On July 3, 1890 Idaho became the 43rd state of the Union. At that time, the federal government granted a total of 3,650,763 acres to the new State of Idaho. The acres were distributed to nine endowment trusts, including one for public schools.

Endowment assets consist of both lands and funds. Over time, properties were sold or exchanged, with proceeds from the sales and certain other income deposited in the endowment funds. Endowment land status as of June 30, 2006 stood at 2,460,261 total acres.

The Idaho Constitution established the State Board of Land Commissioners as the trustee over the assets of the nine endowments. The Land Board consists of the Governor, Secretary of State, Attorney General, State Superintendent of Public Instruction, and State Controller.

As the trust manager, the Land Board is obligated to manage the assets of each trust “…in such manner as will secure the maximum long term financial return to the institution to which granted…”

The Constitution also established a permanent endowment fund, the principal of which “…shall forever remain inviolate and intact…” and the interest from which must be used for the maintenance of the public beneficiaries of the state.

The Earnings Reserve Fund was created in the late 1990s when the Idaho Legislature proposed amendments to the State Constitution to allow the permanent fund to be invested rather than loaned, to create an earnings reserve, and to allow for payment of administrative costs from the earnings reserve. Voters approved that constitutional amendment in November of 1998.

Since then, any renewable revenue from the public endowment lands (e.g., cottage leases, timber sales and contracts, gas exploration) has flowed into the Earnings Reserve Fund. Additionally, any interest and dividend revenue coming from the Public Schools Permanent Endowment Fund also flows into the Public Schools Earnings Reserve Fund.

The Land Board determines the amount of distribution that will flow each year from the Reserve Fund to public schools. Their policy is to distribute 5% of a three-year average of the permanent fund, or $31.2 million annually. Any remaining funds over and above that distribution remain in the Reserve Fund and are reinvested for future distributions.

Another important Land Board policy is that once the Earnings Reserves total more than five years of reserves (basically $31.2 million x 5 or $156 million), the excess reserves are redirected into the Permanent Endowment Fund to be invested into perpetuity.

The Idaho Land Board Earnings Reserve Fund is not intended to serve as a rainy day account for the state. At the same time, the money sitting in that account is earnings from the corpus of the fund and can be distributed by the Land Board, at their discretion.