The permanent fund consists of the accumulated value of the investments from divested lands, mineral royalties and earnings from those investments. The Idaho Department of Lands places a rough estimate on the value of those lands at $2.5 billion. The permanent fund (including the earnings reserve) consisting of stocks and bonds is valued at $1.7 billion. So the total value of the lands (not very liquid) and permanent fund (very liquid) is circa $4.2 billion.
The distributions from these assets were $49 million in 2014 and are scheduled to be $52 million in 2015, with about $31 million going to Idaho’s public schools. That’s correct, a little more than 1 percent payout or distribution on the total asset base or 2.8 percent distribution on the permanent fund.
Part of the reason for the small distributions is that the permanent fund has grown at a compounded annual growth rate of more than 6.5 percent for the last two decades. This growth was designed to protect the fund from investment down cycles and erosion due to inflation. Perhaps this is overly conservative.
Had the compounded annual growth rate of the fund been reduced by about 1 percent, several hundred million dollars could have been distributed to beneficiaries like public schools.
Finally, the endowment lands include residential and commercial real estate. Selling these assets and shifting the proceeds into the permanent fund (after passing them through the land bank) would increase the returns from the permanent fund, simplify the land asset portfolio and would add these properties to the property tax rolls. It is time to consider some creative thinking regarding this source of school funding.
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