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H0307......................................................by STATE AFFAIRS
PERMANENT ENDOWMENT FUNDS - Amends existing law to provide for separate
accounting of earnings reserve funds and permanent endowment funds; to
provide for certain allocation of gains and losses between the permanent
endowment funds and earnings reserve funds; to provide a method of
determination of gains and losses to permanent endowment funds; to provide
for transfers to make up losses to the Public School Permanent Endowment
Fund; to provide for certain legislative transfers or appropriations; to
provide that losses to permanent endowment funds other than Public School
Permanent Endowment Funds shall be made up from certain earnings reserve
fund moneys; and to revise a definition of earnings.
02/21 House intro - 1st rdg - to printing
02/22 Rpt prt - to St Aff
03/01 Rpt out - rec d/p - to 2nd rdg
03/02 2nd rdg - to 3rd rdg
03/05 3rd rdg - PASSED - 61-3-6
AYES -- Barraclough, Barrett, Bedke, Bell, Bieter, Black, Boe, Bolz,
Bradford, Bruneel, Callister, Campbell, Clark, Collins, Crow, Cuddy,
Deal, Denney, Ellis, Ellsworth, Eskridge, Field(13), Field(20),
Gould, Hadley, Hammond, Harwood, Henbest, Jaquet, Jones, Kellogg,
Kendell, Kunz, Lake, Langford, Loertscher, Mader, McKague, Meyer,
Montgomery, Mortensen, Moss, Moyle, Pearce, Pischner, Pomeroy,
Ridinger, Robison, Sali, Schaefer, Sellman, Shepherd, Smith, Smylie,
Stevenson, Stone, Swan, Tilman, Trail, Young, Mr. Speaker
NAYS -- Chase, Marley, Roberts
Absent and excused -- Gagner, Higgins, Hornbeck, Raybould, Wheeler,
Wood
Floor Sponsor -- Deal
Title apvd - to Senate
03/06 Senate intro - 1st rdg - to St Aff
03/19 Rpt out - rec d/p - to 2nd rdg
03/20 2nd rdg - to 3rd rdg
03/21 3rd rdg - PASSED - 32-1-2
AYES -- Andreason, Boatright, Branch, Bunderson, Burtenshaw, Cameron,
Danielson, Darrington, Davis, Deide, Dunklin, Frasure, Geddes,
Goedde, Hawkins, Ingram, Ipsen, King-Barrutia, Lee, Lodge, Noh,
Richardson, Risch, Sandy, Schroeder, Sims, Sorensen, Stegner, Thorne,
Wheeler, Whitworth, Williams,
NAYS -- Stennett
Absent and excused -- Brandt, Keough
Floor Sponsor -- Sandy
Title apvd - to House
03/22 To enrol - rpt enrol - Sp signed
03/23 Pres signed
03/26 To Governor
03/28 Governor signed
Session Law Chapter 254
Effective: 07/01/01
|||| LEGISLATURE OF THE STATE OF IDAHO ||||
Fifty-sixth Legislature First Regular Session - 2001
IN THE HOUSE OF REPRESENTATIVES
HOUSE BILL NO. 307
BY STATE AFFAIRS COMMITTEE
1 AN ACT
2 RELATING TO THE INVESTMENT OF PUBLIC FUNDS; AMENDING SECTION 57-720, IDAHO
3 CODE, TO PROVIDE FOR SEPARATE ACCOUNTING OF EARNINGS RESERVE FUNDS AND
4 PERMANENT ENDOWMENT FUNDS AND TO PROVIDE FOR CERTAIN ALLOCATION OF GAINS
5 AND LOSSES BETWEEN THE PERMANENT ENDOWMENT FUNDS AND THE EARNINGS RESERVE
6 FUNDS AT THE END OF EACH FISCAL YEAR; AMENDING SECTION 57-724, IDAHO CODE,
7 TO PROVIDE FOR GAINS AND LOSSES TO PERMANENT ENDOWMENT FUNDS, TO PROVIDE A
8 METHOD OF DETERMINATION OF GAINS AND LOSSES TO PERMANENT ENDOWMENT FUNDS,
9 TO PROVIDE FOR CERTAIN TRANSFERS TO MAKE UP LOSSES TO THE PUBLIC SCHOOL
10 PERMANENT ENDOWMENT FUND, TO PROVIDE FOR CERTAIN LEGISLATIVE TRANSFERS OR
11 APPROPRIATIONS, AND TO PROVIDE THAT LOSSES TO PERMANENT ENDOWMENT FUNDS
12 OTHER THAN PUBLIC SCHOOL PERMANENT ENDOWMENT FUNDS SHALL BE MADE UP FROM
13 CERTAIN EARNINGS RESERVE FUND MONEYS; AND AMENDING SECTION 57-724A, IDAHO
14 CODE, TO REVISE THE DEFINITION OF EARNINGS.
15 Be It Enacted by the Legislature of the State of Idaho:
16 SECTION 1. That Section 57-720, Idaho Code, be, and the same is hereby
17 amended to read as follows:
18 57-720. PERMANENT ENDOWMENT FUNDS -- EARNINGS RESERVE FUNDS -- INCOME
19 FUNDS -- INVESTMENT POLICY REGULATIONS -- ANNUAL AUDIT. The investment board
20 or its investment manager(s) may, and are hereby authorized to, invest the
21 permanent endowment funds and the earnings reserve funds of the state of
22 Idaho. Earnings reserve funds shall be accounted for separately from permanent
23 endowment funds. Gains and losses as defined in section 57-724, Idaho Code,
24 shall be annually allocated between the permanent endowment funds and the
25 earnings reserve funds at the end of each fiscal year. This allocation shall
26 be made based upon the proportion that the market value of the permanent
27 endowment funds and the market value of the earnings reserve funds bear to the
28 combined market value of both sets of funds, at the end of the fiscal year.
29 The investment board shall formulate investment policy regulations governing
30 the investment of permanent endowment funds and earnings reserve funds. The
31 regulations shall pertain to the types, kinds or nature of investment of any
32 of the funds, and any limitations, conditions or restrictions upon the meth-
33 ods, practices or procedures for investment, reinvestments, purchases, sales
34 or exchange transactions, provided such regulations shall not conflict with
35 nor be in derogation of any Idaho constitutional provision or of the provi-
36 sions of this act.
37 Annually, the investment board shall cause an audit to be conducted of the
38 investment of permanent endowment funds and earnings reserve funds, such audit
39 to be conducted by a recognized certified public accountant. The certified
40 public accountant conducting the audit shall not be an employee of the state.
41 The expense of such audit shall be paid from the appropriation to the invest-
42 ment board.
43 The state treasurer shall invest the income funds of the respective endow-
2
1 ments and distribute the moneys in the income funds according to legislative
2 appropriation.
3 SECTION 2. That Section 57-724, Idaho Code, be, and the same is hereby
4 amended to read as follows:
5 57-724. DETERMINATION OF GAINS AND LOSSES. Gains and losses to permanent
6 endowment funds shall be determined as follows: by comparing
7 (1) Tthe current market value of the permanent endowment fund as of the
8 end of the fiscal year, excluding unrealized capital gains and losses; com-
9 pared to
10 (2) All amounts allocated under section 4, article IX, constitution of
11 the state of Idaho excluding all amounts allocated from the earnings reserve
12 fund funds transferred to the permanent endowment fund from the earnings
13 reserve fund or funds deposited as a result of land sales or mineral royal-
14 ties, to the market value of the permanent endowment fund at the end of the
15 prior fiscal year.
16 Losses to the public school permanent endowment fund shall be made up from
17 earnings reserve funds or by legislative appropriation as follows:
18 (1) The state board of land commissioners may annually transfer any funds
19 in the public school earnings reserve fund that it determines will not be
20 needed for administrative costs or scheduled distributions to the public
21 school income fund in the following fiscal year to the public school permanent
22 endowment fund, to make up for any prior losses in value.
23 (2) If funds transferred from the earnings reserve fund are insufficient
24 to make up any losses in value to the public school permanent endowment fund,
25 then the remaining loss shall be made up, within four (4) years, by legisla-
26 tive transfer or appropriation. If subsequent gains, as determined pursuant to
27 the provisions of this section, or transfers from the earnings reserve fund,
28 make up for any remaining loss before this four (4) year period expires, then
29 no legislative transfer or appropriation shall be necessary.
30 Losses to permanent endowment funds other than the public school permanent
31 endowment fund shall be made up from earnings reserve fund moneys that the
32 state board of land commissioners determines will not be needed for adminis-
33 trative costs or scheduled distributions to each endowment's respective income
34 fund.
35 SECTION 3. That Section 57-724A, Idaho Code, be, and the same is hereby
36 amended to read as follows:
37 57-724A. EARNINGS DEFINED. "Earnings" shall mean all revenues generated
38 from the management of endowment lands and their related endowment funds
39 including, but not limited to, timber sale proceeds, lease fees, interest,
40 dividends, and net realized capital gains and losses and gains as defined in
41 section 57-724, Idaho Code. "Earnings" does not include mineral royalties, or
42 land sale proceeds, or unrealized gains or losses from the investment of
43 endowment funds.
STATEMENT OF PURPOSE
RS 11061
The purpose of this legislation is to better define the process
by which endowment fund gains and losses are determined, and to
clearly define how losses are to be made up. This bill clearly
spells out that gains and losses are to be determined on an
annual basis. This will tend to lessen the endowment
beneficiaries? exposure to daily market volatility. It also
changes the way that gains and loss are determined to include
unrealized gains and losses as part of the annual market
valuation of the fund. This will prevent the state from having to
track the endowments on two sets of books ? one that follows the
Generally Accepted Accounting Principles (GAAP), and one that
follows the current law, which excludes unrealized gains and
losses from market valuations.
This bill also helps define how losses to endowment funds are to
be made up. These changes are consistent with constitutional
requirements.
FISCAL IMPACT
No negative fiscal impact. By reinstating the provision that
losses can be carried for four years before having to be made up
by the Legislature, this bill could potentially save the state
General Fund millions of dollars in FY 2002.
Contact
Name: Charles Saums
Phone: 208/334-3311
STATEMENT OF PURPOSE/FISCAL NOTE H 307