By Ron VandenBoom
If, 25 years ago, the Montana Board of Investments had invested 25 percent of the Education Trust Fund in stocks instead of bonds, the fund would have earned $25 million more than it has.
That's the message Montana's new secretary of state, Bob Brown, is sending to members of the House and Senate regarding SB-493 a proposal that would allow the Board of Investments to use up to 25 percent of the money received from state owned lands to purchase stocks instead of bonds.
The change, Brown said in a recent interview, could generate more money for education than is currently receive from the fund.
"So what we are essentially attempting to do here is free the hand of the Board of Investments in the way the people did in the fall elections with the Workman's Compensation Fund," Brown said, adding that it would allow the board more latitude in making state money work harder for the beneficiaries the school children of Montana.
The message appears to be having the desired affect because the House Education Committee Monday overwhelmingly approved SB-493, which will now go to the House for debate.
If approved, the measure will come before Montana voters in November.
Brown said that this is not a new idea in investments, and Alaska, Wyoming, Idaho and North Dakota have been investing in stock for some time with Idaho investing 70 percent of their trust fund in stocks.
"And those are just the states that are near us," Brown said.
Brown points out that no individual would invest their own money in just one investment and history has proven that in the long term, stocks will out perform bonds by an average of 11 percent to 5.5 percent.
SB-493 is one of a pair of bills Brown and Superintendent of Public Instruction Linda McCulloch drafted in an attempt to increase funding for education.
The other bill, SB-495, would "expedite" $11.4 million out of the Education Trust Fund to be used to fund schools this biennium. Through a somewhat complex formula, the expedited funds would be covered by a loan from the Coal Tax Trust Fund. The loan would then be paid back from royalties and with investments from the Education Trust Fund in stock.
The bill will require a three fourths vote of both houses.
Brown defended the use of Education Trust Fund money noting that there is an immediate need in education now and that it's important to do something while making the other part of the plan work.
"This could provide some first aid for school systems like the Havre school system," he said.
Brown and McCulloch are both former educators and members of the State Land Board, which oversees state lands. But Brown said the bills are not the result of action by the board.
So far Brown, McCulloch, and Gov. Judy Martz have all come on board favoring the proposals. Brown said he did not want to speak for the two remaining board members, Attorney General Mike McGrath, and State Auditor John Morrison.
State lands currently produce through mineral royalties, grazing fees, agricultural lease payments, and funds received from the harvest and sale of timber, about $40 million annually for K-12 and secondary education.
Speaking of SB-493, Brown said "I think there will be a good public discourse about this."