With the constitutional obligation to maximize revenue for endowment beneficiaries, the Idaho Department of Lands (Department) analyzes rates of return and financial performance for our land assets. A decade ago, the Department commissioned a study to analyze grazing leases on Idaho endowment land, which determined that the grazing formula was likely not capturing market value (Attachment A). In recent years, the private grazing lease rate has increased faster than the rate for endowment lands, according to available data. In 1992 the Department rate was approximately 50% of the private lease rate; in 2022 the Department rate is projected to be about 37% of the private lease rate.
The Department and stakeholders have identified the need for a rate that is stable, tracks market trends, and is easy to understand. As directed by the State Board of Land Commissioners (Land Board), the Department has been evaluating the grazing rate, alternate formulas, and non-fee costs related to grazing on endowment land. Attempts to develop a fair, market-value grazing rate formula have been difficult due to limitations in the formulas brought before the Land Board. The Land Board has rejected formulas which contained arbitrary base rates and multipliers as key components and those which did not adequately demonstrate their ability to capture market value.
Prior work to collect data for extrapolating the market value of grazing on endowment rangeland has been inconclusive. Published research does not exist, and efforts to ascertain a defensible rate by surveying our customers has failed. The price impacts of inholdings are anecdotal; lessees have indicated that if lease rates increase, they may simply forgo certain endowment leases, placing the cost of fencing out cattle on the endowments. Accurate and detailed data related to the carrying capacities of private and endowment rangeland does not exist; the Department does not have adequate staffing to undertake such a study for the entire rangeland asset class, and the cost may eclipse any potential gains in revenue. Studies of carrying capacity of certain high quality leased areas can be completed and may increase net revenue in some cases.
Central to the debate of choosing a proper base rate has been the determination of the actual cost of grazing on state endowment trust leases versus private leases. A recent analysis by the University of Idaho offers insight into the expenses incurred by the average ranching operation in Idaho, across various rangeland ownerships and grazing strategies. Using this information, a defensible, data-driven method for the grazing rate can be established.