COMMITTEE ON HIGHER EDUCATION

Representative Don Carlson, Chair

BILL ANALYSIS

HB 2859

Creating the Washington state endowment for higher education

BACKGROUND:  An endowment fund is a fund that provides a continuous future income for an institution or person.  The income is continuous only if the investment earnings and not the principal of the fund are spent.  In the past, legislatures have combined the endowment fund concept and a matching fund requirement in order to provide for an ongoing income and an incentive for private sector contributions.

Washington=s Distinguished Professorship program is an example of such a fund.  Under the Distinguished Professorship program, the state appropriates $250,000 per professorship to the Higher Education Coordinating Board.  An institution may apply to the board for a $250,000 match when the institution has private pledges or contributions of an equal amount.  Once the private donation is actually received by the institution, the board asks the state treasurer to release the state matching funds to a local endowment fund established by the institution for the professorship.  Proceeds, but not the principal, may be used to supplement the salary and expenses associated with the holder of the professorship.

SUMMARY:   The Washington State endowment for higher education is established to provide a permanent source of funding for quality improvements in Washington's public higher education system.  The endowments are to be used solely for those purposes for which state funds may be unavailable or limited.  The trust fund is administered by the State Treasurer, is not subject to appropriation, and is not to be used to supplant state appropriations. The bill contains an appropriation section with an unspecified amount.

Each higher education institution or its foundation is responsible for soliciting the matching private donations, investing and maintaining all endowment funds, administering the uses of the funds, and reporting to the Governor and the Legislature.  Only the earnings from the endowment may be expended.

The appropriation to the trust fund is allocated in the following manner: (1) 32 percent for the State Board for Community and Technical Colleges (SBCTC); (2) 32 percent for the University of Washington; (3) 22 percent for Washington State University; and (4) 14 percent for the comprehensive institutions and The Evergreen State College (TESC). The SBCTC determines the allocation for the two-year colleges, while the 14 percent allocated for the comprehensive institutions and TESC is distributed based on a written agreement filed with the State Treasurer.

All of the state's public higher education institutions are eligible for disbursement from the trust fund when private matching funds have been raised and certified by the Higher Education Coordinating Board (HECB). Disbursements from the fund are possible when the private matching funds meet one of two qualifying conditions: (1) the funds were received by the institution or its foundation after April 1, 1998; or (2) the funds were received or pledged for the distinguished professorship or graduate fellowship matching grant programs and certified for state matching dollars by the HECB and for which public matching dollars have not been received.

A method for the distribution of any unmatched funds is established, making them available on a first-come basis to other institutions within the same sector on a percentage basis within five years or to any institution after six years.

  HB 2859                                                      Page 2

Prepared for the House Higher Education Committee

by Sherie Story, Research Analyst (786-7120)

Office of Program Research

May 12, 2006