I would like to voice my support for an important measure that will be on the ballot in the November election. Utah Constitutional Amendment B represents a small change that would make a big difference to our public schools.
As you may know, the State of Utah invests a $2.15 billion permanent State School Fund, comprised of the profits earned on the 3.5 million acres of school trust lands. Amendment B would modernize and update the distribution formula on that permanent school fund. It would increase the amount of money available to schools, without raising taxes, and would place education funding on a stronger footing in the future. As a result, Amendment B has received broad support from the education and the business communities.
By adopting Amendment B, earnings from the permanent school fund will be distributed every year based on a formula set by state statute. Those earnings are distributed to each school in the state to be spent on the school’s greatest academic needs, as determined by a School Community Council.
The proposed formula takes into account a variety of factors, including student enrollment growth, inflation, and investment performance. This formula provides a much better framework for the investment and distribution of the fund, not only for future growth but also for much-needed funds in the classroom today. The formula was derived from an extensive study of the best practices of endowments, pensions, and foundations. To ensure the long-term growth of the fund, it would cap the distribution at 4% of the fund for any given year, which is the standard distribution amount of most other foundations and endowments. This would also prevent raids on the fund in the future.
I have spent most of my career in the investment management field. I’ve helped manage assets for high net worth individuals, foundations and endowments. When evaluating the right investment asset allocation, many factors are taken into consideration. The goals and needs of the funds should drive the investment policy. For those with a longer-term investment horizon and the ability to assume some volatility, it’s appropriate to invest in a more diversified asset mix. Having a diversified portfolio can actually reduce the overall volatility of the portfolio and improve investment returns, particularly when taking inflation into consideration. Under the current model of distribution based on dividends and interest, we’re incentivizing a portfolio that is misaligned to our long-term goals and current cash flow needs.
Amendment B will incentivize the right investment asset allocation and will provide desperately needed funds in the classroom today. I hope you will join me in voting to support Amendment B.
Originally posted in the Salt Lake Tribune. Reposted with the permission of the author.