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Creation of the Funds
Idaho’s permanent endowment funds originate from federal land grants provided under the Idaho Admission Act. Those land grants became Idaho’s endowment lands. Income is generated from timber sales, leases (grazing, farming, commercial, recreation), mineral extraction, land use permits, and land sales. State law allocates these revenues to support the Public School Fund and eight other pooled beneficiary funds. (Beneficiaries)
The Department of Lands administers the endowment lands, and the Endowment Fund Investment Board manages the endowment fund. The Endowment Fund Investment Board was created by the Legislature in 1969. (The Board)
Purpose
The Endowment Fund Investment Board invests the proceeds generated by endowment lands. Along with public schools, eight additional beneficiaries were granted endowment lands. All land grant beneficiary funds are invested in a single, commingled pool.
The Idaho Admission Act provides that five percent of net profits from federal land sales in Idaho will go to the Public School Fund. The fund is also supported by unclaimed corporate dividends, anonymous political donations, and property left behind by people who die without a will or heirs.
Land grant endowment funds are not “public” funds for the general use of state government. Instead, according to federal law and the state constitution, the State must act as a trust administrator, managing and distributing the funds solely in the interest of the trust beneficiaries.
Evolution of Fund Management
Oversight of the fund progressively shifted from external to fully internal management. Four contract managers and the Department of Finance shared responsibility for the initial $76.9 million in assets. Between 1971 and 1978, the Board systematically phased out these outside managers, replacing them with a dedicated, professional in-house investment manager. To keep pace with the fund’s continued growth, the Board later expanded its internal team by hiring an assistant investment manager and financial officer.
Legislative Reform and Policy Shifts
For its first three decades, the fund was managed under a rigid, conservative mandate. It was legally restricted to a “buy and hold” philosophy, investing exclusively in high-quality bonds. This approach changed dramatically following a 1998 constitutional amendment that granted the legislature authority to broaden investment boundaries.
Implemented in July 2000, these reforms adopted the “prudent investor” standard, giving the Board freedom to invest in a much wider array of assets. It also transferred control over beneficiary distributions to the State Board of Land Commissioners, moving away from simply paying out raw income.
The Board adopted a more diversified investment strategy that included stocks, bonds and real estate. Today, the asset allocation stands at 66% equities, 24% fixed income, and 10% U.S. commercial real estate. This change resulted in major increases in both income and capital gains for its beneficiaries. Currently, endowment fund assets are worth approximately $4 billion.
Investment Authority Expansion
Over several decades, the Board steadily grew its portfolio and took on investment authority for other state agencies’ funds. In 1978, the Board began managing the reserves for the State Insurance Fund. The newly created Capitol Permanent Endowment Fund was added in 1998. Between 2007 and 2009, the Board assumed the Ritter Island and Trail of the Coeur d’Alenes endowment funds, both operating under the Department of Parks and Recreation.
The Board accepted control of the Bunker Hill Water Treatment Endowment for the Department of Environmental Quality in 2014. Management of the Trust Fund and Stewardship Fund for the Department of Fish and Game soon followed in 2015. The Forest Legacy Stewardship Fund for the Department of Lands is the most recent addition. These distinct state funds are invested together with the land grant endowments in a commingled pool, except the State Insurance Fund which by statute has specific investment strategy.