Idaho’s state Land Board voted unanimously this morning to approve a new strategic reinvestment plan that’s been years in the works, and calls for shifting the state endowment’s land assets out of residential cottage sites and commercial property and into timber land and ag land.
It’s a big deal, because the state’s Land Bank fund – which holds proceeds from the sale of endowment land for five years, at which point they revert to the permanent endowment fund – now has a balance of $31.85 million, and another $50 million is expected to flow into the fund this year from auctions of state-owned lake cabin sites and sales of commercial property now owned by the endowment. State Lands Director Tom Schultz said those sales likely will generate another $15 million to $25 million for the next three years after this big one.
Attorney General Lawrence Wasden said, “It appears to me, with this plan, what we’re doing is we’re leveraging the stability of our land assets against the volatility of our market- based assets … actually increasing the kind of return, that’s my perception of what we’re doing here. It appears to me we’re leveraging the best use of our assets.”
Sally Haskins, senior vice president of Callan Associates, the consultant who helped develop the plan, said, “I think that’s correct. And it’s not just about return, it’s about managing the risk in your portfolio by maintaining investments that create stable cash flow and also have low to negative correlations with the financial assets.”
The state received comments both in favor of and opposed to the plan; opposition came from the Idaho Farm Bureau, Idaho Wool Growers and Idaho Cattle Association, who expressed opposition to any government land purchases; while support came from county commissioners, recreation and wildlife interests and education groups; the state’s public schools are the largest beneficiary of income from Idaho’s endowment lands. Timber interests were either neutral or supportive.
The Land Board is required by the Idaho Constitution to manage the endowment for the maximum long-term financial returns to the beneficiaries, with the schools the largest of those, but others including universities, state prisons and state hospitals.
Haskins told the board, “The whole purpose of reinvestment is to make the portfolio better … than the existing portfolio is achieving.” She added, “The other thing about this plan … it doesn’t close off any options for you. If IDL (Idaho Department of Lands) cannot find transactions that are acceptable … you can transfer money right back to the permanent fund at any time. … Either outcome I think is a good outcome.”
Idaho received grants of more than 3.65 million acres of land in trust from the federal government when it became a state. About 33 percent of that land has been sold off, most of it between 1900 and 1940. The state endowment now owns 2.44 million acres of land, plus the permanent endowment fund, which totals $1.87 billion.
Gov. Butch Otter said the state “could substantially change complexion” of its endowment land through the reinvestment, by moving from cottage sites and downtown buildings to timber land, which provides the endowment’s highest rate of return.