Board puts Per­ma­nent School Fund at risk

Austin American-Statesman - - OPINION -

Last week, a slim ma­jor­ity of the State Board of Ed­u­ca­tion passed a pro­posal to use the Per­ma­nent School Fund to buy real es­tate and lease it to char­ter schools — an un­ortho­dox plan that could af­fect the fund’s vi­a­bil­ity.

De­spite warn­ings from the board’s fidu­ciary coun­sel, its in­vest­ment man­agers and the Texas Ed­u­ca­tion Agency’s staff, some mem­bers of the board were de­ter­mined to use the fund as a way to boost char­ter schools in Texas, which typ­i­cally have dif­fi­culty se­cur­ing ad­e­quate fa­cil­i­ties from which to op­er­ate. Though it’s cer­tainly an ad­mirable goal, putting the Per­ma­nent School Fund at risk is not the means by which to do it.

The Per­ma­nent School Fund was es­tab­lished in 1854 to pro­vide free text­books to Texas pub­lic school­child­ren. The ini­tial rev­enue was $2 mil­lion from oil and gas in­ter­ests; now it gen­er­ates $700 mil­lion to $800 mil­lion a year, which the Texas Con­sti­tu­tion says must be used to pay for “in­struc­tional ma­te­ri­als” for school­child­ren in the state. Over the years, the board has strug­gled to pro­tect the fund from raids from the Leg­is­la­ture, which has wanted to use the money to pay for items other than con­tent, such as lap­tops and Kin­dles.

One of the pri­mary roles of the State Board of Ed­u­ca­tion is to main­tain the suc­cess of the Per­ma­nent School Fund. The de­ci­sion to in­vest PSF money into char­ter schools is a bla­tant dis­re­gard for our fidu­ciary re­spon­si­bil­ity to the chil­dren of this state.

The fi­nan­cial strength of the fund also is used to back the bonds is­sued to pay for the con­struc­tion of pub­licly owned school build­ings through the Bond Guar­an­tee Pro­gram. This back­ing gives the school bonds the equiv­a­lent of the high­est rat­ing avail­able in the bond mar­ket, and con­se­quently the PSF has the full faith and credit, as well as the school district’s tax­ing author­ity as se­cu­rity.

Some mem­bers be­lieve that since the Per­ma­nent School Fund is used for this pur­pose, it opens the door for in­vest­ing in fa­cil­i­ties for pri­vately owned char­ter schools. Not so. Pur­chase/lease­back real es­tate in­vest­ments of school fa­cil­i­ties are spe­cial­ized de­vel­op­ments in res­i­den­tial neigh­bor­hoods rented to typ­i­cally not well-cap­i­tal­ized users. Ad­di­tion­ally, fund­ing of usu­ally non­profit char­ter schools is nor­mally by vol­un­teer and stu­dent con­tri­bu­tions, mak­ing this type of in­vest­ment highly un­suit­able for the school fund. For this rea­son, us­ing the fund to in­vest in char­ter schools could ham­per its prof­itabil­ity, po­ten­tially lead­ing to a sit­u­a­tion where it can­not cover the costs for its ini­tial pur­pose.

The Leg­is­la­ture voted last ses­sion to al­low schools to use the funds they re­ceive from the Per­ma­nent School Fund to buy Kin­dles and lap­tops, which rapidly be­come out­dated. There­fore, it is more im­por­tant than ever that we make well-in­formed in­vest­ing de­ci­sions to en­sure that fu­ture pub­lic school­child­ren have the ma­te­ri­als they need to learn.

One of the pri­mary roles of the State Board of Ed­u­ca­tion is to main­tain the suc­cess of the Per­ma­nent School Fund. The de­ci­sion to in­vest PSF money into char­ter schools is a bla­tant dis­re­gard for our fidu­ciary re­spon­si­bil­ity to the chil­dren of this state. This is the sec­ond time in the past year that the board has asked for coun­sel on Per­ma­nent School Fund in­vest­ment de­ci­sions, and a slim ma­jor­ity has voted to op­pose their sug­ges­tions. (The first vote oc­curred in 2009 with the se­lec­tion of fund man­agers. The Com­mit­tee on the Per­ma­nent School Fund chose the firm that ranked worst in all cat­e­gories by TEA staff pro­fes­sion­als.)

We are in fa­vor of school choice and have long sup­ported char­ter schools, but this is an in­ap­pro­pri­ate use of the school fund that could lead to lit­i­ga­tion that would be a waste of tax­payer dol­lars.

The board’s fidu­ciary coun­sel strongly urged the board to seek an opin­ion from At­tor­ney Gen­eral Greg Abbott be­fore pro­ceed­ing with this plan. Let’s hope the board can stick with that de­ci­sion be­fore com­mit­ting any money to this risky pro­posal.

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