State schools Superintendent Tom Luna says he believes the state’s distribution and investment strategy for endowment funds is short-changing current public school students by focusing too much on future students. “Every year … we have 3,000 to 4,000 more students that we’re serving with that distribution,” he said. But the distribution has remained frozen at $31 million a year for five years, but for a one-time, extra $22 million distribution in 2010. “I think we need to take a hard look at if we’re sacrificing the benefit of the current beneficiary in the need to protect the future beneficiary,” Luna told the Land Board this morning. “We’ve accumulated a lot of cash and then our fund balances have increased … but the policies we have in place still haven’t resulted in the current beneficiaries seeing an increase. So I think they’re a bit out of whack.”

Luna noted that the state’s permanent endowment fund is invested 70 percent into volatile equities, and 30 percent into more secure bond funds. He said that’s appropriate for long-term funds, but said the earnings reserve funds, from which distributions are made, shouldn’t have the same split – they should be more secure, to guarantee distributions to schools and other endowment beneficiaries. Larry Johnson, endowment fund investment manager, responded, “I don’t think it would make much difference, because we’ve looked at this before. … We’ll certainly have an opportunity to look at it again.” He added, “We’re permanently intending to have reserves and a significant amount of reserves.”

The state is in the midst of an analysis of its investment strategies; Johnson said he’ll have results from that for the board in February.