September 23, 2003 Statewide Election - Constitutional Amendments

Amendment 1 is setting up a cabinet level appointed "Secretary of Public Education"

Amendment 1 would create a public education department headed by a cabinet-level “secretary of public education” who would be appointed by the governor [the current superintendent is appointed by the “board of education”] and confirmed by the state senate.  The amendment requires that the appointed secretary be an “experienced educator” but the term is not defined and is seemingly a minor change from the current constitutional requirement of an “experienced educational administrator” that applies to the superintendent of public instruction.

The amendment also proposes a ten member elected public education commission with staggered four-year terms [initially made up of the ten elected members on the current board of education.]  This proposed structure is in contrast to the current 15-member state board of education (10 elected and 5 appointed).  If an elected commissioner moves outside their district their term ends immediately and the governor would fill any vacancies occurring on the commission [no change from the current structure on the board of education.]  The current 5 appointed state board of education members would not be part of the new commission.  Neither does the current superintendent of public instruction necessarily become the new secretary of public education.

Current legislation that addresses the “state department of public education” or the “state board of education” would seemingly become moot and laws addressing such would not necessarily apply to the new entities “public education department” or “public education commission.”  So, any laws referring to the old structure will need to be revised.  The duties and power of the public education commission are undefined.

Amendment 2 would increase the annual payout % of the Land Grant Permanent Fund from 4.7% to 5.8% (23% increase).  The annual Land Grant Permanent Fund results are as follows:

Calendar	Market	Annual	5-Year	5-Year	Annual
Year End	Value	Change	Moving Sum	Moving Ave	Change
31-Dec	Thousands of $	%	(Thousands of $)	(Thousands of $)	%
12/31/1992	$3,827,430
12/31/1993	$4,065,810	6.23%
12/31/1994	$3,851,628	-5.27%
12/31/1995	$4,601,725	19.47%
12/31/1996	$4,929,439	7.12%	$21,276,031	$4,255,206
12/31/1997	$5,898,605	19.66%	$23,347,206	$4,669,441	9.73%
12/31/1998	$6,901,892	17.01%	$26,183,288	$5,236,658	12.15%
12/31/1999	$7,811,039	13.17%	$30,142,700	$6,028,540	15.12%
12/31/2000	$7,624,359	-2.39%	$33,165,334	$6,633,067	10.03%
12/31/2001	$7,196,182	-5.62%	$35,432,077	$7,086,415	6.83%
12/31/2002	$6,255,967	-13.07%	$35,789,439	$7,157,888	1.01%

Nonrenewable (Oil & Gas)
Royalty Income5		% Beginning
	(In Thousands)	Fiscal Yr Balance
6/30/1998	$129,980	2.38%
6/30/1999	$104,642	1.62%
6/30/2000	$154,732	2.12%
6/30/2001	$288,517	3.64%
6/30/2002	$200,149	2.71%
6/30/2003	$220,417	3.29%
Average	$183,073	2.63%

 

Date	Fund Balance	Average Return	CPI Index	Average Inflation	Real Average Return
06/30/97	$5,464,700		160.3
06/30/03	$6,807,644	4.10%	183.7	2.43%	1.67%

 Bond Review makes the recommendation to VOTE NO on Amendment 2.  Amendment 2 is fatally flawed as written and should be REJECTED by taxpayers.

 Ironically, because of this year’s stock market run-up, the Fund could handle a one-time boost in its payout but to lock in a greatly increased payout year after year until 2016 is unwise and dangerous to the health of the Land Grant Permanent Fund.  Bond Review could support a much smaller increase; say to no more than 5.0% if it contained an instant downside trigger.

 Patrick Lyons, Commissioner of Public Lands, has suggested that rather than taking additional funds from the Land Grant Permanent Fund, funds could be gleaned from the Severance Tax Fund, Medicaid reform, or by closing the state gas tax loophole provided to certain Indian reservations.

 Another solution could be to expand oil and gas exploration on State land and thus increase the annual income from oil and gas royalties.

 Another solution would be to write an amendment that would allow a higher annual payout only if the overall Fund; for example, grew annually 2% more than inflation after the payout.  This would allow the actual performance of the fund to determine the payout.

 Any, or some combination of all, of the alternate solutions would be preferable and wiser than raising, by 23%, the payout of the Land Grant Permanent Fund.