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Utah’s $1.6 billion education trust fund overhauled
Investing » An independent board will oversee the fund; the change aims to boost its investment returns.
First Published Aug 02 2013 05:37 pm • Last Updated Feb 14 2014 11:31 pm

The Utah Board of Education on Friday voted to overhaul how the state manages a $1.6 billion education trust fund, aiming to safeguard its investment returns for schools and potentially increase those returns.

The state School Fund, which is funded by money from oil, gas and other commercial enterprises on 3.4 million acres of state trust lands, generated $37 million for public schools this year, reducing the burden on taxpayers.

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But could the public fund be getting more bang from its $1.6 billion bucks?

A task force of professional investment counselors says changes could increase the fund’s average return, which has stood at 5.75 percent over the past decade.

"This whole thing is about checks and balances," said attorney Timothy Donaldson, director of the School Children’s Trust. "We need to do all we can to make as much money as we can [from the trust]."

The task force, which has been working since February, made its report to the state board on Friday with these recommendations:

• An independent board should oversee the fund; currently, the elected state treasurer manages it.

• Investment language should be changed to provide more consistent revenue, a step that would require a state Constitutional amendment.

• Reporting requirements about the fund’s management should be enhanced.

• An annual audit should be conducted.

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• The new board should be allowed to use the "prudent investor rule," instead of the Legislature stipulating particular investments.

• The trust should be excluded from an antiquated "subscription to stock" prohibition, giving the board more leeway in investments.

• Different agents should handle the investments and the dividend checks.

The seven-member task force unanimously agreed to the seven recommendations, which were approved by the state board.

"These are modern best practices for portfolio theory, which is diversity," said state board member Jennifer Johnson, who served as chair of the task force.

The State Trust and Institutional Lands Administration (SITLA) manages the lands that support the trust. Under the Utah Constitution, the fund’s principal cannot be touched. The fund’s gains are reinvested, while dividends and interest are allocated to public schools based on enrollment.

Each school’s community council, made up of educators and parents, decides how to spend the money.

Donaldson told the board the recommendations would help buffer the fund from lawmakers who may want to use it for other purposes. Recently, the Legislature has looked into using the fund for relocating the state prison in Draper and to make up for reduced sales tax revenue, among other issues.

At Friday’s meeting, board member David Thomas asked whether the restructuring would increase the fund’s returns.

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