History of Endowment Fund

Creation of the Funds

The endowment funds have their origin in three federal acts granting federal lands to the territory and later the State of Idaho for specific educational purposes under the Idaho Admissions Act. Income is derived from the sale of land, timber sales, land rentals, cottage site rentals, grazing rentals and mineral extraction from these endowment lands. In accordance with Idaho Code, these funds are perpetually appropriated and set a part for the support and maintenance of the Public School Fund and the other eight endowments. (Beneficiaries)

The Department of Lands administers the endowment lands and the Endowment Fund Investment Board manages the income derived from these lands. The Endowment Fund Investment Board was created by the 1969 Legislature after passage of an amendment to the Constitution of the State of Idaho Article IX in 1968 by Idaho voters. (The Board)

Purpose

The purpose of the Endowment Fund Investment Board is to invest the proceeds from the endowment lands. The Idaho Admission Act also provides that five percent (5%) of the proceeds of sales of federal lands within the state – after deducting expenses – shall be paid into the Public School Fund. That fund also receives monies from unclaimed animals, brands, Taylor Grazing, and escheated* estates. In addition to the Public School Fund, other agencies were granted endowment lands.

Passage of a 1968 constitutional amendments allowed the Legislature to establish much broader investment parameters for the funds. The Board adopted a dynamic investment policy, as opposed to the previous “buy and hold” philosophy. This policy created a dramatic increase in income and capital gains for the funds’ beneficiaries. When the Board was created, the assets in the endowment funds were approximately $77 million. Currently, those assets are worth over $1 billion. (Reports)

Program Changes

The Board originally employed four contract investment managers to manage $40 million of the assets. The balance of the $36.9 million was managed by the Department of Finance. In July 1971 the Board employed a professional staff investment manager and released two contract managers. In 1974 one of the remaining contract managers was released, and in 1978 the last remaining outside manager was released. The funds’ growth led the Board to hire two assistant investment managers. The first was funded and hired beginning July 1, 1986, and the second was funded and hired beginning June 6, 1994.

Since 1978 the Board has had investment management responsibility for the assets of the State Insurance Fund; and since 1998 the Board has had investment management authority for the Capitol Permanent Endowment Fund. The Board is also charged with employment of managers for the Judges’ Retirement Fund, under the direction of the Supreme Court. In 2007, the Board assumed investment management authority for the Ritter Island Endowment Fund.

During the 1998 session, the Legislature made substantial changes to the endowment program. A package of bills was passed that requested a change to the Idaho Admissions Act, a Constitutional Amendment was placed on the November 1998 ballot for a vote of the electorate of the State, and major changes to the investment authority of the Endowment Fund Investment Board were enacted. These changes allow for a broader investment scope and enhancement of distributions to the beneficiaries. Two separate funds were established for every endowment (except Capitol Permanent) – a Permanent Fund, whose principal can never be spent, and an Earnings Reserve Fund, a buffer fund which receives land and Permanent Fund income and from which distributions are made.

The changes were implemented in July 2000. The most notable change allowed investment in equity securities. Currently, the fund’s asset allocation is 70% equity and 30% fixed income securities.

*escheated: property that has reverted to the state when no legal heirs or claimants exist.