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State might buy forests, use
returns for college grants

Oregonian July 26, 2004

The governor's aides say it's just an idea, but it's one that blends financial aid, management of resources and long-term thinking
Monday, July 26, 2004

Gov. Ted Kulongoski's staff is exploring the idea of the state purchasing forest land as a long-term investment, with the goals of protecting Oregon's wooded character while aiding troubled logging communities and using returns to make college more affordable for residents.

If they pursue the concept, it could be reminiscent of the state's restoration of forests in the Coast Range after wildfires leveled them more than five decades ago. Voters invested $12 million in bond revenue to replant what has become the Tillamook State Forest, which now holds an estimated $3 billion worth of land and timber.

The governor "wants to do something that, in 30 years, we're going to look back on like we do with the Tillamook and say, 'That was a great idea,' " said Jim Brown, Kulongoski's natural resources adviser and a former state forester.

The proposal might help maintain working forests that are a crucial part of the state's timber economy so they are not overcut or sold for development, especially in Eastern Oregon. Also, decades from now, logging money could help low-income and some middle-income Oregonians pay for a college education in the state.

The governor has said creating a state trust fund that would provide tuition grants is a top priority for his administration, as college costs outpace inflation and state support for public universities declines. His advisers say funding would have to come from many sources. Investing in timberland is one item on a growing list of short- and long-term money raising strategies they are discussing.

But aides emphasized the idea remains preliminary and would need approval from the Legislature -- and, probably, voters. They now are trying to determine whether the state could raise what probably would be hundreds of millions of dollars necessary by issuing revenue bonds.

Such bonds raise money that would have to be paid back through a return on the investment, in this case the forest land.

"The public would really have to believe in this," said MardiLyn Saathoff, higher education adviser and general counsel in the governor's office. "This is clearly a long-term return project."

The logging revenue would be funneled into a trust fund that Kulongoski wants voters to enshrine in the state Constitution, to protect the money from uses other than higher education. Earnings would provide annual grants to low-income and some middle-income Oregonians of as much as the average cost of tuition and fees at a state public university. The grants could be used at any community college, public university or private nonprofit college in the state.

Raising $3 billion

Kulongoski has forecast that it would take a decade to build an endowment large enough to serve the majority of Oregonians who would qualify. Based on the number of students who qualify for an existing state grant program, the Oregon Opportunity Grant, the endowment would need to reach $2 billion to $3 billion to meet demand, according to estimates by Kulongoski's advisers and a State Board of Higher Education workgroup designing the plan.

To put that figure in perspective, $3 billion equals $877 for every man, woman and child in the state. Oregon's entire state budget for 2003-05 is roughly $11 billion.

Other potential money sources include donations from private companies and revenue from state taxes on capital gains. Capital gains taxes flow into the state general fund, which pays for K-12 schools and human services, so using them could divert money from those programs.

Kulongoski, the interim chairman of the higher education board, said he doesn't want to take resources from existing programs. But he also told a board committee at Portland State University last week that capital gains revenue could expand existing grants to serve more students in the short term and build the endowment in the long term.

He said that might win support from the business community, which regularly lobbies for cuts in capital gains taxes but also has an interest in more educated workers. "I don't think personally there's anything more important in what we do than getting this program together," Kulongoski said. "It will be a long march. . . . We can get there if we just understand how important it is to Oregon's progress."

Advisers said they have several key requirements if they pursue investments in timberland. First, counties would have to be protected, so public purchase of private timberland would not erode their tax rolls. The state might have to reimburse the counties in some form, Brown said.

Balancing wood with trees

Also, the forest land would need a clear mandate for management. Logging in the Tillamook and Clatsop state forests has become mired in controversy, and a ballot initiative now seeks to set part of their acreage aside for wildlife and other environmental values.

Brown said one compromise might be for the state to sell conservation values attached to land it buys. Conservation groups might pay the state for assurances of certain environmental protections, supplying money that could help pay off the purchase of the land. The state could then produce long-term revenue through sustainable logging that does not jeopardize the conservation values.

Investing in timberland could help address disconcerting trends playing out in Oregon's forests, Brown said.

Some large timber companies, prodded by global forces such as increased lumber imports, are selling their private forest land. That puts it at risk of being subdivided for residential development or logged at unsustainable rates by investment groups seeking fast returns.

Logging on federal land throughout Oregon has meanwhile collapsed, in part because of forest and wildlife protections. The combined trends have forced sawmills to close. About 15 sawmills still operate in Eastern Oregon, and nearly a third of those probably will close soon, according to the Oregon Department of Forestry.

Without sawmills to purchase timber, private forests lose value and are more likely to be developed at the expense of wildlife value and rural jobs, say many in the field.

"If you take natural resources out of the picture in Eastern Oregon, there's not much left," said Ray Wilkeson of the Oregon Forest Industries Council.

He said linking forests to higher education funding might help Oregonians see the value of managed forests in the state at a time when they are subject to increasing contention. He said it would also help preserve rural communities eroding as they lose access to timber.

"If they can figure out a way to make it work, I can't imagine anybody who wouldn't think that's a good thing," Wilkeson said.

But Jay Ward, conservation director at the Oregon Natural Resources Council, said the demand for education money might force officials to log faster than forests can stand.

He said the state might turn out to be a better land manager than private timber companies. But conservation groups remain critical of state management of the Tillamook, where officials have been under pressure to step up cutting to meet demands of the Legislature.

"Public ownership is no guarantee of sustainable management," he said.

In the meantime, Kulongoski wants to boost state funding for the Oregon Opportunity Grant for the students who need help to pay for college now. The Legislature provided $22 million for the program in 2003-04, enough to cover 11 percent of college costs for low-income applicants. An estimated 21,000 eligible students were not awarded grants because the money ran out.

Former Gov. John Kitzhaber, a Democrat who recently has advocated a new cooperative vision for state forests, said he and Kulongoski have discussed the issue. He said the challenge will be to convince industry and conservation groups the state can manage forests in a way that is environmentally and economically sustainable.

"We're looking at a long-term proposition," he said. "I think it's a good concept."

Michael Milstein: 503-294-7689; michaelmilstein@news.oregonian.com Shelby Oppel: 503-221-5368 or shelbyoppel@news.oregonian.com.

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