Can the Idaho Department of Lands pay the costs of selling state endowment land out of the proceeds of the sale?
Plain-English summary
Director Thomas Schultz of the Idaho Department of Lands asked a follow-up to a 2002 AG opinion (No. 02-1). That earlier opinion had said the Department could not net out sale expenses before depositing endowment land sale proceeds into the land bank fund. The follow-up question: could the Department pay those expenses after the proceeds were already in the fund? Attorney General Lawrence Wasden said no.
The land bank fund, created during late-1990s endowment reform, is a narrow temporary parking spot for proceeds from selling endowment land. Idaho Code § 58-133(2) says those moneys "shall be used only to purchase land for the same endowment." That phrasing is exclusive: the only thing the fund pays for is acquiring replacement land. Selling expenses don't fit. They are administrative costs of the Department's job of managing endowment lands, and § 57-723A(3) says administrative costs come out of the earnings reserve fund appropriation.
The opinion left no room for creative accounting. Sale expenses can't be netted out before deposit (per the 2002 opinion), and they can't be drawn out of the land bank afterward (this opinion). The Department had to budget its land-sale expenses through its regular legislative appropriation from the earnings reserve.
Currency note
This opinion was issued in 2014. Subsequent statutory amendments, court decisions, or later AG opinions may have changed the analysis. Treat this page as historical context, not current legal advice. Verify current law before relying on any specific rule, deadline, or remedy mentioned here.
Background and statutory framework
Idaho's endowment land system holds federal grant lands in trust for beneficiaries (mainly public schools). The Idaho Constitution and statutes require that the corpus of the endowment "remain inviolate and intact." Sale proceeds historically went straight into the permanent endowment fund, which earned interest for the beneficiaries.
The land bank fund was the late-1990s exception. It allowed proceeds from selling one parcel of endowment land to be held for up to five years while the Department searched for a replacement parcel of equivalent or better value. If five years passed without a purchase, the proceeds plus any earnings rolled into the earnings reserve fund (or the legislature could extend the holding period).
Because the land bank exception cuts against the "inviolate and intact" principle, the AG construed it narrowly. The fund pays for one thing: replacement land. Anything else, including the cost of brokering the sale, is regular Department business and rides on the regular appropriation.
Common questions
Q: Why couldn't the Department just net expenses out of the proceeds before deposit?
A: Earlier AG Opinion 02-1 said no, because Idaho Code § 58-316 requires the Director to deposit "all purchase moneys arising from the sale of state land" with the State Treasurer. "All" leaves no room for skimming.
Q: What kinds of "expenses" did the Department want to pay this way?
A: The opinion didn't itemize them, but typical land-sale expenses would include appraisals, surveys, title work, real estate broker fees, advertising, and closing costs.
Q: Did this make endowment land sales harder to budget?
A: The opinion reflected the legislature's design choice. By forcing all sale expenses through the regular earnings reserve appropriation, the system kept legislative oversight on Department transaction costs and prevented the land bank fund from quietly being depleted.
Q: Could the Department recoup expenses by adjusting the sale price?
A: The opinion didn't address pricing strategy. As a matter of fiduciary duty to the endowment beneficiaries, the Land Board would still need to obtain fair value for the land regardless of how expenses were financed.
Citations and references
Statutes:
- Idaho Code § 57-723A(3) (Department administrative costs from earnings reserve)
- Idaho Code § 58-128 (daily deposit with treasurer)
- Idaho Code § 58-133 (land bank fund)
- Idaho Code § 58-133(2) (use of sale proceeds limited to land purchase)
- Idaho Code § 58-316 (deposit of purchase moneys with treasurer)
- Idaho Code § 67-1302 (state officer deposit duty)
Other authority:
- 2002 Idaho Att'y Gen. Ann. Rpt. 5 (Opinion No. 02-1)
Source
- Landing page: https://www.ag.idaho.gov/office-resources/opinions/
- Original PDF: https://ag.idaho.gov/content/uploads/2018/04/Opinion14-2.pdf
Original opinion text
STATE OF IDAHO
OFFICE OF THE ATTORNEY GENERAL
LAWRENCE G. WASDEN
ATTORNEY GENERAL OPINION NO. 14-2
To:
Thomas M. Schultz, Jr., Director
Idahq Department of Lands
STATEHOUSE MAIL
Per Request for Attorney General's Opinion
INTRODUCTION
In 2002, this Office issued Attorney General Opinion No. 02-1 answering three
questions from the Department of Lands concerning the Land Bank fund created by
Idaho Code§ 58-133. Question "C" of that opinion was:
What "expenses" of property sale/acquisition, if any, can be paid for
out of the proceeds from the sale of endowment lands that are
invested in the land bank fund?
The opinion concluded that the Department could not deduct expenses from the
sale proceeds prior to depositing the proceeds in the land bank fund. The Department has
now asked the follow-up question of whether the Department may pay expenses
associated with the sale of endowment land from the land bank fund after deposit of the
sale proceeds.
QUESTION PRESENTED
Whether the Depa1iment may pay expenses associated with the sale of endowment
land from the land bank fund, after deposit of the sale proceeds.
CONCLUSIONS
No. Idaho Code § 58-133 states, "Moneys from the sale of lands which are a part
of an endowment land grant shall be used only to purchase land for the same
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endowment."
The expenses associated with the sale of endowment lands are
administrative costs. Therefore, such expenses are chargeable against the Department of
Lands' appropriation from the earnings reserve fund. Idaho Code § 57-723A(3).
ANALYSIS
The land bank fund was created as paii of the "endowment reform" in the late
1990s. Prior to endowment reform, all proceeds from the sale of endowment lands were
required to be deposited in the appropriate permanent endowment fund. The land bank
fund was created as a narrow exception to this general rule. Because the endowment
fund is to "remain inviolate and intact," the land bank fund exception must be narrowly
construed.
Idaho Code § 58-133, which created the land bank fund, authorizes the Board of
Land Commissioners (the "Land Board") to deposit proceeds from the sale of endowment
land in the land bank fund for temporary holding pending the purchase of other
endowment land. The proceeds may be held in the land bank fund for up to five years. If
the proceeds have not been encumbered to purchase other land within five years, the sale
proceeds and all earnings must be deposited in the earnings reserve fund, unless the
period is extended by the legislature.
Attorney General Opinion No. 02-1 concluded that the expenses associated with
the sale of endowment lands cannot be deducted from the proceeds of the sale of
endowment land prior to the deposit of the proceeds in the land bank fund. This
conclusion was based upon the plain language of Idaho Code § 58-316, which requires
that the Director of the Department of Lands deposit "all purchase moneys arising from
the sale of state land" with the Treasurer, and that the Treasurer credit the proceeds to the
Land Bank to which the land sold belonged.
Opinion No. 02-1 left open the question of whether the Department of Lands could
deduct sale expenses after sale proceeds are deposited in the land bank fund. That
question is answered by the plain language of the statute, which states: "Moneys from
the sale of lands which are a part of an endowment land grant shall be used only to
purchase land for the same endowment." Idaho Code § 58-133(2). Thus, the only
permissible use of endowment land sale proceeds is to purchase other land.
Accordingly, sale proceeds deposited in the land bank fund cannot be used to pay
expenses associated with the sale of endowment land. Also, because Idaho Code § 58316 requires that the Director deposit all purchase moneys with the Treasurer, the
expenses cannot be deducted from the sale proceeds prior to deposit in the land bank
fund. See also, Idaho Code§ 58-128 (requiring land board to deposit daily with treasurer
all money received); Idaho Code § 67-1302 (requiring state officers and employees to
deposit money received on behalf of the state with the treasurer).
While the use of sale proceeds deposited in the land bank fund are strictly limited
to the purchase of land and expenses associated with such purchases, Idaho Code § 57723A(3) provides that the Department's administrative costs may be paid out of the
earnings reserve fund. Since the expenses of selling endowment lands arise out of the
Department's duty to administer endowment lands, such expenses are appropriately paid
out of the Department's earnings reserve fund appropriation.
AUTHORITIES CONSIDERED
1.
Idaho Code:
Idaho Code§ 57-723A(3).
Idaho Code§ 58-128.
Idaho Code§ 58-133.
Idaho Code § 58-133(2).
Idaho Code § 58-316.
Idaho Code§ 67-1302.
2.
Other Authorities:
2002 Idaho Att'y Gen. Ann. Rpt. 5
11th day of August, 2014.
Dated this_
LAWRENCEG. WASDEN
Attorney General
Analysis by:
EDITH L. PA CILLO
Deputy Attorney General