HOUSE JOINT RESOLUTION NO. 13 Relating to using oil spill settlement funds to create an endowment for the sciences at the University of Alaska. CO-CHAIR GENE THERRIAULT stated that HJR 13 would support recent action of the Exxon Valdez Oil Spill (EVOS) Trustees to create a long-term research and monitoring endowment using $115 million dollars of the expected reserve. The EVOS Trustee Council allocates money obtained from settlement of the Exxon Valdez spill litigation. Over the years, EVOS funds have largely been used to purchase land for habitat preservation. The Council has been lacking in the area of research, leaving a gap in understanding future spills and how to respond to them. It would be beneficial to know if types of marine ecosystems are extra sensitive to certain cleanup activities, and if so, how to respond to spills in those areas. Co-Chair Therriault concluded that an endowment of this nature would fulfill the intent of the Exxon Valdez Spill settlement and the mission of the Trustee Council, which is to restore, rehabilitate, replace, enhance, and acquire equivalent resources and services in the oil spill regions. Representative Austerman questioned how many endowed chairs there would be. Co-Chair Therriault explained that number has not yet been determined. It would depend on what the Trustees ascertained appropriate. The chairs would be involved in the areas of research instruction and public service on spill impacted areas. Representative Austerman voiced concern that $2-$3 million dollars would be used to cover chair costs and, that additionally, the University would be supplemented with research money. He requested that the University submit a program intent list for use of these funds. Co-Chair Therriault advised that the proposed bill asks that the EVOS Council consider this proposal and pointed out that this entity operates completely independent of the Legislature. Representative J. Davies commented that the endowment would be established by the Trustee Council. They are required to see that funding is spent appropriately. He added, when an endowed chair is established, the endowment will generate usually five times other research in that area, thus, income would be leveraged by that factor. Representative J. Davies instructed that a researcher can not operate in a vacuum; they are dependent on accessing utilities and facilities that a university system can offer. Support functions for research are audited by the Department of Defense. Co-Chair Therriault envisioned that the Trustees could endow a chair at the University. That chair would most likely be an expert in marine sciences, and could provide them with advice. Representative Austerman suggested that there could be other research organizations that would like to be a part of the process. He urged that this be a competitive bid for the EVOS Council to consider. Co-Chair Therriault explained that the actual research was separate from the endowment of the chair. If the EVOS Council was going to endow chairs to help oversee proposals, they would most likely choose a university. He ascertained that the Alaska State Legislature would want them to consider the Alaska University system. The proposed legislation only states that Alaska should use a portion of the funds for endowed chairs. Representative Bunde shared concerns voiced by Representative Austerman regarding administrative overhead costs. In response to Representative Bunde, Co-Chair Therriault stated that the grants are not a moneymaker for the University; although, they would help to spread the fixed costs of the University system over a larger pool. Representative Bunde responded that it would add to the University's cash flow. Representative Austerman suggested language written on Page 4, Line 5 be replaced with "relevant areas or research". WENDY REDMAN, VICE PRESIDENT, UNIVERSITY OF ALASKA-STATEWIDE SYSTEM, FAIRBANKS, disagreed with Representative Austerman that the endowment chairs do not pay attention to what is requested. The EVOS Trustee Council is a very political body. The intent of the resolution will have an impact on that body. What the University envisions would be particularly in the areas of research and public service. In the public service area, there exists faculty in the cooperative extension service and through the marine advisory program. She noted that those are the primary arms which have dealt with impact and the effects of spill in that region. Ms. Redman continued, the two key areas of focus for the Trustees have been: ? The need for continual and long term research; and ? Providing a way to get all the research previously undertaken out to the public. The research does not do any good unless it is used. That research needs to be translated into documents. Ms. Redman addressed the issue of endowed shares. She stated that the University would treat these type of endowed shares like any other donations made to the University. Essentially, it passes to the University of Alaska foundation, and then like a donation, it would be decided how to spend those funds, then establishing a work plan for that chair. Representative J. Davies pointed out that one of the key elements for a long-term research plan is graduate students. Major amounts of research are not undertaken without some graduate students working on the program. Representative G. Davis referenced Page 2, Line 23, and asked why those locations were classified. Ms. Redman replied those units were either affected or have programs with faculty that work there. Representative Austerman asked about the price tag of $2-$3 million dollars per chair. Ms. Redman stated that it would be closer to $2 million dollars if there are no graduate students involved. Representative Austerman asked what the $2 million dollars per chair would buy. Co-Chair Therriault pointed out that it was a small endowment, which spins off a particular cost of a function. Ms. Redman added that the actual administrative costs anticipated per year would be $100 thousand dollars to cover salary benefits, clerical support, travel, commodities and contractual costs. TRACY CRAMER, DIRECTOR OF ADMINISTRATION FOR EVOS, DEPARTMENT OF FISH AND GAME, stated that the EVOS Trustee Council would like to see the resolution passed because of investments results. At this point in time, all of the joint trust funds are in the treasury and are invested in treasury securities with an average of 100 days security. Currently, the treasury is earning 4.5% to 5% on a large amount of money. Ms. Cramer spoke to the issue of the endowed shares. She stated that the Trustee Council would consider the endowed shares, however, the federal trustees are concerned that given their trust responsibility, they may not be able to hand over a sum of funds, even with an agreement to the University of Alaska. Representative Austerman asked if the resolve to the endowed chairs was not included in the legislation, would the EVOS Council still support the bill. Ms. Cramer replied that the Trustee Council does not have an objection to the first resolve. They would appreciate any assistance that the Legislature could provide toward their limited authorization toward investments, addressed by the second resolve. Co-Chair Therriault examined the way the 1st resolve was worded and if it would be taken as a "directive". Ms. Cramer replied that it appeared fine to her. Representative J. Davies asked information regarding a recent action creating a long-term endowment. Ms. Cramer responded that in 1984, the trustee council concluded an environmental impact statement that analyzed the resources and services injured. Part of that statement included the establishment of the restoration reserve. The Trustee Council has allocated $12 million dollars each year into that reserve. The basic assumption is that after the last payment on September 1, 2000, research will continue to be made by the State. Ms. Cramer continued, over the last eighteen months, the Trustee Council has been going through a public review process regarding how that money should be spent. It amounts to roughly $170 million dollars. Based on public comments, the Trustee Council took action on March 1, 1999, and allocated $150 million dollars for research activities. It was assumed that this money would continue to be a perpetual endowment, inflation proofed and that any expenditures would come after inflation proofing. Representative J. Davies MOVED an amendment to Page 4, Line 4, deleting "use" and inserting "consider using". Representative Bunde OBJECTED. He stated that a clear message should be sent to EVOS. Co-Chair Therriault noted that he would not object to the language change. Representative Bunde WITHDREW his OBJECTION. Representative Grussendorf MOVED to report CS HJR 13 (FIN) out of Committee with individual recommendations and with the accompanying fiscal note. Representative Austerman OBJECTED for the purpose of discussion. He noted that he was uncomfortable with the School of Fisheries research history. Representative Austerman WITHDREW his OBJECTION. Representative Kohring OBJECTED for the purpose of comment. He agreed with Representative Austerman, and asked that other research options should be explored within the private sector. He added that the legislation was moving away from the mission of what was intended with the Prince William Sound and endowing of chairs. He commented that the area has been studied for the past ten years and asked why additional research was needed. Representative Kohring WITHDREW his OBJECTION. Representative Bunde OBJECTED for the purpose of a statement. He commented that it was important that the instructional component not be ignored within the resolution. Representative Bunde WITHDREW his OBJECTION. There being NO final OBJECTION, it was so ordered. CS HJR 13 (FIN) was reported out of Committee with a "do pass" recommendation and with a zero House Hess fiscal note dated 3/8/99.