Stock market losses will significantly reduce the distributions to beneficiaries of state land trusts, the state Treasurer’s Office is forecasting.

Treasurer David Petersen sent a letter May 14 to the governor and legislative leaders, among others, to inform them that the total distributions to 13 beneficiaries of the land trusts will drop for fiscal 2004 to about $10 million from $60.6 million in fiscal 2003, which ends June 30. Since that letter was sent, the picture has brightened somewhat, as the Treasurer’s Office revised that estimated distribution to about $13.2 million, which nonetheless would represent a decline of about 78 per cent.

Investments on the state land endowments, created at statehood with federal land, are worth about $1 billion. Distributions on the investments are made monthly to beneficiaries ranging from the Arizona Pioneers Home, a nursing home in Prescott, to primary education to the state universities. The amount of the distribution is calculated annually, and the forecast for fiscal 2004 looks grim, Mr. Petersen said.

The lower payout for next year is the result of “…significant losses in the equity holdings of the fund from September 2000 to October 2002,” Mr. Petersen said.

The State Land Endowment funds have only been investing in stocks since July 1999, following voter approval of Proposition 102 in 1998. The Legislature referred the measure to the ballot, which amended the state Constitution’s prohibition against investing state money in the stock market.

From October 1999 to October 2000, the state’s investments in the stock market showed gains, but had turned to $160 million in losses by early this year. A bullish April saw the land trust funds gain back about $40 million of the losses, but the unrealized losses in equities still stand at about $120 million.

The equity investments are not in individual stocks but are in depositary shares of the Standard & Poor’s 500, the largest of the companies publicly traded in the United States, and the S&P 400, the medium-size publicly traded companies based on the market values of their shares.

The losses have been mitigated by gains of $91 million on fixed-income investments, such as U.S. Treasury bonds and corporate bonds. The net total return through April 3 was a loss of about $31 million to the land trusts. —