The Committee on School Finance /Permanent School Fund met on June 16 to take up a full agenda of items. The full meeting and agenda can be found here.


This report is intended to give you an overview and highlight of the discussions on the various topics taken up. It is not a verbatim transcript of the discussions but is based upon what was audible or understandable to the observer and the desire to get details out as quickly as possible with few errors or omissions.


Item 1: Proposed Amendment to 19 TAC Chapter 109, Budgeting, Accounting, and Auditing, Subchapter C, Adoptions By Reference, §109.41, Financial Accountability System Resource Guide

Paul Moreno, Auditor Texas Education Agency

  • Updates to the six modules; compliance under HB 3
  • Provides overview of amendments
  • SBOE Member Maynard – Who comes up with these changes?
    • The Government Accounting Standards Board (GASB)
  • Maynard – Does GASB change their standards often?
    • In some years they have no changes, some years a lot
  • Motion to adopt amendments carries


Item 2: Per Capita Apportionment Rate for the 2021-2022 School Year

Leo Lopez, Texas Education Agency

  • Commissioner sets rate each year; brings before committee in September with an updated rate in June
  • Updated rate of $510 for the 2021-2022 school year


Item 3: Report on Permanent School Fund Securities Transactions and the Investment Portfolio and Ratification of Purchases and Sales for the Months of February, March, and April 2022

David Trice, Permanent School Fund

  • Reviewed quarterly and yearly fund data; presented SBOE asset allocation
  • Between September 2021 and April 202 fund income gains of $2.4b and expenditures of $1.2 billion
  • Movement that the board approve the ratification of the purchases and sales for the months of February, March, and April of 2022; carries
  • Maynard – There is more volatility now than a few months ago


Item 4: Report on Permanent School Fund Liquid Account and Ratification of Purchases and Sales for the Months of February, March, and April 2022

David Trice, Permanent School Fund

  • Presented report on income, realized gains, and liquid asset makeup
  • Carlos Veintemillas, Deputy CIO TEA – TLO transferred more money to the liquid fund this week
  • Maynard – As we move forward, remember the liquid fund was just a band aid; the corporation was the long-term goal
  • Provided financial presentation
  • Motion to approve ratification of PSF liquid accounts purchases and sales in the months of February, March, and April 2022; carries


Item 5: First Quarter 2022 Permanent School Fund Performance Report

Mike Maher, BNY Mellon

  • Provided financial presentation for 2022 Q1
  • Economic damage from Russia/Ukraine War caused increased volatility and inflation in this quarter
  • Quarter challenging for almost all major asset classes
  • IMF projected Economic Global Growth to drop in 2022-2023
  • Large cap shares outperformed small and medium cap
  • International investments influenced by Russian invasion and Covid-19
  • Real estate continued positive returns
  • Texas PSF had returns of -1.4% for the quarter; outperformed the average of other funds of similar size


Keith Stronkowsky, NEPC

  • Interesting shift from large cap; real return is more important now because of inflation
  • Commodities protected PSF well; hedge funds down, but less than public markets
  • Real estate and private equity brought positive returns
  • This report shows the benefits of diversification
  • Maynard – Before diversification, we just had equities and bonds?
    • Yes
  • SBOE Member Hardy – Why is it that Russia’s economy is doing much better?
    • Timmins – The marks for Russia are still distressed; even if economy has improved its not reflected in the prices
    • Veintemillas – You can’t trade Russian debt right now
  • Veintemillas – Most of the asset classes had negative returns, but total real return, private equity, and real estate had positive
  • Maynard – There is opportunity in every market
  • Veintemillas – We are seeing opportunities in the fixed income market because rates are going up


Item 6: Review the Process to Consider Board Member Nominees for a School Land Board Position

  • Maynard – There is a vacancy the government has not acted upon; could they appoint from the list we submitted a year ago?
    • Staff – Not sure, but would seem so
  • Maynard – This is something we need to talk about with the Appointments Office
  • Staff – There is a list of six, but that list is down to four now because two are ineligible
    • You could talk to the Governor or readopt members of the list at the next meeting
  • Maynard – Even though we submit a list for each position, they Appointments Office just treats it all as one list
  • SBOE Member Allen – Seems like we are just talking about the end result; has something we can consider?
    • Staff – Should follow the same process used last June; each SBOE member could find a any state citizen and have that individual apply
  • Maynard – The people on our list have been interviewed but no appointment movement has been made; we need to figure out what’s going on with the Appointments Office
  • SBOE Member Keven Ellis – Might as well start conversation with the full board


Item 7: Review and Adoption of the Long-Term Strategic Asset Allocation Plan of the Permanent School Fund (SBOE) and the Permanent School Fund Liquid Account

  • Motion to approve the recommended targets the SBOE reported; carries


Item 8: Report of the Permanent School Fund Executive Administrator and Chief Investment Officer

Holland Timmins

  • Cost of building schools up with inflation
  • We guarantee bonds; lots of demand currently
  • Lots of communication occurring with the Treasury department
  • Maynard – Are we down to 10 million?
    • Yes, was the case for May and June
  • Maynard – Under what authority does the federal government have to tell us what to do?
    • I would defer to constitutional lawyers
  • Maynard – Is the rational that bonds sold across state lines count as interstate commerce?
    • Yes
  • The federal government is trying hard to address inflation in a difficult environment
  • Overviews previous litigation of the Tribune Company; are no pending items against the Tribune Company