Bush and State Ed Board’s $600M Disagreement About the Permanent School Fund Continues

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Even people who follow public education are often unaware of how the General Land Office and the Texas Land Commissioner and the State Board of Education can impact public school finance.

And that is, in part, because up until this year, things between the two entities and the services and funding they make available to school districts were pretty copacetic. But now current Land Commissioner George P. Bush wants to make a change, and it’s put him at odds with pretty much every single member of the State Board of Education.

You see, the School Land Board — a three-person board lead by Bush — oversees the largest educational endowment in the country. The board has decided it will bypass the State Board of Education’s Permanent School fund and put $600 million directly into another fund that goes directly to schools. The SLB will also invest an additional $55 million.

This change could impact how much Texas schools can spend on textbooks, among other things.

The education board also uses the $41.4 billion PSF to back construction bonds so that school districts and charter schools can earn lower interest rates.

Basically, both sides are arguing about which one can use that money to generate more revenue. The PSF is made up of land and investments that help support public schools. Each side — the SLB and the SBOE — have each had their own separate portfolios for about 17 years.

The land office manages the real estate and mineral leases for the SLB, and passes on those proceeds from those investments to the SBOE’s own fund for securities investments. The SLB manages about 13 million acres of land and generates public education dollars by selling and leasing that land; oil and gas revenue; and through grazing, agriculture, commercial and right-of-way uses.

In years past, the SLB put up to $300 million into the Available School Fund, and another $200-$500 million into the PSF.

This year, the SLB voted to only give money to the Available School Fund, to the tune of $600 million.

In the last funding cycle, the SBOE got $490 million from the SLB and gaive 3.25 percent of its endowment to schools — about $2.5 billion. The board says that number will have to be reduced to keep the endowment healthy now. The board could release up to 6 percent of its endowment, but has historically refused to do so in a bid to keep the fund sustainable.

If all this sounds confusing, SBOE support division executive director Debbie Ratcliff helped clarify a bit more. “The State Board of Education oversees a Permanent School Fund portfolio worth $34 billion, while the School Land Board oversees about $8 billion in additional Permanent School Fund investments,” she said. “Collectively, they manage the largest educational endowment in the country but the State Board oversees the bulk of the fund.”

The decision may mean a cut of $140 million to public education funding in the upcoming two-year budget, the SBOE said.

“The whole reason that we created the School Land Board … is to support the Permanent School Fund and not for the land commissioner to do their political empire building,” State Board of Education member Tom Maynard, R-Florence, told the Austin American-Statesman.

Bush says that the GLO investment fund brings in more money, so it makes more sense for it to oversee that chunk of school funding. The SBOE call the move “unprecedented,” and insist their fund generates more funding overall for schools. The board also accuses Bush of being untruthful about the success of the GLO portfolio.

The GLO says its return on investment is about 13 percent. The SBOE told the Statesman that is inflated, and that “if the agency’s cash assets were factored in, the land board’s rate of return would be 7.8 percent.”

The SBOE says that almost 40 percent of the land board’s $8.7 billion in assets are cash. By comparison, the SBOE says less than 1 percent of its $32.7 billion in assets are cash, and the SBOE’s ROI was 8.3 percent.

“Today, education dollars are needed in our classrooms more than ever. Texas public school funding will be a hotly debated issue in the upcoming session of the Texas Legislature,” GLO spokeswoman Karina Erickson said in a statement. “The SLB’s decision sent much-needed money directly to classrooms across Texas and will be put to use immediately, providing textbooks and supplies for our students. Commissioner Bush believes this direct source of funding is in the best interest for our kids.”

And that could prove to be true — maybe. The School Land Board’s contribution to the Available School Fund could potentially help make up the difference (which is estimated to be in the neighborhood of $500 million) the SBOE won’t be able to give to schools.

But with the Available School Fund, monies are divided among school districts according to the same school funding formulas that have stymied districts for years. Property-poor districts could get less funding from the ASF, and while half the funds from the PSF are designated for technology upgrades and textbooks, there are no restrictions for the funds held by the SLB.

With the SLB’s decision to bypass the SBOE entirely, districts will have about $300 million less to spend on textbooks as they prepare to purchase new English and Spanish textbooks.

The GLO will meet tomorrow at 10 a.m., but there is no real discussion planned regarding the decision by the SLB on the agenda.

And it looks like there won’t be much discussion in the future, either. In a letter to the SBOE, Bush was adamant that he wouldn’t be changing his mind.

“Under no circumstance will I reconsider my decision to release $600 million directly to the ASF. I stand firmly by my vote,” he wrote.

That decision (among others) is costing the incumbent endorsements from his own party, former Land Commissioner Jerry Patterson wrote last month in the Houston Chronicle.

“While the General Land Office has had great success in generating revenue from Texas school lands, last month Bush, for the first time, decided to forgo the biennial transfer of GLO revenue to the State Board of Education-managed PSF portfolio,” Patterson wrote. “Last week all 15 members of the Republican-dominated SBOE signed a letter asking him to reconsider his decision, a decision that flies in the face of more than 100 years of GLO and SBOE co-operation.”

Bethany Erickson is the education, consumer affairs, and public policy columnist for CandysDirt.com. She is a member of the Online News Association, the Education Writers Association, and the Society of Professional Journalists, and is the 2018 NAREE Gold winner for best series. Contact her at bethany@candysdirt.com.

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Bethany Erickson

Bethany Erickson lives in a 1961 Fox and Jacobs home with her husband, a second-grader, and Conrad Bain the dog. If she won the lottery, she'd by an E. Faye Jones home. She's taken home a few awards for her writing, including a Gold award for Best Series at the 2018 National Association of Real Estate Editors journalism awards, a 2018 Hugh Aynesworth Award for Editorial Opinion from the Dallas Press Club, and a 2019 award from NAREE for a piece linking Medicaid expansion with housing insecurity. She is a member of the Online News Association, the Education Writers Association, the International Academy of Digital Arts and Sciences, and the Society of Professional Journalists. She doesn't like lima beans or the word moist.

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