At a December meeting, the board, consisting of Gov. Butch Otter, Superintendent of Public Instruction Tom Luna, Controller Donna Jones, Attorney General Lawrence Wasden and Secretary of State Ben Ysursa, unanimously approved an update to its asset management plan, essentially an investment road map for coming years.

In a section about the board’s investment philosophy, there appears a new provision essentially codifying the practice of buying private enterprises, as long as the state is not the director operator of any companies. “Consistent with this constitutional directive, the Land Board will manage the real estate in its endowment portfolio to capture the full economic value of such lands and improvements for endowment beneficiaries,” says the section about commercial real estate. “In pursuit of this objective the Land Board will contract with private entities to operate business activities upon the land trust assets.”

One Land Board watchdog says the panel did exactly the opposite of what it should have to done to get the government out of competition with private business.

Bob Forrey, a Republican who represented Nampa for two terms in the Idaho House and a vocal critic of recent panel transactions, says the updated investment plan is at least more of the same. “I think it’s worse than it was before,” Forrey told IdahoReporter.com. “It shows they are going to keep on with the same agenda.”

The Land Board came under fire in late 2010 for purchasing a commercial storage facility and contracting with a management company to run it and deliver the profits to the endowment fund. Critics, including Forrey, argued then and continue to believe the board is in competition with private business and perhaps violating the Idaho Constitution.

The updated plan seems to give some acknowledgement to that criticism, at least in the revised mission statement.  ”A significant challenge for the trustee is managing revenue-generating activities within a government agency,” says a new paragraph added in the mission statement. “This includes a concern expressed by some members of the public that the trust unfairly competes with private enterprise.”

That doesn’t sit well with Forrey. “It’s not the place of government to operate a for-profit business,” he said. Forrey and other board critics say that the board’s tax-exempt status gives it an unfair fiscal market advantage and hurts private business.

The latest example of the practice came in August when the board put out a bid request for a contractor to build a brewery of sorts in downtown Boise. Some media reports speculated the board might be entering the brewery and restaurant business, but officials say they only intended to build the property and rent it to a private entity.

See the full updated plan here.

Reps. Grant Burgoyne, D-Boise, and John Vander Woude, R-Nampa, says they will again pitch a bill next year to prevent the Land Board, a five-member panel charged with managing state endowment assets, from buying commercial businesses.

The duo’s first attempt, 2011′s House Bill 188, stalled when House Resources and Conservation chairman Bert Stevenson, R-Rupert, exercised his special privilege to stall the legislation. “There’s not a reason to hear it,” said Stevenson told IdahoReporter.com near the end of the 2011 session.

Stevenson said that the purchases fulfilled the board’s constitutional task of maximizing investment returns.

Vander Woude said Wednesday that not much has changed in the bill, with the exception of the addition of some language explaining the need for it. “The restrictions are still the same,” Vander Woude explained.

It seems likely that the measure will get a hearing next year. Stevenson pledged – unless otherwise directed by House leadership – to allow the bill to be heard if it reaches his committee. “If they bring it back, it will get a hearing,” Stevenson.

The bill wasn’t heard last year, the chairman explained, which allowed the Land Board to explain its policy to an interim committee. Stevenson said last year’s version of the legislation might have also sparked a battle of constitutional authority between the executive branch of government – of which the Land Board is a part –and the legislative branch of government.

Even with the go-ahead from Stevenson, Vander Woude sees obstacles to passage. “I think we can get it through the House, but we’ll struggle in the Senate,” he said, adding that senators might not be eager to take on the fight in an election year.

The bill stems from the Land Board’s 2009 decision to purchase Affordable Storage, a commercial storage facility in west Boise. In reaction to the purchase, Burgoyne told IdahoReporter.com the deal represented “a piece of socialism.” Subsequently, a number of other Land Board commercial dealings were revealed following the controversy over the storage unit purchase.

Two Land Board members, Gov. Butch Otter and Superintendent of Public Instruction Tom Luna, made news earlier this year when they switched their positions on the issue. Otter admitted to making a mistake on the storage facility vote, while Luna said he didn’t understand the full scope of the deal prior to the vote.

The three other members of the board – Attorney General Lawrence Wasden, Secretary of State Ben Ysursa, and Controller Donna Jones – have stood firm in support of the purchase.

“The decision represents the importance of adhering to the rule of law and working within the constitutional system of checks and balances and we are pleased that the Court agreed with our position that the individual mandate is unconstitutional,” Idaho Attorney General Lawrence Wasden said.  Wasden joined in the lawsuit after Gov. Butch Otter and legislators passed a law opposing the individual mandate to buy health insurance.

Update: Bob Cooper, Wasden’s spokesman, said it was attorney general’s sole decision to enter into the lawsuit, because he had concerns about the constitutionality of the federal reform.

“The (state) statute itself infringes upon the constitutional duties of the executive branch,” Cooper said.  “He appreciated the input of the Legislature. It was helpful to know that they had his back, but the decision to file the lawsuit was his.”  The state law, the Idaho Health Freedom Act, requires the attorney general to take legal measures to defend other parts of the act, which assert Idahoans’ right to choose or decline health care services.

Otter’s attorney, David Hensley, said the ruling joins similar decisions that call into question the reform law.  “All of them reaffirms not only the governor’s opposition to the individual mandate but his general concerns with Obamacare,”  Hensley told IdahoReporter.com.  “He has said all along that Congress overreached in requiring individuals to purchase health care.”

In a 2-1 ruling, Chief Judge Joel Dubina and Circuit Judge Frank Hull ruled Congress overstepped its power in creating the individual mandate, but ruled that the rest of the law is constitutional. The states had tried to throw out the expansion of Medicaid in the Patient Protection and Affordable Care Act (PPACA).  The appeals court ruling differs from a lower court decision that overturned the entire health care reform law.

Dubina and Hull wrote that the individual mandate goes beyond the limits of Congress’ power in the Interstate Commerce Clause of the Constitution.  “What Congress cannot do under the Commerce Clause is mandate that individuals enter into contracts with private insurance companies for the purchase of an expensive product from the time they are born until the time they die,” they wrote in their decision.

Wasden, Otter and other state leaders who oppose the health care law have argued, similar to the judges ruling, that the reform plan doesn’t follow the Commerce Clause.

The ruling sets up a likely U.S. Supreme Court case, since a separate appeals court sided with the federal government, saying the individual mandate is constitutional.

“We have always anticipated that this case will ultimately be decided by the United States Supreme Court and we expect that the federal government will appeal to the Supreme Court,” Wasden said.

“When we began this process of challenging Obamacare, we recognized that ultimately the Supreme Court was going to have to decide some of these issues like the individual mandate,” Hensley said.

Circuit Judge Stanley Marcus dissented in the Georgia federal appeals court.  He called the views of the states and the two other judges approaching the case “wooden, formalistic, and myopic.”  Marcus wrote that Congress has long regulated health insurance and regulated parts of the system, including prescription drugs and the cost of health care through setting Medicare prices.

“The majority has ignored many years of Commerce Clause doctrine developed by the Supreme Court,” Marcus wrote.  Dissenting opinions don’t carry the force of law, though arguments in such opinions can be adopted by later courts.

The other states in the lawsuit include neighboring Wyoming, Utah, Nevada and Washington, as well as Alabama, Alaska, Arizona, Colorado, Florida, Georgia, Indiana, Iowa, Kansas, Louisiana, Maine, Michigan, Mississippi, Nebraska, North Dakota, Ohio, Pennsylvania, South Carolina, South Dakota, Texas and Wisconsin.

Note: IdahoReporter.com is published by the Idaho Freedom Foundation (IFF), which filed a legal brief with the appeals court. The court’s ruling did not mention IFF.

To make that happen, he would need the support of two more of the board’s members.  Though Gov. Butch Otter now calls the purchase a “mistake,” after he initially voted for it, three other officials are standing firm.

The latest to come out in support of the purchase of Affordable Storage in Boise is Secretary of State Ben Ysursa, who told IdahoReporter.com Thursday that he stands behind his vote to buy the business.

“I thought it was a sound business decision then and I think it’s a sound business decision now,” Ysursa said.  “I think it meets our constitutional mandate.”

The board’s functions are guided by Article IX, Section 8 of the Idaho Constitution, which says the panel must act “in such manner as will secure the maximum long term financial return to the institution to which granted or to the state if not specifically granted.” That means that the five board members must spend on investments which will provide a maximum fiscal return to the state.

Ysursa says the board is seeing about an 8 percent return on investment on the facility.  It’s estimated the business brings in about $20,000 per month.

State Controller Donna Jones and Attorney General Lawrence Wasden, the other two board members, have stood firm on their votes to buy Affordable Storage.  Wasden says the purchase fits within the parameters and Jones says that while she is not “comfortable” with the state competing against private business, she, too, believes the purchase was and is in the interest of the state.  “At the end of the day, the board is obligated to charge market rent and to obey Idaho’s laws with its investment decisions,” Jones said in a prepared statement.

Could the board look into purchasing other businesses that would stand to bring in big bucks for the board’s reserve accounts?  Don’t count on it.  Ysursa says that Affordable Storage is an exception to the board’s normal purchasing practices.  “We’re not doing this as a matter of routine,” he explained.

The issue will continue to be discussed as time moves on.  In August, there are plans for an interim legislative committee to discuss just exactly what the Land Board can purchase.  There was a bill pitched earlier this year to limit the board’s purchasing power to land only, but the legislation was killed by Rep. Bert Stevenson, R-Rupert, chair of the House Resources and Conservation Committee.

Stevenson told IdahoReporter.com after he held the bill that the purchase of the storage facility by the Land Board was an example of panel members running their operation like a good business.

That question is part of on an ongoing debate about the Idaho Land Board and its role in making money for Idaho schools and other budget items.  The board, consisting for Gov. Butch Otter, Attorney General Lawrence Wasden, Superintendent of Public Instruction Tom Luna, Secretary of State Ben Ysursa, and Controller Donna Jones, is tasked with managing state endowment lands to bring the most money back to its coffers.

But lately, the board has been mired in political controversy as it defended the purchase of a commercial business – a storage company in Boise – as a way to fulfill its constitutional duty of furthering investments.

At least two board members – Otter and Luna – have indicated that purchasing the property was a mistake, and the superintendent believes the panel should investigate selling the storage company.

In an interview with IdahoReporter.com last week, Otter signaled that his support of the purchase of the storage facility may not have been the right move.  “I think that was a mistake,” Otter said.  “But, I’m the first to admit it. I sat right there and asked a bunch of questions about it. And, it’s not a mistake we’re ever likely to make again.”

Otter also said he will likely favor future investments that don’t put the state and private business in competition with one another.

But with Otter signaling a change of course on his plan for the Land Board, could other panel members follow?

It appears Luna is ready to reverse course, too.  A statement issued through his communication director, Melissa McGrath, indicates that he, too, thinks public interference into private businesses is a mistake.  Here’s what McGrath had to say about this issue Tuesday:

Supt. Luna does not support the state competing with the private sector in the storage business or any other kind of business. He was not aware of those details of the transaction when he cast his vote. When he became aware of those details, he was disappointed in his vote and will work with the Land Board to explore selling Affordable Storage.

Though Luna appears to have done an about-face on the issue, Wasden is sticking to his guns.  When asked for a comment, Wasden’s spokesman, Bob Cooper, pointed to a recent article in the Idaho Business Review about the storage company.

“I don’t think it was a mistake,” Wasden told the Idaho Business Review June 29. “(Affordable Storage) fits all the criteria (of the asset management plan).”

Yet another member is somewhere in the middle of the issue.  Staffers for Controller Jones issued a statement to IdahoRepoter.com on her behalf Tuesday, but she seemed to shy away from taking a firm position.  Here is her prepared statement on the state competing with private business:

I’m not at all comfortable with government being in competition with private enterprise.  However, Idaho law and our Constitution require the board to act with undivided loyalty and to generate the maximum return possible for the endowment beneficiaries.  With net revenue of around $20,000 per month, and an annual rate of return of nearly 9%, Affordable Storage has been a top performing asset for the endowment.  At the end of the day, the board is obligated to charge market rent and to obey Idaho’s laws with its investment decisions.  The endowment’s beneficiaries expect us to follow all applicable laws.

The final board member, Ysursa, has not yet commented on the state competing with private businesses.

Lawmakers themselves may try to do something with the practice during the next legislative session.  Rep. John Vande Woude, R-Nampa, pitched a bill to prevent the state from buying businesses, but it never received a formal hearing.  The man who killed the legislation, Rep. Bert Stevenson, R-Rupert, chair of the House Resources & Conservation Committee, said there was “no reason” to hear the bill and that the board is simply fulfilling its mandate to maximize investments.

Stevenson said an interim committee may explore the issue in the months leading up to the 2012 session.

The nation’s highest court rejected requests from Wasden and Shackelford on March 7. Four of the nine Supreme Court justices must agree to hear a case for the court to take it up.

“This means the decision of the Idaho Supreme Court ordering that Shackelford be resentenced by a jury is final,” Shackelford’s attorney Leo Griffard told IdahoReporter.com via e-mail. “It is now up to Latah County to decide how to proceed.”

The request from Wasden followed an Idaho Supreme Court decision that Shackelford’s death sentence be reconsidered. Shackelford was found guilty of murder for the 1999 deaths of his ex-wife and her boyfriend, but the Idaho Supreme Court ruled that the jury in Latah County didn’t convict Shackelford of committing both murders at the same time. That distinction matters, because the double murder was an aggravating factor that triggered the death penalty.

Wasden’s spokesman Bob Cooper said he wasn’t surprised by the high court’s decision. “The Court receives several thousand petitions each year and hears fewer than 100 cases,” Cooper said via e-mail. “That doesn’t mean the cases the Court does not accept are not important, just that the Court has to choose a small number of cases from a large universe.”

Shackelford also asked the U.S. Supreme Court to review the case, but was rejected by the court.

The U.S. Supreme Court did hear an Idaho death penalty case in 2008, siding with the state in the case involving Max Hoffman. A later court ruling gave Hoffman a term of life without parole.

Reps. Grant Burgoyne, D-Boise, John Vander Woude, R-Nampa, and Cliff Bayer, R-Boise, are working on legislation aimed at preventing the state Department of Lands from owning businesses, like the self-storage facility on Maple Grove Road in Boise, that the state bought last August.

The Department of Lands has traditionally dealt primarily in grazing and forest lands, but the agency is looking to become more involved in commercial ventures and real estate in metropolitan areas. The goal is to maximize profits, which go to to elementary schools, and the University of Idaho, among other beneficiaries.

Vander Woude said the land board is “putting the wrong values first” in turning to running businesses to make as much money as possible for schools.

“Philosophically we have to say this is wrong,” Vander Woude told IdahoReporter.com Tuesday. “It just doesn’t fit … we’re trying to make sure that legally it’s something they can’t do.”

Burgoyne said he’s “at a loss to understand” the state land board’s business strategy.

“The government should avoid becoming involved in business and competing with private enterprise.”

In a previous interview, Burgoyne called the policy “a piece of socialism.”

According to the state constitution, the Department of Lands must manage endowment holdings in the way that will make the most money and the department has decided that means operating more businesses and commercial properties, including lands leased to geothermal concerns. The department wants to become less dependent on timber leases, which now represent 85 percent of the returns on endowment lands.

The pro tempore of the Senate, Sen. Brent Hill, R-Rexburg, said in a previous interview with IdahoReporter.com the commercial strategy doesn’t sit well with him, but that there’s not an easy answer.

“I don’t want to be critical of the state land board. It’s very difficult. They’re just doing their job. But I think we need to be very careful in the public sector to try not to compete with the private sector. The storage business is a symptom. They need to reset their own parameters. It’s somewhere in between (nothing and the storage business) …  It’s hard to evaluate the thing, but I still think there needs to be a fundamental desire to try to avoid it.”

Department of Lands Director George Bacon said in an e-mail that he was not aware of pending legislation and did not offer comment. Bob Cooper, a spokesman for Attorney General Lawrence Wasden, said the AG would have to see legislation before commenting on it.  Wasden, as attorney general, is a member of the state land board. The constitution also puts the governor, state controller, secretary of state, and state superintendent of schools on the panel.

Burgoyne and Vander Woude said they aren’t sure when exactly they will bring a proposed bill forward.

Barbieri and Boyle are seeking to nullify 2010’s federal health care reforms, which they contend are illegal and unconstitutional.

In an interview with IdahoReporter.com, Boyle said that she gives no credence to the opinion of the attorney general’s office.

It appears she’s not the only one who seems not to care what the attorney general’s office has to say because, based on recent history, it seems that opinions about the constitutionality of proposed legislation isn’t that important to Idaho lawmakers.

At least three bills proposed in last year’s session had questions about their legality, and of those, two passed.  Two of last year’s most controversial pieces of legislation – the Idaho Health Freedom Act and the Firearm Freedom Act – had questionable constitutionality, but the measures cleared the House and Senate and were signed by the governor.  Another bill, Rep. Phil Hart’s, R-Athol, measure to ban body-scan machines in the Gem State, passed the House but never received a hearing in the Senate.

Bob Cooper, spokesman for the attorney general’s office, said that bills passed with constitutional questions stand until some party successfully challenges them in court.  “A bill is not unconstitutional until a court says that it is,” he noted.  Cooper, who declined to comment specifically on the nullification bill, said that Idaho statutes are challenged “on a regular basis.”

Even if he wanted to, the attorney general couldn’t stop a questionable piece of legislation.  “The attorney general cannot stop a bill that he believes is unconstitutional,” Cooper explained.  “I have heard Lawrence Wasden say several times that he is not the 106^th state legislator.”

As for legal opinions, Cooper noted, they are simply advice to lawmakers.  “He [Wasden] is the attorney for the state of Idaho and gives legal advice,” said Cooper.

Once laws are passed, Wasden and his office are bound by law to defend the provisions of the legislation, even if they felt the law might have been questionable, as was the case if the Firearm Freedom Act. “The attorney general has a duty to defend state law,” said Cooper. (See update at the bottom)

The Firearm Freedom Act, a measure sponsored by Rep. Dick Hardwood, R-St. Maries, was on the receiving end of an unfavorable opinion for the state attorney general’s office prior to its passage.  The bill sought to prevent the federal government from regulating guns that are made – and stay – in Idaho.

The legal opinion, requested by Boise Democrat Phylis King, says that the act was likely unconstitutional, though deputy attorney general Ken Jorgenson recognized that the bill was intended to spark a lawsuit with the federal government.

“… It is within Congress’s authority to regulate a class of items, such as firearms, that move in interstate commerce without establishing that a particular firearm has so moved,” wrote Jorgenson in an e-mail to King.

The Idaho Health Freedom Act, co-sponsored by Reps. Lynn Luker, R-Boise, and Raul Labrador, R-Eagle, and Rep. Jim Clark, R-Hayden, directed the attorney general’s office to sue the federal government over a provision contained within 2010’s health care reforms that requires citizens to purchase health insurance or pay a penalty.  The legal challenge is being tended to by the attorney general, but his office questioned the act’s constitutionality prior to working on the case.

In another legal opinion , again at the request of King, deputy attorney general Brian Kane said that the constitutionality of the act could come into question after its passage.  “As addressed below, there may be constitutional challenges presented by this legislation but at this point, it is difficult to forecast either the significance or the likelihood of success of such a challenge,” Kane wrote to King.

The act passed the Legislature on a 72-28 count.

The situation surrounding Hart’s bill was a little different because the sponsor himself requested a legal opinion on his measure.  Hart received an informal analysis of his bill on March 1, 2010, that said the measure, an act to prevent the Transportation Safety Administration from using body scanners at Idaho airports, would likely conflict with the U.S. Constitution. Hart pushed forward with the legislation two weeks later, testifying at the House Transportation Committee and gaining passage of the bill from the panel.

A formal legal opinion was delivered to Hart March 18, saying that his bill is unconstitutional because the federal government has jurisdiction over travel. “In the area of airport security, it is quite likely that any state law that affects airport security – and particularly passenger screening protocols – will be preempted,” wrote Carlson in the March 18 letter to Hart. That same day the House approved the measure and sent it on to the Senate, where it never received a committee hearing.

Correction: Bob Cooper e-mailed IdahoReporter.com Friday to add one element to the story.  Cooper said that the attorney general and his deputies are only required to defend or execute a state law when their is a legally acceptable defense for the statute.  If there does not exist a valid argument for a specific provisions within a state law, Cooper pointed out, the attorney general is not legally obligated to defend that portion of statute and may have to admit in a court challenge that he cannot.

He says they’re right, but it’s not a bad thing. It’s his consitutionally-mandated job as a member of the state land board to manage state endowment lands as a business in order to make as much money as possible for public schools, and other beneficiaries, he says.

 There’s no secret about it – when you are talking about endowment lands, the state is indeed in business, Wasden said, and it has been since 1890, when the federal government granted Idaho 3.6 million acres to hold in trust (distributed in a fashion that resulted in a checkerboard of holdings across the state) to benefit public education.

When it comes to endowment lands, the “state” is not the “state” as it is commonly conceived, he argues. It’s a business entity that has competed with private timber and land concerns since statehood. 
When it comes to managing state of Idaho endowment lands, which primarily benefit public schools and the University of Idaho, the mission is to make money, he states unapologetically.

That’s why the state can’t make a park out of some tract of endowment land that might be perfect as a park (and perhaps not much good as anything else) because parks don’t make money. That’s also why Wasden sued the land board — which consists of himself, Gov. Butch Otter, Controller Donna Jones, Superintendent of Schools Tom Luna, and Secretary of State Ben Ysursa — over the renewal of cottage-site leases for hundreds of homes on state-owned land at Priest and Payette lakes. The suit challenged a 1990 law allowing the state to lease cabin sites without putting the leases up for public auction, and thus not getting top dollar for the desired properties.

Flanked by Clive Strong, a longtime deputy attorney general assigned to the land board, Wasden defended his stand on the cottage sites, the purchase in August of 2010 of Affordable Storage and the state land board’s plan to lessen its dependence on timber leases, in an interview in his  office at the Capitol last week.

In March 2010, the board voted to extend leases of 521 sites to set leases at 4 percent of the current land value starting in 2012. Leases now are set at 2.5 percent of the current value. In December, the Idaho Supreme Court on a 3-2 vote dismissed the attorney general’s challenge. The majority argued Wasden should approach the case in a lower court. In a dissent, Justice Roger Burdick wrote, “The facts in this case are not in dispute. The record clearly demonstrates that the Land Board is exceeding its discretion in leasing the cottage sites for less than market value and failing to obtain the maximum long-term financial return for the beneficiaries, which is a violation of both I.C. § 58-310A and the Idaho Constitution. The majority does not deny this, instead finding that the Attorney General has other plain, speedy and adequate remedies available.”

The “underperformance” of the cabin-site leases is due to decades of “old lease management practices,” a consultant found; beneficiaries are losing about $13 million annually due to the undervaluation of the cottage sites by $66 million. Selling the sites and reinvesting the money “could double net revenues and significantly diversify holdings over the next 20 years,” reads the December 2010 report of consultant Heartland LLC. “Instead of averaging $48 million in net revenue per year, the land portfolio could average as much as $100 million in net distributable revenue for trust beneficiaries.”

The board has decided to gradually get rid of cabin sites by selling them or through land exchanges. Previous trades of cabin sites, from 1998-2001, resulted in the state acquiring downtown Boise retail and office buildings, and parking lots – 15 properties in all, including the Garro Building and the Hoff Building parking lot. Disposing of the cottage sites could mean greater state involvement in downtown Boise – the December report concluded that “beneficiaries are far better off disposing of the cottage sites in a down market and reinvesting the proceeds in institutional grade assets with similarly reduced valuations but with far more potential to capture long-term appreciation.” The endowment should “reinvest the proceeds … using methods and procedures that are consistent with those of professional investors with similar fiduciary responsibilities.” The combined 2010 appraised value of the 521 cottage sites is $252 million.

Converting to commercial is in mind for other types of land holdings besides cottage sites. 
Wasden said leasing land for grazing is a loser from an investment perspective – on 1.4 million acres the state makes about $300,000 per year. Agriculture land — about 40,000 acres of it – generates only a little more than $150,000 annually. The state gets about $45 million from timber leases, about 85 percent of total endowment land returns. The state is leasing more land for less money these days as the housing market has stalled.

So what to do with that land. Sell it off? Put all of the money in financial markets?

That’s an idea, but trying to sell certain parcels would draw fire from all over, including from hunters and other outdoor enthusiasts who use endowment lands to recreate, said Strong. Conservation groups too might object to the state unloading land to commercial prospectors. Some states, including Utah, struck oil in those scattered squares of land allotted them by the federal government. No such luck in Idaho, where officials are thinking about the role and potential of state involvement in commercial property, ownership of businesses, and participation in developing urban properties.

The state constitution says the land board must act as a “prudent investor” in its managing of endowment lands. It’s a standard that applies to managers of trusts that basically means the manager must do whatever any right-minded businessperson would do to get top dollar; that means not accepting anything less than the very most that can be got, but the state constitution that makes it that way at the same time stands in the way of achieving it. The Idaho Department of Lands (IDOL) and the land board want to change the constitution so that land can be sold through private bid, and negotiations, with particular developers, rather than only at public auction. The land board plans to put the change up for a public vote in 2012. Disposing of land at public auction and making a pittance off of grazing land when there’s possibility for a higher return is not what a prudent investor would do. The board also seeks to make it legal to dispose of property through private negotiations and development deals, rather than solely at public auction, in order to get the most of each property. That’s despite what’s happening with the cabin sites where the board has shunned public auction and, as a result, accepted less money for beneficiaries.

The state’s pursuit of commercial properties and businesses, which irks some who see the action violating the principles of limited government and an understanding that government won’t battle its benefactors, is seen by the land board as the action of a prudent investor. So Wasden and the land board are doing what they have to do, according to the constitution. Wasden is doing what he needs to do when it comes to the cottage sites, according to the constitution.

Still, the evolution of endowment lands and the state’s management role over time raises questions, said Strong.

”We have an 1890s system that’s being applied in a 21st century world,” he said, noting that land is no longer the ultimate investment, or the representative of wealth, that it once was. If things were to be done over today, the feds would probably give states a pile of money, instead of land, to invest in bonds, gold, or whatever, in order to support public education, Strong said.

But as things are the state is looking to explore business opportunities, buying commercial buildings, buying businesses, and developing commercial and residential projects.

So how far could it go? What could the state own? Fast food franchises? Bowling alleys? Dairy farms?

Nothing spells out or limits what areas the state might operate, but, said Strong, the “prudent investor” provision would prevent the board from venturing into high-risk businesses or highly-specialized businesses that the state does not understand. Self storage is pretty cut and dry, you just do paperwork and collect a check, basically, he said. 

But nothing requires the state to deal only in relatively uncomplicated, static ventures, and the land board and Department of Lands has, in reports and speech, readily said that they don’t have the know-how to run a business, whatever it may be, and that contractors must be hired to oversee operations acquired.

Contractors like Colliers of Boise, which manages the endowment’s commercial properties, except for Affordable Storage, which is managed by Thornton Oliver Keller, the firm that helped arrange the sale of the storage company on South Maple Grove Road to the state in August.

George Iliff, managing principal of Colliers, defends the state’s commercial real estate activities. Expansion of commercial holdings, including more buildings in downtown Boise, is in large part meant to diversify, and in the long term to stabilize, the endowment’s portfolio, but in the last few years the property business, along with most everything else, has taken a dive.
 Income may be down, but the commercial properties  are bringing in more than near-worthless grazing land somewhere, Iliff said. In 2009, the downtown properties altogether made about a half-million dollars, with several buildings that received major remodels posting big losses. Iliff says the state owns a number of “landmark assets,” old buildings that “managed to avoid the wrecking ball,” like the 120-year-old Garro Building, at 816 W. Bannock, which required $252,444 in repairs and improvements in 2009, and finished the year with a loss of $37,976.

Combating the notion that the state could someday expand its holdings to a point where it could dictate market lease rates downtown, Illif said that the state behaves “responsibly” to the point, occasionally, where it moves slower than the private sector and misses opportunities. However, in an e-mail, Iliff complained that a story published last week by IdahoReporter.com depicted the state as not being as nimble as the private sector when it comes to being a landlord, an observation offered by Colliers executive David Wali.

“Their portfolio is comprised of landmark assets, into which IDOL has continually and heavily invested, not only to bring the buildings up to code and marketable standards, but also to act as a steward for Boise’s history,” Iliff said. “Most private investors would not have invested similarly in these buildings, so instead of having viable, functioning assets downtown, Boise could have been saddled with distressed properties in the core.  IDOL’s stewardship should be commended, not condemned.”

State of Idaho holdings and returns

Asset                                         Acres            Value               Net income

Agriculture (all types)            39,308     $46.8 million     $169,749

Forest                                       972,210     $1.3 billion         $45.3 million

Range (grazing)                    1.4 million   $821 million     $316,938

Acres            Value                    Net income

Real Estate (Commercial)                              16,315           $50 million             $796,560

Real Estate (Conservation)                            226,346        $18.6 million         $8,415

Real Estate residential (cottage sites)           815               $337 million          $4.5 million

Total                                           2.4 million      $2.6 billion             $51.1 million

Source: Western States Land Commissioners Association

Warrick Pharmaceuticals and Schering-Plough, now known as Merck, will pay Idaho the money as part of a settlement. Idaho’s Medicaid program reimburses pharmacies for Medicaid drug purchases for low-income children and adults using the reported average wholesale price. If that price is inflated above actual prices, the state can end up overpaying for prescription drugs.

Idaho Attorney General Lawrence Wasden has resolved eight such cases dealing with drug makers’ average wholesale prices, which have netted Idaho $9.4 million. His office reports that three more cases, involving 21 companies, are still pending.

Read Wasden’s news release below.

Idaho to collect $750,000 in drug pricing settlement

(Boise) – Prescription drug manufacturers Warrick Pharmaceuticals Corporation and Schering-Plough Corp. (now known as Merck & Co., Inc.) have agreed to pay the State of Idaho $750,000 in a legal settlement resolving Idaho’s claims relating to the “average wholesale prices” reported by the companies, Attorney General Lawrence Wasden said.

Idaho Medicaid provides health care services, including prescription drugs, to low-income Idahoans. By law, Idaho Medicaid must reimburse pharmacies at the “estimated acquisition cost” of the drug. Idaho Medicaid primarily uses “average wholesale price,” as reported by drug manufacturers, as a basis for determining this amount.

If the manufacturer reports an inflated or false average wholesale price for a drug, taxpayers can pay too much for that drug through Medicaid reimbursements. For example, the pharmaceutical product Albuterol, manufactured by Warrick, had a published average wholesale price of $1.259 in 2003, but Attorney General Wasden’s investigation revealed an actual average wholesale price of $0.25 in 2003. This results in a 405% difference between the published price and the actual price.

“Where published prices are false or misleading, the taxpayers are significantly harmed by excessive Medicaid reimbursements,” Attorney General Wasden said. “Investigation by my office has revealed that the reported average wholesale price often is not related to the actual wholesale price paid for the drug. Misrepresenting the wholesale price is a violation of the Idaho Consumer Protection Act.”

The settlement with Warrick and Schering has been submitted for approval by the Fourth District Court in Ada County. The companies admitted no liability or wrongdoing.

“This settlement provides relief to Idaho taxpayers and brings the matter to a conclusion without the need for continued litigation,” Attorney General Wasden said. “I appreciate that the company was willing to work with my office to reach an appropriate resolution.”

$615,531 from the settlement will be deposited in the state’s general fund to be appropriated by the legislature. $50,000 will go to the consumer protection account to reimburse the attorney general for investigative and legal costs.

Since 2005, Wasden has resolved eight average wholesale price cases with drug manufacturers, including this settlement, resulting in approximately $9.4 million recovered for Idaho taxpayers. Three average wholesale price cases, naming approximately 21 other drug manufacturers, are still pending.