Board moves on sale of Elliot State Forest tracts

By Economist Dr. Eric Fruits, Econinternational

The Oregon State Land Board on Tuesday agreed to move forward with the sale of scattered tracts of the Elliott State Forest, reports OPB. Gov. John Kitzhaber, Secretary of State Kate Brown and State Treasurer Ted Wheeler—who make up the State Land Board—unanimously backed the plan.

They said the board needs to balance conservation concerns against a constitutional requirement that the land generate money for public schools. Kitzhaber said the state needs to go forward with accepting bids to determine the value of the 2,700 acres, whether the land is sold to timber companies or conservation groups.

Three years ago, I testified before the State Land Board and presented evidence that the state was violating its fiduciary duty to manage the Elliott State Forest for the benefit of Oregon’s K-12 schools. In 2009, the Elliott State Forest contributed $6.4 million to the state’s Common School Fund.  Fast forward to 2013 and land management in the Elliott State Forest will cost the state about $3 million, according to the Oregonian.

In other words, under state management, the Elliott State Forest went from making a modest contribution to Oregon schools to effectively taking money from Oregon schools.

I suggested that the state sell or lease the Elliott State Forest, place the proceeds with the Oregon Investment Council, and use the investment returns to fund K-12 schools. Using the Council’s history of returns I performed a Monte Carlo simulation to develop a range of potential investment returns.  I assumed that the state would annually fund schools with the greater of (1) one-half of the annual growth in the fund, or (2) 2.5 percent of the outstanding value of the fund.  The chart below show how much would be distributed under the median scenario produced by the Monte Carlo process.



It’s hard to see in the figure above, but under the median scenario, investment returns from a sale or lease of the Elliott State Forest was projected to provide an average of $34.6 million a year to Oregon K-12 schools for the first 10 years after the sale/lease. Which is a whole lot better than taking $3 million away from schools.

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