Experts Assure Legislators Endowments Plan Is Safe They Say Managing Cash, Lands Wouldn’t Hurt Policies

Two financial experts tried to ease legislative concerns on Monday over a proposal to essentially combine management of the state’s financial and real estate endowments.

Robert Maynard, the portfolio manager for the state $5 billion public employment pension fund, said consolidating management of the $600 million cash endowment with the $3 billion land endowment in no way jeopardizes longstanding management policies.

What it will do, Maynard said, is eliminate the existing structure of estranged management of the two assets that “prevents consideration of doing something different.”

The concerns, voiced by both Democratic Sen. Marguerite McLaughlin of Orofino and Republican Sen. John Andreason of Boise, were prompted by the questions raised about current land management policies by Sally Fairfax, a University of California-Berkeley expert on state trust lands.

Fairfax said the state Land Board timber policy based on sustainableyield harvests has basically become an policy of selling the same amount of timber annually. It does not permit the state to increase sales when timber prices are high and cut them back when prices are low to boost returns for education on that part of the endowment.

“You give the advantage to the timber purchaser when to buy and not to buy,” Fairfax said.

But McLaughlin and State Lands Director Stan Hamilton disputed the suggestion that the current policy undermines the state’s obligation to maximize returns for public and higher education.

Assuring the state’s lucrative forest land continues producing annually cuttable tracts guarantees education a constant source of revenue.

Fairfax acknowledged the arguments on the other side and warned the special legislative committee that attempting to impose the ideology of financial managers on assets that have been run for generations by resource managers creates “some really hard questions that you ought to be prepared for.”

The panel is assessing the report of Gov. Phil Batt’s special tax force on increasing the cash generated by the endowment fund and lands.

Investment counselor Doug Dorn believes that applying private sector management structure and principles to the entire endowment could easily increase the return. Now the endowment is returning about 3 percent a year - or $100 million. Just a percentage point increase would be $33 million more for schools.

It is that kind of cash that some politicians believe can head off the need for a general tax increase in 1999 after next year’s election. But doubt remains among many analysts that any dramatic change in managing the state lands - which account for the bulk of the endowment - is possible, as long as decisions remain with a board of statewide elected politicians seemingly bent on protecting long-term state land users.