The state Endowment Fund Investment Board is recommending that the state stick with its current distribution rate of 5 percent for payouts to endowment beneficiaries, including public schools, rather than increase it. "Our past experience leads to caution," endowment manager Larry Johnson told the Land Board. He said, "What happens if we're too conservative on the distribution rate? What bad things happen if we don't pay out enough this year?" The answer: "If we don't distribute the earnings this year, an excess gets transferred to the permanent fund, which automatically generates an increase in distribution the following year. So maybe you have a year or two lag between a higher distribution rate now and what would automatically be generated," he said.

Johnson warned that the consequences would be far worse if the state promised to pay out a higher amount, then found that its earnings didn't allow for that and had to cut back mid-year. "The pain of being too optimistic and having to make cuts far outweighs missed opportunities to spend additional funds if expectations prove too conservative," he said.