2024 Ballot Guide

Constitutional Amendment B

“Shall the Utah Constitution be amended to increase the limit on the annual distributions from the State School Fund to public schools from 4% to 5% of the fund?”

Summary

Article X, Section 5 of the Utah Constitution establishes a permanent State School Fund that consists of the revenues from certain land sales, leases on nonrenewable resources, and the use of school trust lands. The Utah Constitution currently specifies that up to 4% of the earnings of this investment fund can be used each year to support Utah’s public schools. This amendment would increase that maximum annual earnings distribution to public schools from 4% to 5%.

Background

History of the Permanent State School Fund:

When Utah became a state, the federal government gave it a portion of federal public lands (six million acres) that were to be held in trust for the support of public schools, with revenues from the sale or use of those lands funding public education. Thus, the Utah Constitution created a State School Fund to manage and distribute money from the fund among the state’s school districts.

In 2016, a constitutional amendment was approved by voters that changed how the State School Fund is invested and distributed. That amendment set a cap on annual distributions from the fund at 4% to prevent overusing or draining the fund, which helps balance current funding needs for the present generation of students with providing for future generations.

Growth of the Permanent State School Fund:

As the Permanent State School Fund began, the average distribution per student was $10. In recent years, the balance in the fund and its distributions have steadily increased. Earlier this year, the State Treasurer announced that the Permanent State School Fund had topped $3.3 billion. Schools will receive a record-breaking $106 million distribution from the fund for the 2024-25 school year. In FY 2024, the average distribution per student was over $150.

What will change?

Constitutional Amendment B would increase the cap on annual distributions from 4% to 5% of the Permanent State School Fund. If Amendment B were in place today, public schools would receive $120 million for the 2024-25 school year instead of $106 million.

Arguments in Favor

COMMON PRACTICE IN INVESTMENT FUNDS: Many trusts and investment funds typically use a 5% payout rate on their earnings. This percentage is widely accepted and considered standard.

EVOLVING INVESTMENT GROWTH AND EQUITY: Initially, a conservative cap was set to ensure the growth of investments. However, evidence now shows that the fund is continuing to grow effectively even with this cap. To promote fairness across generations and ensure sustainable funding for future students, it is crucial to raise the payout cap.

STRONG SUPPORT FROM EDUCATION STAKEHOLDERS: There is broad support from the education community for increasing the payout cap. This consensus highlights the importance and potential benefits of adjusting the cap to better support public schools.

Arguments Against

POTENTIAL IMPACT ON INVESTMENT GROWTH: Raising the payout cap could result in withdrawing more money from the Utah Permanent State School Fund, which might slow down its overall growth.