SENATE BILL REPORT

SB 5688

BYSenators Smitherman, Warnke and Lee

Establishing a review procedure for commercial activities conducted by institutions of higher education.

Senate Committee on Commerce & Labor

Senate Hearing Date(s):February 19, 1987; March 5, 1987

Majority Report:  That Substitute Senate Bill No. 5688 be substituted therefor, and the substitute bill do pass.

      Signed by Senators Warnke, Chairman; Smitherman, Vice Chairman; Anderson, Cantu, Sellar, Tanner, Vognild, West, Williams, Wojahn.

Senate Staff:Patrick Woods (786-7430)

                  March 6, 1987

AS REPORTED BY COMMITTEE ON COMMERCE & LABOR, MARCH 5, 1987

BACKGROUND:

During recent years, the Legislature has received testimony from representatives of for-profit businesses stating that institutions of higher education are competing unfairly with private sector businesses in providing certain goods and services. 

SUMMARY:

The Legislature states that the primary mission of institutions of higher education is the creation and dissemination of knowledge. A mechanism for reviewing the commercial activities of the universities and colleges is required.  "Commercial activity" is defined as an activity which provides a product or service for a fee which could be obtained from a commercial source and which does not constitute an educational function.  Institutions of higher education may engage in "commercial activities" only when they are directly related to the educational mission of the institution.

The criteria used in assessing the validity of providing goods and services to the campus community are:  substantially related to the institution's instructional research or service; represent a special convenience to the campus community; fees cover the cost of services; and provided only to persons holding current identification.

The criteria in assessing the validity of providing goods or services to the external community are: related to the institution's educational mission and not commonly available from the external community; and the fees reflect the full costs of the goods or services.  In no case are the fees for goods or services to be below the private marketplace.  The initial approval for commercial activities is vested in the institution's deans or vice presidents.  The institution's chief administrative officer is required to appoint a commercial review officer whose role is to review requests from deans and vice presidents regarding commercial activities, in establishing the institution's budget.  A review process is implemented which requires the unit of the institution that is intending to engage in "commercial activities" to provide to the deans and vice presidents a justification for the project; upon approval, supporting documentation is provided to the commercial review officer.

The institution's chief administrative officer is authorized to:  resolve matters concerning the application of the chapter; make final decisions regarding commercial activities when the commercial review officer believes the project to be inconsistent with the chapter; and address questions from members of the external community.  The current commercial activities of the state's institutions are to be evaluated by the appropriate deans and vice presidents within six months of the effective date of the act.

EFFECT OF PROPOSED SUBSTITUTE:

The Legislature states its intent to require institutions of higher education to define the legitimate purposes under which commercial activities may be approved, and to establish a mechanism for reviewing commercial activities.

Institutions of higher education in consultation with representatives of small business are required to develop:

      --comprehensive policies that define the legitimate purposes under which institutions may provide goods, services or facilities;

      --a mechanism for reviewing current and proposed commercial activities; and

      --a process for responding to inquiries from private business.

The following criteria is considered in developing policies regarding commercial activities:  the goods and services are related to the institution's educational mission; fees include direct and indirect costs; and goods and services represent a special convenience to the campus community.  An institution's education and residential life programs are not subject to review.  The institutions are required to report to the Legislature by December 1, 1987, outlining their policies regarding commercial activities.

Fiscal Note:      requested

Senate Committee - Testified: Robert Schiffner, Students Block Corp.; Barb Gorham, Association Students of WSU; Michael S. Stewart, Council of Presidents; Steven Olswang, University of Washington; Jay Hartford, Washington State University; Courtney Jones, Central Washington University; Mike Bigelow, State Board of CC Education; Jerry Brockey, S. Seattle CC; Larry Cenotto, AWB; Bob Seeber, Washington State Lodging Association; Keven Krog, Body Magic Fitness; Gary Smith, IBA; Barbara Gorham, WSU; Gary Tombinson, SEA; Brian Christ, SEA Chamber