Testimony of John A. Charles, Jr.
President and CEO, Cascade Policy Institute
Regarding SB 847
June 5, 2017
My name is John Charles and I have been closely following the management of Common School Trust Lands since 1996.
Sadly, the Trust Lands have been steadily losing value as an endowment asset during that entire period. For example, the Elliott State Forest was estimated to be worth over $800 million in 1995; it is currently a liability for the Common School Trust Fund.
The 620,000 acres of rangelands had net operating income of -$1.2 million in 2016.
SB 847 offers a pathway for the disposal of underperforming lands, but it’s difficult to see how a proposed transfer to other public bodies would be compliant with the fiduciary duty that Land Board members have to CSF beneficiaries.
Funds that the legislature might appropriate to “buy out” Trust Lands have to be paid by taxpayers. A large subset of that group will include beneficiaries of the CSF, including public school parents, school board members, public school teachers, and other school employees. Taxing them with debt service on bonds, as is now being proposed by the Governor for the Elliott, would be taking money away from them.
The Trust Land portfolio includes 1,540,000 acres of lands, as displayed in the attached summary from the most recent DSL status report. The estimated return on asset value for 2016 was 0.4%, which is an inflated number due the unknown market value of 767,100 acres of “Mineral and Energy Resource” lands and 13,200 acres of “Special Stewardship Lands.” They have minimal value to the CSF as an endowment asset, and that will not change.
The only way to carry out the fiduciary duty to CSF beneficiaries is to inject new, private capital into the picture. The state should sell the remaining Trust Lands – which could be worth more than $700 million — and invest the net proceeds in the Common School Fund, where annual total returns of 5%-8% could be expected for centuries to come.[Click Download the PDF to view exhibits]