AP NEWS

Permanent School Fund needs increased oversight and transparency

April 6, 2019

Any fixes to the state public school finance system also must address how Texas’ public school endowment is administered.

Over the past 20 years, the 165-year-old Texas Permanent School Fund has grown at a slower rate than comparable funds and has paid out less in inflation-adjusted dollars. This is what “Broken Trust,” a yearlong Hearst Newspapers’ investigation, revealed.

The distribution from the funds, which now sits at $44 billion, has dropped to an average of $986 million annually the past decade, compared with an average of $1.1 billion in the previous 20 years, the investigative team of Susan Carroll, Matt Dempsey and David Hunn reported.

The cloak of secrecy that surrounds the administration of these funds by the School Land Board and the State Board of Education must be lifted. The School Land Board controls $10 billion of the portfolio, while the SBOE oversees the other $34 billion.

The newspapers’ investigation found both entities less than forthcoming about the investments they are making on behalf of Texas taxpayers, the return on investments and the fees charged by fund managers.

The lack of transparency is troubling.

The newspapers’ investigation found that since 2006, nearly $3.7 billion of the fund has been invested with companies having direct links to members of the three-member School Land Board or those who made the appointments to the board. The members of that board include the Texas land commissioner, currently George P. Bush, and appointees named by the governor and the state attorney general.

Texas’ founders created the school fund in 1854 with a $2 million appropriation for “a sacred trust” to forever support public education. The Texas Constitution of 1876 stipulated that certain public domain lands and all proceeds from their sale would also become part of the Permanent School Fund. Today, the fund invests money from the sale of state-owned oil, gas and land, and distributes a portion of those earnings to Texas public schools.

The Texas Permanent School Fund is the largest public education fund in the country, and steps must be taken to ensure Texas schoolchildren reap the maximum benefits.

The state’s contribution to public education covers just over one-third of the actual costs. Lawmakers are facing a tough job as they try to figure out a plan to lower the school tax burden while increasing public school appropriations to allow for higher funding per student, expanded programs and increased teacher compensation, among other things.

All this can’t be covered with new money. Some of the funds will have to come by closing tax loopholes and a reprioritizing of state spending. Taking steps to ensure that the schoolchildren of Texas are getting the maximum benefit from the Texas Permanent School Fund would go a long way toward that end.

A slew of legislation has been filed aimed at fixing some of the more obvious problems with the state’s public school endowment. None of it is going to win easy approval.

There is talk of seeking a legislative study before the next session to review the problem and come up with recommendations. That is a good plan, but it should not be used as an excuse to delay action.

Legislative proposals include changing how the fund is handled. One proposal is to restore the SBOE’s control over the bulk of the investments, reverting to the way things were before 2001 legislative changes. Another calls for a new nine-member body appointed by the governor to decide how funds are invested and the proceeds distributed.

Here’s one must in any changes to improve oversight: more transparency.

The public has the right to know who the fund managers are and how much they are charging. School land sales should be made at public auction, not via sealed bids. Records of multimillion-dollar partnerships and the audits of those partnerships should not be confidential.

State officials should also limit the amount of money they will accept in campaign contributions from those with a business relation to the fund. While there is nothing legally wrong with taking the money, it does not pass the smell test.

The money in the Permanent School Fund was intended to benefit Texas public school students. Let’s keep the focus on that.