How fast will the state schools fund grow?

Dear Teri,

Your (December) article showed a Common Schools Trust Fund valuation of $1.6 billion and the state owning 1.5 million mineral acres. It would be interesting to know the potential growth of this fund over the next 25 years.

It would also be nice if some of their (Department of Trust Lands) employees would visit Fargo for a question and answer session to better educate those of us on the eastern side of the state.

Keith Berg

Fargo

Thanks for writing! I contacted Jeff Engleson, who is deputy commissioner and chief financial officer of the department. Here’s what he said:

“A land grant from the federal government at statehood and Article IX of the state Constitution both provide that the Board of University and School Lands shall manage those lands, minerals and the proceeds there from, for the exclusive benefit of the institutions for which they were granted.

“The North Dakota Department of Trusts Lands manages the permanent educational trust funds and assets under the board’s control as outlined in the Constitution and Century Code. In addition, state law gives the board and department responsibility for managing mineral resources for designated nonpermanent trusts as well.

“The Common Schools Trust Fund is the largest of the permanent educational trust funds managed by the board. The beneficiary of the fund is K-12 education in North Dakota. As of Jan. 31, the value of the fund was $1.73 billion. The fund will distribute $46.257 million to public schools during both years of the 2011-13 biennium.

“As to the question about the potential for future growth, the department does not make formal projections because distributions are based on the value of financial assets and growth of those assets over a trailing five year period.

“However, by making relatively simple assumptions one can see the potential for trust growth, and the growth of trust distributions, over the next 25 years.

“Assumptions used:

* Common schools fund balance of $1.9 billion on June 30.

* $220 million of new money (surface and minerals revenues, taxes, tobacco lawsuit proceeds and unclaimed property – same as in FY 2011) in 2013, increases by 5 percent per year going forward

* Return on investments of 6 percent per year on average yearly balance

“Projected results:

If all of the above hold true, projected distributions and assets are as follows:

* In FY 2020 distributions will be $159.2 million; ending fund balance will be $4.72 billion

* In FY 2030 distributions will be $391.1 million; ending fund balance will be $10.43 billion

* In FY 2037 (25 years) distributions will be $601.4 million; ending fund balance will be $16.64 billion

“As to the issue of providing educational opportunities or question and answer sessions to people concerning what the department does, the commissioner and staff are available to participate in educational opportunities for civic groups and other entities as time allows, no matter where in the state those entities are located.

rrr

“I hope this answers your questions.”

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