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H0591......................................................by STATE AFFAIRS ENDOWMENT FUND - Repeals and amends existing law relating to the investment of permanent funds to provide for calculation of gains achieved by the permanent fund of each endowment fund to be incorporated into the calculation of gains and not be a separate item of earnings. 02/08 House intro - 1st rdg - to printing 02/09 Rpt prt - to St Aff 02/16 Rpt out - rec d/p - to 2nd rdg 02/17 2nd rdg - to 3rd rdg 02/22 3rd rdg - PASSED - 68-0-2 AYES -- Anderson, Andrus, Barraclough, Barrett, Bastian, Bayer, Bedke, Bell, Bilbao, Black, Block, Boe, Bolz, Brackett, Bradford, Cannon, Chadderdon, Clark, Collins, Deal, Denney, Edmunson, Ellsworth, Eskridge, Field(18), Field(23), Garrett, Hart, Harwood, Henbest, Henderson, Jaquet, Kemp, Lake, LeFavour, Loertscher, Martinez, Mathews, McGeachin, McKague, Miller, Mitchell, Moyle, Nielsen, Pasley-Stuart, Pence, Raybould, Ring, Ringo, Roberts, Rusche, Rydalch, Sali(Sali), Sayler, Schaefer, Shepherd(2), Shepherd(8), Shirley, Skippen, Smith(30), Smith(24), Smylie(Luker), Snodgrass, Stevenson, Trail, Wills, Wood, Mr. Speaker NAYS -- None Absent and excused -- Crow, Nonini Floor Sponsor - Deal Title apvd - to Senate 02/23 Senate intro - 1st rdg - to St Aff 02/28 Rpt out - rec d/p - to 2nd rdg 03/01 2nd rdg - to 3rd rdg 03/07 3rd rdg - PASSED - 33-0-2 AYES -- Andreason, Brandt, Broadsword, Bunderson, Burkett, Cameron, Coiner, Compton, Corder, Darrington, Davis, Fulcher, Gannon, Geddes, Goedde, Hill, Jorgenson, Kelly, Keough, Langhorst, Little, Lodge, Malepeai, Marley, McGee, McKenzie, Richardson, Schroeder, Stegner, Stennett, Sweet, Werk, Williams NAYS -- None Absent and excused -- Burtenshaw, Pearce Floor Sponsor - Little Title apvd - to House 03/08 To enrol 03/09 Rpt enrol - Sp signed 03/10 Pres signed 03/13 To Governor 03/14 Governor signed Session Law Chapter 44 Effective: 07/01/06
]]]] LEGISLATURE OF THE STATE OF IDAHO ]]]] Fifty-eighth Legislature Second Regular Session - 2006IN THE HOUSE OF REPRESENTATIVES HOUSE BILL NO. 591 BY STATE AFFAIRS COMMITTEE 1 AN ACT 2 RELATING TO THE INVESTMENT OF PERMANENT FUNDS; REPEALING SECTIONS 3 AND 5, 3 CHAPTER 132, LAWS OF 2004, REGARDING THE DEFINITION OF "EARNINGS DEFINED" 4 AND THE EFFECTIVE DATE OF THE ACT; AND AMENDING SECTION 57-724A, IDAHO 5 CODE, TO PROVIDE FOR CALCULATION OF GAINS ACHIEVED BY THE PERMANENT FUND 6 OF EACH ENDOWMENT FUND TO BE INCORPORATED INTO THE CALCULATION OF GAINS 7 AND NOT BE A SEPARATE ITEM OF EARNINGS. 8 Be It Enacted by the Legislature of the State of Idaho: 9 SECTION 1. That Sections 3 and 5, Chapter 132, Laws of 2004, be, and the 10 same are hereby repealed. 11 SECTION 2. That Section 57-724A, Idaho Code, be, and the same is hereby 12 amended to read as follows: 13 57-724A. EARNINGS DEFINED. "Earnings" shall mean all revenues generated 14 from the management of endowment lands and their related endowment funds 15 including, but not limited to, timber sale proceeds, lease fees, interest, 16 dividends, and gains as defined in section 57-724, Idaho Code; provided how- 17 ever, for the permanent fund of each endowment, on and after July 1 of the 18 calendar year following the first calendar year in which gains, as calculated 19 under the provisions of section 57-724, Idaho Code, have been achieved by the 20 permanent fund of such endowment fund, dividends and interest shall be incor- 21 porated into the calculation of gains as defined in section 57-724, Idaho 22 Code, and shall not be a separate item of earnings for such permanent fund. 23 "Earnings" does not include mineral royalties or land sale proceeds.
STATEMENT OF PURPOSE RS 15838 The State of Idaho has eight permanent endowment funds. Under the law currently in effect, dividends and interest earned by these permanent funds are deposited directly into the earnings reserves for each fund and are then immediately available for distribution to the beneficiaries according to the endowment's distribution schedule. In 2004, the legislature passed Senate Bill 1306 to change the definition of earnings for these permanent endowment funds to incorporate dividends and interest into the annual gain calculation for each fund. This change will eliminate the direct deposit of interest and dividends into the earnings reserves and instead incorporate them into the year end calculation of gain based on the overall market value of the permanent fund. Under SB 1306, the effective date of the change is as of the first day of the fiscal year following the year in which the public school permanent endowment fund first exceeds the gain benchmark established under Section 57-724, Idaho Code (i.e. June 2000 value adjusted for inflation and certain deposits). The revenues of the endowment funds vary widely, as do their respective gain benchmarks. A permanent endowment fund may not first achieve a statutory gain by the year in which the public school permanent endowment fund first achieves a gain. If interest and dividends are not available for distribution and the permanent endowment fund has not achieved a statutory gain, the earnings reserve fund for the endowment may not have enough funds available to make scheduled distributions. This bill establishes a triggering event for the change in the definition of earnings on an individual endowment fund basis rather than tying each endowment to the public school endowment. It also allows for at least one legislative session to occur between the time the triggering event occurs and the new definition of earnings takes effect. This will provide adequate time for the Endowment Fund Investment Board and the Board of Land Commissioners, as trustees of the endowments, to review whether an adjustment to the beneficiary's distributions is appropriate once the triggering event has occurred, and will also allow the Legislature to take any such adjustment into account in the appropriations process for the beneficiary. FISCAL NOTE This legislation has no direct impact on the general fund. However, it reduces the likelihood that there will be a shortfall in expected distributions from the endowment fund, and therefore reduces the likelihood that general fund revenues will be requested to make up that shortfall. Contact Name: Larry Johnson, Manager of Investments, Endowment Fund Investment Board Phone: (208) 334-3311 STATEMENT OF PURPOSE/FISCAL NOTE H 591