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June 24, 2026 Committee of the Full Board Item 2

Permanent School Fund Percentage Distribution Rates Under Consideration for Fiscal Years 2028 and 2029

June 24 2026

COMMITTEE OF THE FULL BOARD: DISCUSSION
STATE BOARD OF EDUCATION: NO ACTION

SUMMARY: This item provides an opportunity for the State Board of Education (SBOE) to discuss a range of Permanent School Fund (PSF) percentage distribution rates to the Available School Fund (ASF) under consideration for fiscal years 2028 and 2029.  Pursuant to the Texas Constitution, Article VII, the SBOE is authorized to adopt an annual distribution rate before the regular session of the Texas legislature convenes in January 2027. The SBOE will consider various factors associated with the distribution rate such as expected returns, inflation, and student population change.

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. Specifically, §5(a) authorizes the SBOE to adopt an annual distribution rate before the regular session of the Texas legislature convenes in January 2027.

19 TAC Chapter 33, Subchapter A, Rule §33.2 directs the SBOE, when adopting the rate of distribution, to strive to balance the needs of current and future generations of Texas school children by attempting to maintain consistent levels of distributions per student and assets per student, after adjusting for inflation.

The full text of statutory citations can be found in the links above.

PREVIOUS BOARD ACTION: At the June 2024 meeting, the SBOE discussed a range for the percentage distribution rate to the ASF from the PSF for fiscal years 2026 and 2027 of between 2.43% and 3.88%.

BACKGROUND INFORMATION AND JUSTIFICATION: The distribution rate is to be determined by a vote of two-thirds of the total membership of the SBOE taken before the regular session of the legislature convenes.  If the SBOE does not adopt a rate, then the legislature will adopt a rate by general law or appropriation.  In November 2024, the SBOE adopted a rate for fiscal years 2026 and 2027 of 3.45%, applied to the average market value for the trailing 16 state fiscal quarters ending November 30, 2024.

According to the FY 2026-27 General Appropriations Act, in Rider 8 of the Texas Permanent School Fund Corporation’s bill pattern, at least 45 days prior to the adoption of the distribution rate from the PSF to the ASF by the SBOE, a report shall be sent to the Legislative Budget Board and the Governor on the following:

  1. The distribution rate or rates under consideration
  2. The assumptions and methodology used in determining the rate or rates under consideration
  3. The annual amount the distribution rate or rates under consideration are estimated to provide, and the difference between them and the annual distribution amounts for the preceding three biennia
  4. The optimal distribution amount for the preceding biennium, based on an analysis of intergenerational equity, and the difference between it and the actual distribution amount

Staff Member Responsible:
Jared Stout, Deputy Chief Investment Officer, Texas Permanent School Fund Corporation

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