Benefitting public education for 177 years and counting
The Permanent School Fund (PSF) was created by the Texas Constitution in 1845 as a perpetual fund to support Texas public schools, and in 1854 the Texas Legislature seeded the fund with $2 million. The Texas Constitution of 1876 stipulated that certain lands and all proceeds from the sale or lease of these lands would comprise the PSF. In the mid-20th century, the US Supreme Court ruled that Texas owned the seabed extending three leagues (10.35 miles) from its coastline; these lands, and the royalty revenue generated from them, were added to the PSF.
PSF lands, including the leasing of surface and mineral rights, are managed by the General Land Office and overseen by the School Land Board (SLB). The proceeds from these lands, particularly oil and natural gas royalty revenue, formed the historical corpus of the PSF. Since 1929, the Texas Constitution has authorized the State Board of Education (SBOE) to both invest these proceeds and to make annual distributions to public schools. The SLB retained the authority to use certain proceeds to make real property purchases for the benefit of the Fund, and in the early 2000s this was significantly expanded to include other real asset investments.
In the 2000s as PSF assets increased and diversified, the Fund’s bifurcated governance and management structure – with investments split between the SBOE and SLB – presented challenges to optimal asset allocation. In 2021, the 87th Legislature responded by enacting Senate Bill 1232, which allowed for the creation of a corporation to unify the PSF’s governance and management for the purpose of maximizing returns for Texas public schools by optimizing asset allocations and improving operational efficiency.
Timeline
1845 – Texas Constitution established a perpetual fund for free public schools
1854 – Special School Fund (predecessor of the PSF) created with a $2 million state investment
1855 – The fund made its first distribution to the few schools in existence at the time (in 1857, the fund’s distribution was $1.21 per school-age child)
1861 – Railroad loss defaults and loans to Confederate war effort eroded the fund
1876 – Fund rebuilt by proceeds of certain land sales
1901 – Spindletop gusher near Beaumont marks birth of modern petroleum industry, providing a key source of revenue to the Fund from mineral royalties on PSF land
1929 – Texas Legislature gives the State Board of Education constitutional authority to invest PSF assets and make annual distributions to public schools
1960 – Tidelands court case victory
1983 – Bond Guarantee Program created
2010 – More than $9 billion of fund attributed to Tidelands victory
2014 – Charter districts bonds began participation in the Bond Guarantee Program
2019 – State Board of Education hosts “Brand the Fund,” a statewide design competition for high school students to create the fund’s first logo. The winning design was submitted by Melissa Richardson, a sophomore at Dripping Springs High School in the Dripping Springs Independent School District.
2021 – 87th Texas Legislature passes Senate Bill 1232, authorizing the creation of the Texas Permanent School Fund Corporation
2023 – PSF assets, investment functions and core operations are transferred to the new corporation. The beginning of a new era supporting K-12 public education!