LMR-October_PROOF6

Partner Insight
Treasury Notes
ESTABLISHING THE KEVIN P. REILLY SR. LOUISIANA EDUCATION
QUALITY TRUST FUND ONE OF SMARTEST MOVES STATE EVER MADE
BY RON HENSON, STATE TREASURER
Over the past decade, higher
education institutions have felt the
sting of repeated budget cuts to
the tune of $82 million in overall funding. Louisiana’s
universities and community colleges continue to take
a beating when the state seeks out the money it needs
to fill budget holes. If education were truly a priority for
our state, we would “put our money where our mouth is”
by enacting measures that ensure education funding is
protected.
Louisiana voters did this in 1986 when they approved a
constitutional amendment establishing the Kevin P. Reilly
Sr. Louisiana Education Quality Trust Fund (LEQTF). It’s
hard to believe that more than 30 years have passed
since the creation of the trust fund, and it’s still one of
the smartest moves the state ever made for education.
The LEQTF was established with a $641 million
settlement with the federal government over oil and gas
revenues. Instead of using the windfall to fund current
operating expenses, the state put $541 million away into
a trust fund for education.
The LEQTF was the brainchild of my friend, the late Kevin
P. Reilly, Sr., who spearheaded the legislation that led to
its creation. Kevin was a former legislator and lifelong
proponent of education. His legislation permanently
dedicated the proceeds from the oil and gas settlement
with the federal government to benefit students in
elementary, secondary and higher education. In 2013,
lawmakers renamed the LEQTF in his honor.
The State Treasury has unique oversight of the LEQTF,
and we work to preserve the fund’s capital, enhance
its market value, and provide a stable income stream.
The three major sources of income for the trust fund
are investments, capital gains/losses and royalties. For
FY 2016, total income from all sources equaled $81.75
million.
Annual earnings on LEQTF investments are allocated
pursuant to Act 698 of the 2001 Regular Legislative
Session and then split between the Board of Regents
for higher education and the Board of Elementary and
Secondary Education (BESE) for students in K-12. For
the 2016 Fiscal Year, the fund allocated $21.61 million to
Regents and $21.55 million to BESE. Over the life of the
LEQTF, these two agencies have received $1.635 billion in
total allocations.
There are internal and legislative benchmarks the
Treasury strives to meet when it comes to the investment
of LEQTF dollars. The fund’s total rate of return during
FY 2016 was 5.47 percent, which beat legislative
benchmarks of the 30-day Treasury Bill which earned 0.11
percent, and the Two-year Treasury Note, which earned
1.25 percent. Fixed income investments earned a total
rate of return of 5.44 percent during this time, beating
the Barclays Government/Credit bond benchmark,
which earned 4.33 percent. Equity investments earned
a whopping 20.74 percent, beating the S&P 500, which
earned 3.99 percent.
Investment income generated by the LEQTF is dedicated
to providing educational enrichment programs. BESE and
Regents use the money earned on LEQTF investments
to fund research projects, grant proposals and other
educational enhancements.
Because of the LEQTF, BESE has been able to dedicate
millions for pre-K programs, teacher certifications, and
virtual/state-wide distance learning. Regents has been
able to fund graduate fellowships, scholarships and
research projects. Because of continued budget cuts
across education, many of these programs would fall by
the wayside without the LEQTF.
The LEQTF, along with TOPS and the START 529 College
Savings program, is one of a handful of programs in
Louisiana that gets it right when it comes to prioritizing
education. Louisiana leaders should continue to support
programs like these that demonstrate our state’s
commitment to education and protect much-needed
funding for students of all ages.
LMR | October 2017 Page 15