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September 2019 Committee on School Finance/Permanent School Fund Item 5

Determination as to Whether Transfers May be Made from the Permanent School Fund to the Available School Fund

September 13, 2019


This item provides an opportunity for the committee and board to review the requirement in Article VII, §5(a)(2) that the total amount distributed over ten years cannot exceed the total return on all investment assets of the PSF over the same ten-year period. The board will determine whether transfers may be made from the Permanent School Fund to the Available School Fund in fiscal year 2020.

STATUTORY AUTHORITY: Texas Constitution, Article VII, §2 and §5, and 19 Texas Administrative Code (TAC) Chapter 33.

The Texas Constitution, Article VII, §2 and §5 establish the permanent school fund, the assets that comprise the permanent school fund, the bond guarantee program, the available school fund, and authorize the SBOE to manage and invest the permanent school fund in accordance with the prudent person standard.

Administrative rules found in 19 TAC Chapter provide a statement of investment objectives, policies, and guidelines of the Texas Permanent School Fund and Bond Guarantee Program as adopted by the State Board of Education (SBOE).

The full text of statutory citations can be found in the statutory authority section of this agenda.

PREVIOUS BOARD ACTION: At the September 2018 meeting, the board determined that a distribution for fiscal year 2019 is permitted under Texas Constitution Article VII, Subsection 5(a)(2).

BACKGROUND INFORMATION AND JUSTIFICATION: On November 4, 2008, the chair of the SBOE sought an opinion from the Attorney General regarding the implementation of Texas Constitution, Article VII, §5(a)(2) in limiting transfers from the Permanent School Fund (PSF) to the Available School Fund (ASF). A supplementary request was made on January 14, 2009. On April 13, 2009, the Attorney General responded to the requests, noting that Article VII, §5(a)(1) and §5(a)(2) require distinct calculations using different methodologies and covering different time periods.

PUBLIC BENEFIT: The distribution of the Permanent School Fund will flow to the school districts and reduce the tax burden to the public and the state of Texas.


Staff Members Responsible:
Holland Timmins, Executive Administrator and Chief Investment Officer, Texas Permanent School Fund