Texas Insider

Says PSF’s current organizational structure inadequate

Texas Insider Report: AUSTIN, Texas – “The State Board of Education’s (SBOE) recent decision to invest $100 million of the Permanent School Fund (PSF) in charter school facilities reinforces the need to have individuals with investment experience managing this important fund.”  So said State Representative Donna Howard (D-Austin) earlier today as she announced her intention to re-introduce a measure from last session to inject financial expertise & accountability into the management of the state’s Permanent School Fund (PSF).  

“After their own investment advisors failed to endorse the proposal, the SBOE initially voted it down.  But the next day they inexplicably flip-flopped and somehow decided it’s okay after all to pursue a risky investment that may not even be legal,” Howard said.

The PSF was first established by the Legislature in 1854 to help fund public education for present and future generations of Texans. 

Authority over the fund is granted in the Texas Constitution.

“That doesn’t sound like a fiscally responsible or conservative choice to me,” said Howard.

Howard’s legislation would have allowed voters to decide who is best equipped to serve as fiduciaries of the multi-billion dollar fund – an appointed body comprised of individuals with backgrounds in investing and finance or the politicians on the State Board of Education. 

HJR 77 earned more than the 100 votes needed for a constitutional amendment to pass the House.  However, the bill was stalled in the Senate Education Committee and was never even scheduled for a public hearing.

“The SBOE has compromised the management process  by inserting their desire to pursue a political agenda rather than following their constitutional mandate and fiduciary responsibility to make investment decisions based on maximum returns,” said Howard.  

“And, unfortunately, this isn’t the first time that their management of the PSF has come under scrutiny,” she said.

In 2003, the State Auditor’s Office contracted with Cortex Applied Research, Inc. to perform a fiduciary review of the key governance and investment functions of the PSF.  The report detailed the inadequacies of the fund’s current organizational structure and included a recommendation that the Legislature create a state-sponsored, quasi-independent entity to administer the PSF. 

The House Committee on General Investigating & Ethics made a similar recommendation in their interim report release in 2000.