PRESIDENT SMITH SIGNS AGREEMENT TO REIMBURSE WSU TRUST FUNDS; SPOKANE BUILDING SECURE
A $36 million settlement agreement signed yesterday by university President Sam Smith and Dick Thompson, director of the state Office of Financial Management (OFM), will reap substantial benefits for Washington State University students and faculty in the next millenium. This four-page agreement, ensuring a brighter financial future for WSU, was made possible by federal land grant laws that are more than 137 years old.
The agreement triggers the release of $20 million this week that was appropriated by the 1999 Legislature. Another $16 million is to be paid to the trust before June 30, 2005. These funds are being released by OFM, which is Governor Gary Locke`s budget office. Investment income on these added trust funds will pay for future capital construction projects in the WSU system. The first project to directly benefit from the settlement is the WSU Spokane Health Sciences Building. Construction on the building is scheduled to begin in November at the campus, which is across the Spokane River from Gonzaga University. Perhaps indicative of the era of cooperation among institutions, the WSU Health Sciences building will have Eastern Washington University as its largest tenant. Thus, EWU will also realize some of the benefits of WSU`s land grant mission. Many state officials indicated that there would not have been funding in the 1999-2001 capital budget for the Spokane building without the WSU trust settlement. Indeed, the building was not funded in the draft OFM budget prior to settlement negotiations.
This agreement settles a dispute involving management fees associated with trust lands granted to the State of Washington by the first Morrill Act of 1862. When Washington became a state it was given acres of timberland in trust to benefit a college. In its first year of statehood the legislature designated what is now Washington State University as the beneficiary. The federal lands in question were provided to the former Washington Territory with conditions. One condition was that the state would use all of the income from the trust for the college, and would pay any management fees from the state treasury. Unfortunately, nearly one quarter of the revenues from timber sales over the last several decades were used for the payment of management fees. Those charges continued to be assessed against trust income until the 1999 legislative session. In a formal opinion the state attorney general confirmed the DNR deductions were improper under federal law. WSU estimates that $60 million to $100 million was lost in principal and interest as a result of this practice during the last 35 years. Efforts in the 1997 and 1998 legislative sessions to find a solution to this issue were unsuccessful. The governor, Thompson, and OFM higher education analyst Wolfgang Opitz worked with WSU to achieve this settlement, which was pushed through the Legislature by Senate Ways and Means Chair Valoria Loveland, D-Pasco. The settlement was funded in section 1703 of Substitute Senate Bill 5180, the supplemental and biennial operating budget.
Loveland, who wrote the budget, also sponsored Senate Bill 6090, which provides that all costs and expenses for managing the trust will be funded separately by the Legislature in the future. The bill was signed by the governor on May 12.
A key sentence in the agreement states, "As a matter of good faith....payments shall not be made from, nor shall they reduce, any other fund or appropriation to Washington State University." In a letter this week, Thompson thanked President Smith for his "persistence and patience" in helping to work through the problem. "Of course, good faith requires that we not recommend adjustments elsewhere in the WSU budget to compensate for these payments. It is especially helpful that the interest earnings on the $36 million will go to pay the debt service on bonds issued to construct the much-needed and important Spokane Health Sciences Building, thereby relieving pressure on the state`s very tight capital budget." The concept of funding the Spokane building with a trust settlement was proposed late last year by John Fricke, who was then senior budget assistant for capital planning and facilities at OFM. Fricke left OFM but continues to work on WSU capital construction projects for the state Higher Education Coordinating Board. State Assistant Attorney General Gary Ikeda was a key facilitator of the negotiations. Greg Royer, WSU`s executive director of budget and planning, and Seattle attorney Doug Lawrence represented the university in the successful discussions.
GOVERNOR GARY LOCKE COMPLETES ACTION ON MAJOR UNIVERSITY LEGISLATION. Gov. Gary Locke has now completed action on legislation affecting WSU passed during the 1999 regular session of the Legislature. One of the highlights was the signing of WSU`s Real Estate Center bill on May 5, Engrossed Senate Bill 5720, supported by the Washington Association of Realtors. The legislation provides that $10 from each new and each two-year renewal license for real estate practitioners will be directed to real estate research at a state institution of higher learning. The WSU research center the only such program currently operating in Washington and one of the few in the West. With as many as 45,000 licensees in the state, it is estimated about $215,000 per year - nearly twice the amount available the past few years, will be awarded to the university. Since the center`s inception in 1989, funding was derived from interest on broker pooled trust accounts. The new law takes effect July 25 of this year. Other legislation recently signed by the governor includes: Substitute House Bill 1016, the Border County Higher Education Tuition Pilot Project, signed May 14; Senate Bill 5125, the WSU Pesticide Commission bill, signed May 10 and Substitute Senate Bill 5277, the higher education student Child care bill, signed May 17.
