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H0592......................................................by STATE AFFAIRS PERMANENT ENDOWMENT FUNDS - Amends existing law to revise the method for the calculation of gains and losses of the permanent endowment funds. 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, Nonini, Pasley-Stuart, Pence, Raybould, Ring, Ringo, Roberts, Rusche, Rydalch, Sali(Sali), Sayler, 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, Schaefer 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 43 Effective: 06/30/00
]]]] LEGISLATURE OF THE STATE OF IDAHO ]]]] Fifty-eighth Legislature Second Regular Session - 2006IN THE HOUSE OF REPRESENTATIVES HOUSE BILL NO. 592 BY STATE AFFAIRS COMMITTEE 1 AN ACT 2 RELATING TO INVESTMENT OF PERMANENT FUNDS; AMENDING SECTION 57-724, IDAHO 3 CODE, TO REVISE THE METHOD FOR THE CALCULATION OF GAINS AND LOSSES; 4 DECLARING AN EMERGENCY, PROVIDING A RETROACTIVE EFFECTIVE DATE AND PROVID- 5 ING APPLICATION. 6 Be It Enacted by the Legislature of the State of Idaho: 7 SECTION 1. That Section 57-724, Idaho Code, be, and the same is hereby 8 amended to read as follows: 9 57-724. DETERMINATION OF GAINS AND LOSSES. (1) Gains. Gains to permanent 10 endowment funds shall be determined by the investment board when the current 11 market value of the permanent endowment fund as of the end of the fiscal year 12 exceeds the gain benchmark market value of the permanent endowment fund. Gains 13 for each permanent endowment fund shall be calculated as of June 30 of each 14 fiscal year by subtracting the gain benchmark market value as of June 30 of 15 such year, after all adjustments set out in this section, from the current 16 market value of the permanent endowment fund as of the same June 30 date. The 17 gain benchmark market value shall begin with the market value of the permanent 18 endowment fund calculated as it existed on June 30, 2000, and shall bemodi-19fied on June 30 of each subsequent fiscal year by the percentage change in the20average of the immediately preceding three (3) fiscal years of the unadjusted21consumer price index for all urban consumers as issued by the United States22department of labor, and by the addition of funds deposited as a result of23land sales and mineral royalty paymentsadjusted cumulatively as of June 30 of 24 each fiscal year thereafter for inflation during the preceding year based on 25 the unadjusted consumer price index for all urban consumers as published by 26 the United States department of labor, hereafter referred to in this section 27 as "CPI-U," and further adjusted for certain deposits of funds into the perma- 28 nent endowment fund during the preceding year, such adjustments to be calcu- 29 lated as follows: 30 (a) Inflation Adjustment. The gain benchmark market value shall be 31 adjusted for inflation as of June 30 of each fiscal year by multiplying 32 the gain benchmark market value as of the commencement of business on July 33 1 of the preceding calendar year by the sum of one (1) plus the percentage 34 change in the average CPI-U for the fiscal year then ending. The percent- 35 age change in the average CPI-U shall be a fraction, the numerator of 36 which is the average CPI-U for the fiscal year then ending less the aver- 37 age CPI-U for the preceding fiscal year, and the denominator of which is 38 the average CPI-U for the preceding fiscal year. The average CPI-U for 39 each fiscal year shall be calculated by dividing the sum of the monthly 40 CPI-U index figures for such fiscal year, July through June, by twelve 41 (12). 42 (b) Deposit of Funds. After adjustment for inflation, the gain benchmark 43 market value shall be further adjusted by adding the amount of funds 2 1 deposited into the permanent endowment fund from and including July 1 of 2 the preceding calendar year through and including the June 30 date of 3 adjustment, from any of the following sources: 4 (i) Land sales proceeds not deposited into the land bank fund under 5 section 58-133(2), Idaho Code; 6 (ii) Funds transferred from the land bank fund after expiration of 7 the time frame under section 58-133(3), Idaho Code; 8 (iii) Mineral royalty payments; or 9 (iv) Such other deposits into the permanent endowment fund as are 10 required by law or otherwise permitted to be added to the permanent 11 endowment fund except for the following: 12 1. Deposits to make up for losses to the permanent endowment 13 fund; 14 2. Deposits of earnings reserves if the state board of land 15 commissioners directs that such deposit not be added to the gain 16 benchmark market value; or 17 3. Other deposits, including bequests, to the permanent endow- 18 ment fund if the depositor or grantor thereof directs that the 19 deposit not be added to the gain benchmark market value. 20 (c) Gain Benchmark Floor. Notwithstanding any other provision of this 21 section, in no event shall the gain benchmark market value fall below the 22 permanent corpus balance. For purposes of this subsection, the permanent 23 corpus balance shall be calculated by adding to the permanent endowment 24 fund balance as of June 30, 2000, all deposits to the permanent endowment 25 fund up to and including the June 30 date of adjustment, other than depos- 26 its resulting from the investment activities of the permanent endowment 27 fund and deposits made to make up losses to the permanent endowment fund. 28 (2) Losses. Losses to permanent endowment funds shall be determined by 29 the investment board when the market value of the permanent endowment fund as 30 of the end of the fiscal year is less than the loss benchmark market value of 31 the permanent endowment fund. The investment board shall calculate any annual 32 loss as well as the cumulative loss for each permanent endowment fund as of 33 June 30 of the fiscal year. 34 (a) Cumulative Loss. The cumulative loss for each permanent endowment 35 fund shall be equal to the difference between the loss benchmark market 36 value as of June 30 of the fiscal year, after all adjustments to the loss 37 benchmark market value as set out below in this subsection (2), and the 38 current market value of the permanent endowment fund as of the same June 39 30 date. 40 (b) Annual Loss. The annual loss for a fiscal year shall be equal to the 41 increase, if any, of the cumulative loss as of June 30 of such fiscal 42 year, compared to the cumulative loss as of June 30 of the preceding fis- 43 cal year. 44 (c) Loss Benchmark. The loss benchmark market value for each permanent 45 endowment fund shall begin with the market value of the permanent endow- 46 ment fund calculated as it existed on June 30, 2000, and shall bemodified47on June 30 of each subsequent fiscal year by the addition of funds depos-48ited as a result of land sales and mineral royalty paymentsadjusted 49 cumulatively as of June 30 of each fiscal year thereafter by adding the 50 amount of funds deposited into the permanent endowment fund from and 51 including July 1 of the preceding calendar year through and including the 52 June 30 date of adjustment, from any of the following sources: 53 (i) Land sales proceeds not deposited into the land bank fund under 54 section 58-133(2), Idaho Code; 55 (ii) Funds transferred from the land bank fund after expiration of 3 1 the time frame under section 58-133(3), Idaho Code; 2 (iii) Mineral royalty payments; or 3 (iv) Such other deposits into the permanent endowment fund as are 4 required by law or otherwise permitted to be added to the permanent 5 endowment fund except for the following: 6 1. Deposits to make up for losses to the permanent endowment 7 fund; and 8 2. Deposits of earnings reserves. 9 (d) Loss Recovery. Cumulative lLossestoin permanent endowment funds 10 other than the public school permanent endowment fundshallmay be made up 11 from earnings reserve fund moneys that the state board of land commission- 12 ers determines will not be needed for administrative costs or scheduled 13 distributions to each endowment's respective income fund. Cumulative 14 lLossestoin the public school permanent endowment fund shall be made up 15 as follows: 16 (ai) The state board of land commissioners mayannuallytransfer 17 any funds in the public school earnings reserve fund that it deter- 18 mines will not be needed for administrative costs or scheduled dis- 19 tributions to the public school income fund in the following fiscal 20 year to the public school permanent endowment fund, to make up for 21 all or part of anypriorthen existing cumulative losses invaluethe 22 public school permanent endowment fund. 23 (bii) Iffunds transferred from the earnings reserve fund are insuf-24ficient to make up any losses in value toa cumulative loss exists in 25 the public school permanent endowment fund, and the market value of26the public school permanent endowment fund atas of the end ofeacha 27 fiscal year,remains below theand there has also been a cumulative 28 lossbenchmark market valueat the end of each of the preceding nine 29 (9) fiscal years, for a total of ten (10) consecutive fiscal years 30 ending with a cumulative loss, then, to the extent the then existing 31 cumulative loss is not made up from transfers of earnings reserves 32 under subsection (2)(d)(i) of this section, the legislature shall, 33make up the lossby legislative transfer or appropriation authorized 34 during one (1) or both of the next succeeding two (2) regular ses- 35 sions of the legislature.,Such loss to be made up shall beauthorize 36 a deposit to the public school permanent endowment fund in an amount 37 equal to the lesser of:the:38(i)1. The cCurrent cumulative loss; or 39(ii)2. An amount not less than the aAnnual loss determined in 40 the first year of the precedingconsecutiveten (10) consecutive 41 fiscal years, provided however, the legislature may offset the 42 amount of this annual loss by any deposits of earnings reserves 43 made by the land board into the public school permanent endow- 44 ment fund after the end of the fiscal year for which such annual 45 loss was calculated, but only to the extent any such deposit of 46 earnings reserves has not been used previously to offset the 47 amount of a prior legislative deposit under this subparagraph 2. 48 (ciii) The deposit of aAny transfersor appropriationsauthorized by 49 the legislaturefor deposit into the public school permanent endow-50ment fundunder subsection (2)(d)(ii) of this section shall take 51 placeatafter the end of the fiscal year, after the determination of52gains and losses. If the market value of the public school permanent53endowment fund exceeds the loss benchmark market value at the end of54any fiscal year in which legislative transfers or appropriations are55authorized to the public school permanent endowment fund, then such4 1transfers or appropriations shall be reduced by the lesser of the:2(i) Amount that the market value of the public school permanent3endowment fund would exceed the loss benchmark market value at the4end of the fiscal year if all authorized legislative transfers or5appropriations were to be made; or6(ii) Amount of the legislative transfers or appropriations autho-7rized for deposit in the public school permanent endowment fund for8the fiscal yearin which the deposit was authorized by the legisla- 9 ture, and as soon as is practicable once the investment board has 10 calculated the cumulative loss in the public school permanent endow- 11 ment fund as of the end of the fiscal year; provided however, in the 12 event the cumulative loss as of the end of such fiscal year is less 13 than the amount of the authorized deposit, the deposit shall be 14 reduced to an amount equal to the cumulative loss, and the balance of 15 the authorized deposit shall be returned to the source of the 16 deposit. 17 SECTION 2. An emergency existing therefor, which emergency is hereby 18 declared to exist, the calculation of gain benchmark market value and loss 19 benchmark market value set forth in this act shall be in full force and effect 20 on and after its passage and approval, and shall be retroactive to June 30, 21 2000, and shall replace and supersede any prior calculation thereof.
STATEMENT OF PURPOSE RS 15860 This legislation makes minor adjustments to and clarifies the calculation of gains and losses to the state s endowment funds. It also clarifies the mechanism for recovery of losses to the endowments, including the constitutionally mandated recovery of losses to the Public School Permanent Endowment. FISCAL NOTE This bill is not intended to have a fiscal impact on the general fund or the endowments. Its purpose is to clarify the application of the existing statutes. The changes to the statutory language are intended to be revenue neutral and to ensure that transfers from the earnings reserve fund by the Board of Land Commissioners are fully applied against any loss that would otherwise have to be made up from the general fund. Contact Name: Larry Johnson, Manager of Investments, Endowment Fund Investment Board Phone: (208) 334 3311 STATEMENT OF PURPOSE/FISCAL NOTE H 592