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HJR008.....................................................by STATE AFFAIRS
PUBLIC SCHOOL PERMANENT ENDOWMENT FUND - Proposing an amendment to the
Constitution of the State of Idaho to change the name of the Public School
Fund to the Public School Permanent Endowment Fund; to provide that
earnings of that fund shall be deposited into the Public School Earnings
Reserve Fund and to provide for distribution; to provide that no part of
the Public School Permanent Endowment Fund principle shall be transferred,
used or appropriated to any other fund; to prohibit legislative
appropriations from the funds except to pay for administrative costs; to
provide that the state treasurer is the custodian of these funds; to
provide that the state shall supply losses incurred by the Public School
Permanent Endowment Fund, excepting losses on moneys allocated from the
Public School Earnings Reserve Fund; and to provide that Permanent
Endowment Funds may be invested, rather than loaned, in investments in
which a trustee is authorized to invest pursuant to state law.
02/20 House intro - 1st rdg - to printing
02/23 Rpt prt - to 2nd rdg
02/24 2nd rdg - to 3rd rdg
02/25 3rd rdg - PASSED - 64-6-0
AYES -- Alltus, Barraclough, Bell, Bieter, Bivens, Black(15),
Black(23), Boe, Bruneel, Callister, Campbell, Chase, Clark, Crane,
Crow, Cuddy, Deal, Denney, Ellsworth, Field(13), Gagner, Geddes,
Gould, Hadley, Hansen, Henbest, Hornbeck, Jaquet, Jones(9),
Jones(22), Jones(20), Judd, Kellogg, Kempton, Kendell, Kjellander,
Kunz, Lake, Linford, Mader, Marley, McKague, Meyer, Miller,
Mortensen, Newcomb, Pischner, Pomeroy, Reynolds, Richman, Ridinger,
Robison, Schaefer, Stevenson, Stone, Stubbs, Taylor, Tilman, Tippets,
Trail, Watson, Wheeler, Zimmermann, Mr Speaker
NAYS -- Barrett, Field(20), Loertscher, Sali, Stoicheff, Wood
Absent and excused -- None
Floor Sponsor - Deal
Title apvd - to Senate
02/26 Senate intro - 1st rdg - to St Aff
03/11 Rpt out - rec d/p - to 2nd rdg
03/12 2nd rdg - to 3rd rdg
03/17 3rd rdg - PASSED - 26-8-1
AYES--Boatright, Branch, Bunderson, Burtenshaw, Cameron, Crow,
Danielson, Deide, Dunklin, Frasure, Ingram, Keough, King, Lee,
McLaughlin, Richardson, Riggs, Risch, Sandy, Schroeder, Sorensen,
Stennett, Sweeney, Twiggs, Wheeler, Whitworth
NAYS--Andreason, Darrington, Geddes, Hawkins, Ipsen, Noh, Parry,
Thorne
Absent and excused--Hansen
Floor Sponsor - McLaughlin
Title apvd - to House
03/18 To enrol
03/18 Rpt enrol - Sp signed
03/19 Pres signed - to Sec of State
HJR008|||| LEGISLATURE OF THE STATE OF IDAHO |||| Fifty-fourth Legislature Second Regular Session - 1998IN THE HOUSE OF REPRESENTATIVES HOUSE JOINT RESOLUTION NO. 8 BY STATE AFFAIRS COMMITTEE 1 A JOINT RESOLUTION 2 PROPOSING AMENDMENTS TO SECTION 3, ARTICLE IX, AND SECTION 11, ARTICLE IX, OF 3 THE CONSTITUTION OF THE STATE OF IDAHO, RELATING TO THE PUBLIC SCHOOL PER- 4 MANENT ENDOWMENT FUND, TO CHANGE THE NAME OF THE PUBLIC SCHOOL FUND TO THE 5 PUBLIC SCHOOL PERMANENT ENDOWMENT FUND, TO PROVIDE THAT EARNINGS OF THE 6 PUBLIC SCHOOL PERMANENT ENDOWMENT FUND SHALL BE DEPOSITED INTO THE PUBLIC 7 SCHOOL EARNINGS RESERVE FUND AND DISTRIBUTED TO SCHOOLS, COUNTIES AND 8 SCHOOL DISTRICTS, TO PROHIBIT TRANSFERRING ANY PART OF THE PERMANENT 9 ENDOWMENT FUND PRINCIPAL, TO PROVIDE THAT FUNDS SHALL NOT BE APPROPRIATED 10 BY THE LEGISLATURE FROM THE PUBLIC SCHOOL EARNINGS RESERVE FUND EXCEPT TO 11 PAY ADMINISTRATIVE COSTS INCURRED MANAGING THE ASSETS OF THE PUBLIC SCHOOL 12 ENDOWMENT INCLUDING, BUT NOT LIMITED TO, REAL PROPERTY AND MONETARY 13 ASSETS, TO PROVIDE THAT THE STATE TREASURER IS THE CUSTODIAN OF THE FUNDS, 14 TO PROVIDE THAT AS DEFINED AND PRESCRIBED BY LAW, THE STATE SHALL SUPPLY 15 LOSSES INCURRED BY THE PUBLIC SCHOOL PERMANENT ENDOWMENT FUND, EXCEPTING 16 MONEYS ALLOCATED FROM THE PUBLIC SCHOOL EARNINGS RESERVE FUND AND TO PRO- 17 VIDE FOR INVESTING OF PERMANENT ENDOWMENT FUNDS; STATING THE QUESTION TO 18 BE SUBMITTED TO THE ELECTORATE; DIRECTING THE LEGISLATIVE COUNCIL TO PRE- 19 PARE THE STATEMENTS REQUIRED BY LAW; AND DIRECTING THE SECRETARY OF STATE 20 TO PUBLISH THE AMENDMENT AND ARGUMENTS AS REQUIRED BY LAW. 21 Be It Resolved by the Legislature of the State of Idaho: 22 SECTION 1. That Section 3, Article IX, of the Constitution of the State 23 of Idaho be amended to read as follows: 24 SECTION 3. PUBLIC SCHOOL PERMANENT ENDOWMENT FUND 25 TO REMAIN INTACT. The public school permanent endowment 26 fund of the state shall forever remain inviolate and intact; the 27interest thereon onlyearnings of the public 28 school permanent endowment fund shall beexpended29 deposited into the public school earnings reserve fund and dis- 30 tributed in the maintenance of the schools of the state, and 31shall be distributedamong theseveral32 counties and school districts of the state in such manner as may be 33 prescribed by law. No part ofthisthe public 34 school permanent endowment fund,principal35or interest,shall ever be transferred to any other fund, or 36 used or appropriated except as herein provided. Funds shall not 37 be appropriated by the legislature from the public school earnings 38 reserve fund except as follows: the legislature may appropriate from 39 the public school earnings reserve fund administrative costs incurred 40 in managing the assets of the public school endowment including, but 41 not limited to, real property and monetary assets. The state 42 treasurer shall be the custodian ofthisthese 43 fund s , and the same shall be securely and profit- 2 1 ably invested as may be by law directed. As defined and pre- 2 scribed by law, tThe state shall supplyall3lossesthereof that may in any manner occur4 to the public school permanent endowment fund, excepting losses on 5 moneys allocated from the public school earnings reserve fund . 6 SECTION 2. That Section 11, Article IX, of the Constitution of the State 7 of Idaho be amended to read as follows: 8 SECTION 11.LOANINGINVESTING PERMA- 9 NENT ENDOWMENT FUNDS. The permanent endowment funds other than funds 10 arising from the disposition of university lands belonging to the 11 state,shallmay beloaned on12 invested in United States, state, county, city, village, 13 or school district bonds or state warrants oron such14 other investmentsas may be permitted by law under such regula-15tions as the legislature may providein which a trustee 16 is authorized to invest pursuant to state law . 17 SECTION 3. The question to be submitted to the electors of the State of 18 Idaho at the next general election shall be as follows: 19 "Shall Section 3, Article IX, and Section 11, Article IX, of the Constitu- 20 tion of the State of Idaho be amended as follows: 21 1. To change the name of the Public School Fund to the Public School Per- 22 manent Endowment Fund; 23 2. To provide that the earnings of that fund shall be deposited into the 24 Public School Earnings Reserve Fund and distributed in the maintenance of the 25 schools and among the counties and school districts of the state; 26 3. To provide that no part of the Public School Permanent Endowment Fund 27 principal shall be transferred, used or appropriated to any other fund; 28 4. To prohibit legislative appropriations from the funds except that the 29 legislature may appropriate moneys from the Public School Earnings Reserve 30 Fund to pay for administrative costs incurred managing the assets of the pub- 31 lic school endowment including, but not limited to, real property and monetary 32 assets; 33 5. To provide that the state treasurer is the custodian of these funds; 34 6. To provide that the state shall supply losses incurred by the Public 35 School Permanent Endowment Fund, excepting losses on moneys allocated from the 36 Public School Earnings Reserve Fund; and 37 7. To provide that permanent endowment funds may be invested, rather than 38 loaned, in investments in which a trustee is authorized to invest pursuant to 39 state law?". 40 SECTION 4. The Legislative Council is directed to prepare the statements 41 required by Section 67-453, Idaho Code, and file the same. 42 SECTION 5. The Secretary of State is hereby directed to publish this pro- 43 posed constitutional amendment and arguments as required by law.
STATEMENT OF PURPOSE
RS 08072
This legislation is recommended by the Legislative Council Interim Committee on Endowment
Fund investment Reform. This legislation is a joint resolution proposing amendments to Sections 3 and 11,
Article IX, of the Constitution of the State of Idaho.
The amendments to Section 3 are intended to maintain protections of the principal of what is
known as the Public School Fund while providing more flexibility for the use of earnings. Currently,
Section 3 provides that principal of the fund must remain intact and only the interest can be spent to
support public schools. The amendments change the name of the fund to the Public School Permanent
Endowment Fund and continue to protect the principal of the fund. Only the treatment of "interest" or
"earnings" is changed. The word "earnings" is used in the amendments because it encompasses a wider
range of proceeds from investments. The amendments require that earnings of the Public School
Permanent Endowment Fund be deposited into a Public School Earnings Reserve Fund. Moneys in the
reserve fund will be available for investment, for distribution to beneficiaries, and to pay administrative
costs incurred managing the real property and monetary assets of the endowment. Administrative costs
may be appropriated by the Legislature out of the reserve fund. Use of earnings to pay administrative
costs has been determined to be a legal use by the Idaho Supreme Court in Moon v. State Board of Land
Commissioners, 111 Idaho 389 (1986). Administrative costs are intended to include all costs of operating,
managing, caring for and improving the endowment assets. The moneys in the reserve fund will absorb
the ups and downs of the investment market and create a stable platform for distributions to public
schools. The amendments provide that the State shall make up losses incurred on earnings.
The amendments to Section 11 are intended to provide greater investment flexibility for
endowment funds. Section 11 currently provides that permanent endowment funds shall be loaned only on
bonds, warrants or other investments as may be provided by law. The Idaho Supreme Court has
interpreted this section narrowly. In Engelking v. investment Board, 93 Idaho 217 (1969), the Court held
that the word "loan" means that there must be a guarantee of repayment of money loaned. The effect has
been to limit investments to very conservative "debt" instruments. The proposed amendment would
remove these restrictions.
fiscal NOTE
These changes will not increase the financial impact on the General Fund or local government.
The change of Section 3, Article IXcreating a Public School Earnings Reserve Fund will provide a
mechanism for ensuring a predictable flow of revenue for the Public School Income Fund. The change to
Section 3, Article IX providing for appropriation of administrative costs from the fund will ensure that the
endowment is self supporting. The change to Section 11, Article IX will permit investment of the
endowment funds in instruments that are expected to generate a higher rate of return for the endowment
beneficiaries than is possible under current limitations.
CONTACTS:
Representative William W. "Bill" Deal Senator Judi Danielson Michael McConnell
House of Representatives Senate Legislative Services
(208) 332-1000 (208) 332-1000 (208) 334-2475
STATEMENT OF PURPOSE/FISCAL NOTE
HJR 8