How the Higher Education Endowment Trust Fund works: history, income and distribution rules

The Higher Education Endowment Trust Fund was established by the legislature in 1999 with an initial appropriation of $6,000,000 and a subsequent $1,000,000 addition, Treasury staff told a legislative committee on Jan. 30.

Deputy Treasurer David Chair described how the fund is structured by statute to serve three beneficiaries and to make a mandatory 5% distribution each year, with an optional additional 2% distribution when allowed. “It’s always been the same 3 beneficiaries, with the same 5% mandatory distribution, with the caveat that you don't eat into the principal, and the same optional 2% distribution,” the deputy treasurer said.

Treasury staff said the fund’s current balance stands at just over $67,000,000 and that most of the fund’s significant income has come from occasional estate-tax receipts. Staff also noted a secondary, smaller revenue stream: transfers from the office’s unclaimed property fund. Those transfers come from accounts more than 10 years old and under $100; the most recent transfer was just under $150,000, and historically such transfers have been small relative to estate-tax receipts.

The committee heard that the fund is invested as part of a consolidated Trust Investment Account rather than as a standalone vehicle. The treasurer’s office manages the account, with the treasurer holding fiduciary responsibility and staff making day-to-day investment decisions. The office described the allocation as “middle of the road,” balancing the need to protect the fund’s body while seeking reasonable returns.

Committee members and Treasury staff discussed distribution history, including an exception in FY2022 when market losses led to no distribution because doing so would have required drawing on principal. Over the trailing 10 years, Treasury staff said the investment account produced an annualized return of about 5.6%, with higher returns in recent years but no guarantee that past performance will continue.

Officials emphasized that changing how the fund is used or how receipts are routed would require statutory action by the Legislature. No vote or legislative action was taken at the Jan. 30 hearing; the treasurer’s office offered to return with an investment specialist for a more technical briefing.