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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 - 2006
IN 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