A. Background

Endowment assets of the State of Idaho consist of both land and funds.  All endowment assets are held in trust by the State in nine endowment trusts.  The State initially received grants of over 3.65 million acres of land in trust from the federal government in the Idaho Admissions Bill and through other federal acts.  Over time, properties were sold or exchanged, with proceeds from the sales and certain other income deposited in the endowment funds.

The state Constitution establishes the State Board of Land Commissioners (Land Board) as the trustee over the assets of the nine endowments.  As trust manager, the Land Board is obligated to manage the assets of each trust with undivided loyalty to the beneficiaries of the trusts.  Idaho Code 58-101 created the Idaho Department of Lands (IDL) to serve as the manager of the non-financial assets of each trust on behalf of the Land Board.  Similarly, Idaho Code 57-718 created the Endowment Fund Investment Board (EFIB) which formulates policy for, and manages the investment of, the financial assets.

B. Mission

All endowment assets of the State of Idaho must, per the state Constitution, be managed “in such manner as will secure the maximum long term financial return” to the trust beneficiaries.  The assets will be managed to provide a perpetual stream of income to the beneficiaries by:

•  Maximizing long-term financial return at a prudent level of risk,
•  Protecting future generations’ purchasing power, and
•  Providing a relatively stable and predictable payout

C. Asset Management Philosophy

To fulfill its fiduciary duties to each individual endowment, the State of Idaho will:

1. Manage the endowed land and financial assets as a whole trust on a total return basis.
2. Seek to optimize risk and return from both the endowments’ land and financial assets through diversification of holdings.
3. Ensure that significant land holdings will be maintained in perpetuity, since they provide material diversification and inflation protection to an endowment’s portfolio.
4. Seek to reposition parcels to reduce risk, lower management costs and increase prospects for immediate and sustainable income, recognizing that much endowment land remains in the original scattered parcels obtained from the federal government. 
5. Provide for the appropriate and reasonable management expenses of each endowment from its own income.
6. Accommodate public use of endowment lands, to the extent feasible, provided such use does not impair financial returns.

D. Performance Objectives

1. Over time, ensure real returns for each endowment (after inflation and net of management expenses), perform at or above median compared to relevant peers.
2. Assets will be grouped into classifications of similar character to facilitate performance monitoring and analyses of portfolio diversification and risk.  Each asset class will have a targeted rate of return and is expected to perform at or above median compared to relevant peers.
3. Over time, the return of land assets should compete favorably with the return of financial assets.  Where determination of land value is problematic, performance will also be measured by discounting expected net cash flows.

E. Protection of Principal

1. Proceeds from the sale of endowment lands will never be distributed, but must be reinvested in land within five years or transferred to the Permanent endowment funds.
2. Proceeds from extracted mineral resources will never be distributed but must be deposited to the Permanent endowment funds.
3. The principal of the Permanent endowment funds, adjusted for inflation, will never be distributed, to protect the future purchasing power of the beneficiaries.

F. Distributions to Beneficiaries

1. Renewable income from the land assets as well as cash income and capital gains above inflation from the Permanent endowment funds will be deposited in the Earnings Reserve accounts.
2. The Earnings Reserve accounts should buffer fluctuations in revenues to provide stable and predictable payouts to the beneficiaries.  If an endowment’s Earnings Reserve account falls to zero, distributions must stop.
3. Long-term spending policy and annual distributions are recommended by the EFIB and approved by the Land Board.  The Legislature considers the approved distributions in setting annual appropriations for the beneficiaries.  The Legislature also appropriates the operating budgets for the IDL and the EFIB from the Earnings Reserve accounts.

A breakdown of the Table of Contents is shown below. To read the Plan in its entirety, click here.

II. Financial Assets [July 2008]

A. Asset Mix, risk/return considerations, performance measurement
B. Spending policy - philosophy
C. Free Fund Balance

III. Land Assets

A. Overview of ownership (asset mix)
B. Land Management Philosophy
C. Management Objectives by Asset Type

1. Forest Asset
2. Residential Real Estate
3. Recreation (non-commercial)
4. Commercial Real Estate
5. Agriculture
6. Grazing
7. Conservation
8. Minerals

D. Rights-of-Way
E. Transition
F. Land Acquisition and Disposal Strategy

IV. Appendix/Exhibits

Appendix A - Asset Business Plan Template
Appendix B - Draft Endowment Income Statement - Land Assets
Appendix C - Draft Annual Transactions by Asset Classification Report
Appendix D - Draft Annual ROA by Asset Classification Report
Appendix E - Draft Efficiency Measures Report by Asset Classification
Appendix F - Gross Revenue Trend by Asset Classification
Appendix G - Sensitivity Analysis
Appendix H - Management Options Graph
Appendix I - Sample Letter of Intent
Appendix J - Sample Agreement to Initiate
Appendix K - Sample Purchase Sale Agreement
Appendix L - Sample Parcel Nomination Coversheet
Appendix M - Sample Parcel Nomination Checklist
Appendix N - Sample Due Diligence Checklist