State Land Department Revenue

Summary of Revenue for Fiscal Year 2010

In this fiscal year, Land Department staff continued their diligent work and sincere dedication to support the Trust. Even in the current recession, we were successful in generating revenue for the beneficiaries. While the Department did not set new records, it did perform remarkably well in this economy. The following statistics help put the year's receipts into perspective:

• $155,429,219 Total Receipts - Ranks 7th all time
• $49,958,007 Expendable Receipts - Ranks 7th all time
• $94,511,605 Permanent Receipts - Ranks 7th all time
• $19,151,000 Land Sales - Ranks 19th all time

The Department's receipts were allocated as follows:

• $94.5 million from the sale of land and natural products was deposited into the Trust Permanent Fund, increasing the book value of the Fund to $2,331,097,000;
• $11.1 million was deposited into the Trust Land Management Fund, which is used to manage the Trust;
• Public schools and institutions received $50.0 million from land rents and interest income; and
• ($0.4 million) was deposited in the General Fund. The negative General Fund amount is due to $1.8 million in corrections being made to receipts that went to the General Fund in prior years that should have gone to the beneficiaries.

Please note that the constitutional formula for the Treasurer's distribution from the permanent funds to the beneficiaries resulted in a distribution of $1,799 from the Penitentiary Fund to the Department of Corrections. For FY 2009, the formula resulted in a total distribution of $59.4 million.

Revenue Forecast

Each year as part of the Department's budget request, the Department provides a revenue forecast to the Governor's Office of Strategic Planning and Budgeting and to the Joint Legislative Budget Committee. The budget request due on September 1, 2010 included a forecast for fiscal years 2011, 2012, and 2013.

The forecast reflects the current real estate market and economy. The forecast assumes land sales of $91 million in FY 2011, $50 million in FY 2012, and $250 million in FY 2013. For comparison, $454 million was sold in FY 2007, $126 million in FY 2008, $72 million in FY 2009, and $19 million in FY 2010. Most of the FY 2011 and FY 2012 sales are expected to be to government entities for conservation purposes. Along with sales volume, the real estate market and economy significantly affect the amount received in early payoffs. The forecast does not assume any early payoffs or partial patents.

More significant than the early payoffs and partial patents is the number of current certificate of purchase (CP) holders that have requested, and will request, extensions for their scheduled payments. The Department has been able to work with the CP holders when it is in the best interest of the Trust. Extensions are not always in the best interest of the Trust or the CP holder; therefore, the Department forecasts some CPs to be cancelled during this three year period. If the land is returned to the Department, the principal received will be converted to expendable earnings. The longer the housing market continues to struggle, the more likely CPs will be cancelled.

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Permanent Fund Revenue

Permanent Fund Revenues come from the sale of land or royalties from natural products of the land. The State Treasurer invests these funds in stocks, bonds, and other interest-bearing securities. The Treasurer distributes funds to the beneficiaries based on a constitutional formula based on the rate of return, inflation, and the market value.

 

Permanent Fund Receipts and Balance by Beneficiary
		June 30, 2010 Balance*
	FY 2010 Receipts	Book Value	Market Value
Common Schools	$91,650,743	$2,170,992,000	$2,529,416,000
Legislative, Executive, and Judicial	201	5,117,000	6,509,000
State Hospital	198,595	3,768,000	4,806,000
Miner's Hospital	797,812	10,751,000	12,234,000
State Charitable, Penal and Reformatory	760,676	75,026,000	87,388,000
Penitentiaries	171,138	7,837,000	9,687,000
Normal Schools	80,748	2,284,000	2,832,000
Agricultural & Mechanical Colleges	153,223	6,249,000	8,135,000
Military Institutes	0	352,000	459,000
School of Mines	86,061	7,541,000	9,186,000
University Land Code	16,595	12,256,000	15,065,000
University of Arizona (Act of 2/18/1881)	161,963	25,955,000	32,269,000
School for the Deaf & Blind	433,850	2,969,000	3,861,000
Total	$94,511,605	$2,331,097,000	$2,721,848,000
*From the State Treasurer's Report dated July 29, 2010

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Expendable Revenue

Expendable Revenue includes lease revenue from Trust land leases and permits, interest from sales contracts, and treasurer's formula distribution on Permanent Fund investments. Expendable Revenue is available to beneficiaries to use directly for their operations. Proposition 301, passed in 2001, provides that all Common School Expendable Revenue exceeding the FY 2001 base will go to the Classroom Site Fund.

 

Expendable Revenue by Beneficiary
FY 2010
	Treasurer's Formula Distribution1	Lease & Sales Contract Interest	Total Expendable Revenue
Common Schools	$0	$38,146,797	$38,146,797
Legislative, Executive, and Judicial	0	252,296	252,296
State Hospital	0	304,250	304,250
Miner's Hospital	0	1,466,321	1,466,321
State Charitable, Penal and Reformatory	0	5,341,811	5,341,811
Penitentiaries	1,799	1,362,480	1,364,279
Normal Schools	0	196,746	196,746
Agricultural & Mechanical Colleges	0	84,261	84,261
Military Institutes	0	79,180	79,180
School of Mines	0	307,338	307,338
University Land Code	0	1,824,531	1,824,531
University of Arizona (Act of 2/18/1881)	0	427,226	427,226
School for the Deaf & Blind	0	164,768	164,768
Total	$1,799	$49,958,007	$49,959,806
1 From the State Treasurer's Office