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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 - 2006
IN 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 be modi-
19 fied on June 30 of each subsequent fiscal year by the percentage change in the
20 average of the immediately preceding three (3) fiscal years of the unadjusted
21 consumer price index for all urban consumers as issued by the United States
22 department of labor, and by the addition of funds deposited as a result of
23 land sales and mineral royalty payments adjusted 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 be modified
47 on June 30 of each subsequent fiscal year by the addition of funds depos-
48 ited as a result of land sales and mineral royalty payments adjusted
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 lLosses to in permanent endowment funds
10 other than the public school permanent endowment fund shall may 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 lLosses to in the public school permanent endowment fund shall be made up
15 as follows:
16 (ai) The state board of land commissioners may annually transfer
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 any prior then existing cumulative losses in value the
22 public school permanent endowment fund.
23 (bii) If funds transferred from the earnings reserve fund are insuf-
24 ficient to make up any losses in value to a cumulative loss exists in
25 the public school permanent endowment fund, and the market value of
26 the public school permanent endowment fund at as of the end of each a
27 fiscal year, remains below the and there has also been a cumulative
28 loss benchmark market value at 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,
33 make up the loss by 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 be authorize
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 preceding consecutive ten (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 transfers or appropriations authorized by
49 the legislature for deposit into the public school permanent endow-
50 ment fund under subsection (2)(d)(ii) of this section shall take
51 place at after the end of the fiscal year, after the determination of
52 gains and losses. If the market value of the public school permanent
53 endowment fund exceeds the loss benchmark market value at the end of
54 any fiscal year in which legislative transfers or appropriations are
55 authorized to the public school permanent endowment fund, then such
4
1 transfers or appropriations shall be reduced by the lesser of the:
2 (i) Amount that the market value of the public school permanent
3 endowment fund would exceed the loss benchmark market value at the
4 end of the fiscal year if all authorized legislative transfers or
5 appropriations were to be made; or
6 (ii) Amount of the legislative transfers or appropriations autho-
7 rized for deposit in the public school permanent endowment fund for
8 the fiscal year in 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