Superintendent of Public Instruction Tom Luna wants to tap a reserve fund for $52.8 million to offset looming cuts of at least $135 million for K-12 education.

But the funds investment manager opposes the transfer, and the four other constitutional officers on the Land Board, which controls the Public Schools Earnings Reserve Fund, are wary of using the money this year and potentially endangering future payouts.

"It does not address the future implications of how you build the fund so that future generations maintain their purchasing power," said Larry Johnson, the manager of the Endowment Fund Investment Board.

He will present his findings Wednesday to the Land Board: Luna, Gov. Butch Otter, Secretary of State Ben Ysursa, State Controller Donna Jones and Attorney General Lawrence Wasden. They will be forced to debate - and vote - on the pressing issue of education funding in an election year.

It is an odd situation for Otter, who can usually let lawmakers cast votes before he signs or vetoes bills.

"We're in a lot of unusual situations this year," Otter spokesman Jon Hanian said.

Though the board often casts votes on land issues - "a lot of mundane items," Ysursa said - Wednesday's meeting will be heavily scrutinized for what Ysursa called "one of the most important votes I've had in my two terms as secretary."

"As much as we would like to give a lot of money up front right now," Ysursa said, "... I think it's a little dangerous to not have adequate reserves when your two sources of income are uncertain at this time."

The Public Schools Earnings Reserve Fund now has $90.4 million. It is fed by interest earned from the Public Schools Permanent Endowment Fund (based on stock market investments) and money earned from about 2 million acres of Public Schools Endowment Lands (largely from timber sales).

Ten years ago, the Land Board formed the schools-reserve fund to create a more consistent flow of money to education. Before, all the earnings would be directed toward public schools, with wild fluctuations from year to year.

Schools received $31.3 million this year and are set to get the same amount next year.

The fund is expected to generate $24 million for fiscal year 2011, even in the most pessimistic forecast. Luna proposes taking $52.8 million additionally this year, which would leave $31.3 million - or one year's worth of payout - under a pessimistic forecast. Luna said that it is a prudent and responsible approach.

"We have chosen the most conservative numbers available to ensure that we do not overcommit the resources of the fund or put future distributions to beneficiaries at risk," Luna told lawmakers last week. "Simply put, this is a one-time drawdown of an excess reserve fund."

The management plan for the fund, however, is to maintain five years' worth of reserves and put any money above that amount back into the endowment fund.

Wasden has expressed skepticism that the fund could rebound quickly after such a large payout.

Jones, too, has questions.

"Ultimately, the decision the board makes may impact students beyond the current budget year," Jones said in a statement to the Statesman. "I'm studying this critical issue so I can vote in a way that protects all students, current and future."

Brian Murphy: 377-6444