Voters are being asked to consider an amendment to the state constitution that would allow research universities to invest in private companies and stocks.

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Voters this fall will be asked to consider a constitutional amendment that would allow the state’s two research universities to invest a portion of their reserve funds in private companies or stocks.

The measure, Senate Joint Resolution 8223, was approved by the Legislature earlier this year. Because it is an amendment to the state constitution, voters’ approval is required.

The measure would affect only the University of Washington and Washington State University, creating an exception to constitutional restrictions on how they invest public funds.

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Proponents call it a common-sense way to maximize funding for higher education and say voters have granted this type of investment authority for several other funds, including state pension funds, disability funds, the industrial-insurance trust fund and university trust-land revenues.

But opponents say both universities should be spending the money instead on reducing tuition. They also question how the schools came up with the amounts of money in their reserve accounts.

The funds in question include money set aside to meet certain obligations as they come due, said Margaret Shepherd, director of state relations for the UW. The funds include money for research, patient and medical revenues, parking proceeds, insurance-fund reserves and housing and food-service revenues.

Shepherd said the amendment doesn’t apply to money allocated by the Legislature to run the universities or money paid by families for tuition, because those are usually spent as soon as they are received.

Lawmakers passed the amendment by a large margin last year, and it also has the backing of regents at both universities.

Four state legislators have joined the opposition: Sen. Maralyn Chase, D-Shoreline; Rep. Bob Hasegawa, D-Seattle; Rep. Jim McCune, R-Graham; and Rep. Sharon Tomiko Santos, D-Seattle, as well as Gerald Barnett, a Lynnwood consultant who advises invention-licensing programs and startup companies. Barnett used to work for the UW in a similar role.

They argue that the UW should be spending some of this reserve money on lowering tuition.

“They’re sitting on a surplus operating fund of $1.2 billion, which they refuse to use to relieve the debt on students and their families,” Chase said. “It makes no sense.”

Barnett said opponents also are skeptical of the accounting of reserve funding. “They have a very complicated set of accounting procedures,” he said. “It’s very difficult for people even within the university to say where a dollar of tuition, or food-service money, or parking goes.”

Shepherd said the money in question is not surplus — it’s money that’s already spoken for. The universities estimate they would be able to invest only about 10 percent of it in the beginning, she said.

Both the UW and WSU are currently restricted to investing these funds in government-backed securities. If the schools had more freedom to invest, they estimate, they could bring in an additional $10 million to $20 million a year.

But investing in the stock market also means the schools could lose money, say Chase and Barnett. They also expressed concerns about conflicts of interests that could arise.

For example, the universities could invest in the stock of a product that was based on a discovery made in one of their research labs, and would then have an incentive to withhold information or time the sale of stock to an important announcement or discovery.

Shepherd said the amendment stipulates that the investment decisions would be made by the Washington State Investment Board, which also manages state pensions and public-school funds. Because the investments would be made by the state agency, there’s no possibility of a conflict of interest, she said.

But Barnett said he worries the Legislature could later pass a bill giving investment authority to the institutions.

Barnett and Chase said private investing is too risky for these funds. “People are misrepresenting the risk that attaches to being in the stock market,” Barnett said. “We don’t know what’s going to happen in Europe; we don’t know if the markets are going to be bullish or bearish.”

Shepherd said the state investment board has “a long track record of responsible and prudent investment,” and that the universities plan to hold enough cash and liquid assets to withstand a stock-market crash, such as the one in 2008.

She said the current lack of diversity in the fund is itself a kind of risk. One of the benefits of the amendment is that it would help the universities diversify their investments.

Opponents are not planning to raise money to defeat the measure, Barnett said. As of the end of September, the Higher Education Investment Committee had raised $61,300 in support of the measure, with most of the money coming in $5,000 donations from members of both universities’ boards of regents.

Both groups have created websites: For proponents, it’s, and for opponents,

Katherine Long: 206-464-2219 or On Twitter @katherinelong.

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