The Permanent School Fund (PSF), the second largest educational endowment in the country, reached a record high value in 2013 and posted the highest return of any major state of Texas investment fund for the fiscal year.
Created by the state in 1854 with a $2 million investment, the endowment topped $29 billion in market value by the end of December.
In fiscal year 2013, which ended Aug. 31, the fund earned a return of 10.16 percent. That was the highest return earned by any major state of Texas investment fund. As a result of recent strong returns, the PSF was also the best performing major state fund over a three-year period ending on Aug. 31, 2013, with a return of 11.07 percent.
“Last year was a golden year for the Permanent School Fund,” said Pat Hardy, chair of the State Board of Education’s (SBOE) Committee on School Finance/Permanent School Fund. “The board’s careful and prudent investment of the fund’s increasingly diverse portfolio resulted in top-of-the-line returns and that’s great news for our public schools,” she said. Other members of that standing SBOE committee are Vice Chair Lawrence A. Allen, Jr. of Houston, David Bradley of Beaumont, Ken Mercer of San Antonio, and Thomas Ratliff of Mt. Pleasant. Ratliff is the vice chair of the SBOE. Holland Timmons is the PSF’s chief investment officer and oversees the PSF investment staff at the Texas Education Agency.
The PSF helps Texas schools and the state’s citizens in two ways. A distribution from the PSF is made every year to the Available School Fund (ASF), which helps pay a portion of education costs in each school district and state charter school. During the 2012-2013 biennium, more than $2 billion was distributed to the schools. Since 1960, it has distributed more than $23 billion to the schools. Since 2011, as a result of Senate Bill 6 which was passed in a special session of the 82nd Legislature that summer, fifty percent of the distribution to schools is dedicated to the Instructional Materials Fund (IMF). The money in the IMF is used by school districts and state charter schools to provide instructional materials.
The PSF also provides a guarantee for bonds issued by local school districts. This important support will soon be extended to state charter schools. As a result of the PSF maintaining the AAA bond rating through the global financial crisis, qualified districts are able to pay lower interest rates when issuing bonds.
At the end of 2013, the PSF’s assets guaranteed $55.2 billion in school district bonds, providing a cost savings to 810 independent school districts.