New Study Shows that Selling the Elliott State Forest Could Double the Common School Fund
For immediate release, March 19, 2007
Cascade Policy Institute released a report today calling for a new management strategy on the Elliott State Forest, including the possible sale to private parties. The study, entitled “Another Option for School Funding: Selling the Elliott State Forest,” was authored by Cascade President John A. Charles, Jr.
The Elliott is part of the state’s “Common School Trust Land” portfolio, which must be managed for the sole purpose of generating the maximum revenue possible over the long term for Oregon K-12 schools. Under the management of the Oregon Land Board, the average annual return on asset value for the Elliott in recent years has been about 3%.
Net revenues from timber harvesting on the Elliott are placed in the Common School Fund (CSF), which is managed by the Oregon Investment Council. In most years the rate of return on the Fund exceeds 8%. One option for the Oregon Land Board would be to sell the Elliott and place the revenues in the CSF. This was recommended to the Board in 1994 by consultant John Beuter as the best way to maximize net revenues, but that advice was ignored by the Board. Since then, the Board has repeatedly ignored requests to increase harvest levels or sell the forest.
The Elliott suffers from high management costs related to federal Endangered Species Act (ESA) compliance. However, there is nothing in the ESA itself that requires such high costs. The Land Board has chosen a compliance strategy that is unnecessarily costly and bureaucratic. If the Elliott were under private management, annual timber harvest likely would double, while still achieving compliance with the Act.
According to study author John A. Charles, Jr., “The State Land Board has been promising to substantially increase the net revenue from the Elliott for over 10 years, and it hasn’t happened. The timber harvest levels from that forest are less than half of the long-term sustainable levels. The excess timber left standing represents money that is not flowing to the Common School Fund, as required by the Oregon Constitution.”
In response to these concerns, Rep. Chuck Burley, Sen. Joann Verger, and six other legislators have sponsored HB 3434, which directs the State Land Board to change its management strategy so that the rate of return on the Elliott matches or exceeds the performance of the CSF during the years 2008-2010. If it does not, the Board is instructed to seek bids for a possible sale to private parties. Based on prior assessments, the Elliott could be worth anywhere from $600 million to more than $1 billion.
In comparison, the current market value of the CSF is approximately $1.1 billion.
“HB 3434 is a non-partisan, market-based response to the unwillingness of the Land Board to carry out its fiduciary responsibilities on the Elliott,” said John Charles. “Oregon’s students deserve to have the maximum net revenue possible being generated from this valuable asset,” Charles concluded.
The House Agriculture and Natural Resources Committee will hold its first hearing on HB 3434 on Tuesday, March 20, at 3:00 p.m.
Contact: John A. Charles, Jr.
503/242-0900 — w
503/459-3727 — c