Bill No.: SF0155                  Drafter:  DKG

LSO No.:  07LSO-0242              Effective Date:

Enrolled Act No.:  SEA0065

Chapter No.:

Prime Sponsor: Select Committee on Capital Financing and Investments

Catch Title: Inviolate higher education funds.

Subject: Excellence in higher education endowment fund and Hathaway scholarship endowment fund.

Summary/Major Elements:

· The bill is largely in response to a constitutional amendment passed at the last election specifying that the legislature may create permanent, inviolate funds for educational purposes and that the Hathaway endowment and excellence in higher education accounts are such funds.

· Renames those funds as permanent funds under W.S. 9-4-204.  Monies in the endowment funds cannot be expended. Earnings may be expended.

• A spending policy is put in place only for the excellence in higher education fund.  The spending policy amount is 5% of the market value of the corpus (5 year average – with a roll-in for the first five years).  A reserve account is created for that fund.  The reserve account is funded by earnings from the endowment in excess of the annual spending policy.  The reserve account is capped at 75% of the spending policy (3.75% of the corpus 5 year average value).  The reserve account is used to supplement earnings on the endowment in those years in which earnings are below the spending policy amount.  A report is due from the treasurer (in consultation with the institutions) if funds are to be spent from the reserve fund.
• Investment of the two funds is provided for in the same manner as other permanent funds, under the treasurer. The investment of the excellence in higher education endowment fund by the State Treasurer rather than by foundations of each institution is a major change made by the act.  The use of these earnings by the institutions is not changed.  There is now, however, with the inclusion of a spending policy amount, a cap on the amount of earnings expended each year.
• The current provisions for the funds are amended to reflect distributions of earnings only.  For the excellence in higher education fund, earnings within the spending policy are distributed quarterly to the institutions.
• This act includes a provision for the institutions to report on reserve fund distributions.  The treasurer will report the actual transfers and on earnings amounts, the institutions will report on how the earnings distributions (and any shortfalls) are reflected in what they have been tasked to do with the income.
• For the Hathaway endowment fund – there has been an insertion of a provision requiring a report from the treasurer to the education and select capital financing committee regarding the status of the Hathaway reserve fund.  While requiring a report, the bill does not change current law providing for automatic distributions of excess Hathaway reserve account funds to the Hathaway endowment fund.

· Provides for the remittance by the foundations to the State Treasurer of distributions to the foundations made prior to this bill's effective date.  The remittance is to be as expeditious as possible, but is authorized to be done in a manner to maximize total net earnings.

Comments: Report Required – spending policy reports and reports on use of reserve funds as noted above.