August-September 2023 Committee on School Finance/Permanent School Fund Item 4
Determination Regarding Whether Transfers May be Made from the Permanent School Fund to the Available School Fund
September 1, 2023
COMMITTEE ON SCHOOL FINANCE/PERMANENT SCHOOL FUND: ACTION
STATE BOARD OF EDUCATION: CONSENT
SUMMARY: This item provides an opportunity for the committee and board to review the requirement in Article VII, §5(a)(2) that states, the total amount distributed over ten years cannot exceed the total return on all investment assets of the Permanent School Fund (PSF) over the same ten-year period. The board will determine whether transfers may be made from the PSF to the Available School Fund (ASF) in fiscal year 2024.
STATUTORY AUTHORITY: Texas Constitution, Article VII, §2 and §5; 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 State Board of Education (SBOE) to manage and invest the permanent school fund in accordance with the prudent person standard.
19 TAC Chapter 33 codifies administrative rules that provide a statement of investment objectives, policies, and guidelines of the Texas PSF and Bond Guarantee Program (BGP) as adopted by the SBOE.
The full text of statutory citations can be found in the statutory authority section of this agenda.
PREVIOUS BOARD ACTION: At the September 2022 meeting, the board determined that a distribution for fiscal year 2023 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 (AG) regarding the implementation of Texas Constitution, Article VII, §5(a)(2) in limiting transfers from the PSF to the ASF. A supplementary request was made on January 14, 2009. On April 13, 2009, the AG 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.
Staff Members Responsible:
Britt Harris, Chief Executive Officer, Texas Permanent School Fund Corporation
Mark Shewmaker, Senior Investment Officer, Fixed Income and Director of Special Projects