4/26/2009 9:35 PM
Monday, the Legislature is considering a constitutional amendment and a bill to take the Permanent School Fund management away from the elected State Board of Education, giving it instead to a corporation set up by the Comptroller of Public Accounts and overseen by a board appointed by the state's major elected officials. (HJR 77 and HB 2037 by Rep. Donna Howard [D-Austin]). The Permanent School Fund is an endowment created largely from oil royalties on state lands that funds textbooks and other public school expenses.
The bill's structure has many similarities to the one the Legislature set up for the University of Texas in the mid-1990s. Ever since then, UTIMCO
(the corporation that manages the Permanent University Fund) has been a non-stop source of controversy at the Capitol. Perhaps there is an academic argument for putting all of the state's investment funds in the hands of industry professionals. But we need look no further than the recent federal bailouts and the state of the U.S. economy, as well as UTIMCO's history to know that this has to be done very, very cautiously to prevent conflict of interests and taking the public for a ride.
Judging from the committee substitute approved by the House Public Education Committee, I think there are a few questions the public may wish to ask about this concept.
1. Conflict of interest. In the late 1990s, the Houston Chronicle's
R.G. Ratcliffe published several stories
noting that UTIMCO invested heavily in funds and businesses with ties to UT regents or major Republican political donors. In response, UTIMCO passed a ban on coinvestment -- UTIMCO investing in the same securities as its board. This ban was relaxed last year. The bill directs the council to create an ethics policy, but will it be a real ethics policy or a political fig-leaf? And how will it deal with coinvestment?
2. Open Government. There are no bigger opponents of open government at the Texas Capitol than UTIMCO and the UT System's governmental relations department. In 1999, then -Rep. Steve Wolens (D-Dallas) sponsored a bill that repealed the "staff briefings loophole" to the Texas Open Meetings act. This loophole used to allow governmental entities to meet with staff only without posting a meeting and in secret. Because Wolens chaired a major committee that had before it several priorities of then-Gov. George W. Bush (parental notification on abortion and electric utility deregulation to name just two), neither the governor nor any state entity was about to pick a fight with Wolens on this topic, particularly with the Chronicle questioning UTIMCO's investment practices. But just two years later, then-Sen. Teel Bivins (R-Amarillo) quietly slipped a provision into an omnibus higher education bill reinstating the staff briefings loophole for UTIMCO. This is only one example of many where UTIMCO is on the wrong side of open government issues.
In all fairness, this new corporation is set up under the purview of the Comptroller of Public Accounts, and our current comptroller -- Susan Combs
-- has a very good record on open government issues. So the corporation may well behave itself as long as Combs is at the helm. But could anyone imagine how such a corporation might have behaved in prior administrations?
3. Bonuses and office expenses. How could anyone forget this session's confrontation between Sen. Kevin Eltife (R-Tyler) and former UTIMCO Chairman Robert Rowling over the bonus paid to UTIMCO's CEO? Does the Legislature want to condone similar bonuses at this new corporation? Also, the Austin American-Statesman
did several articles over the past two years over UTIMCOs office expenses and lease of space in a downtown office building. Permanent School Fund staff currently works in state office buildings.[Note this was later corrected that the PSF staff works in space in the Wells Fargo Building leased by the Texas Facilities Commission, but has by far the lowest operating expenses of any major state fund.
] Will the new corporation do likewise, or rent fancy downtown office space as well?
The biggest problem the Permanent School Fund faces is nonstop interference from politicians at the Capitol, most notably successive lieutenant governors of both political parties. Starting with Bob Bullock, lieutenant governors pressured the State Board of Education -- often under not-so-subtle threat of having other powers stripped -- to change the investment strategy of the fund or otherwise increase the current payout. There is a dollar-for-dollar offset between money coming out of the permanent school fund and the amount of tax dollars required to fund the existing school finance formulas. Raise the payout of the PSF and it frees up money for expanding the state budget. But the cost is less money for future generations. That's why the constitution originally entrusted the fund to the elected board, and the committee substitute does keep the board in charge of the fund's payout rate. Frankly, the main reason the Permanent School Fund has hit the constitutional floor and isn't paying anything out this biennium is because the board was far too compliant with past political requests for an unsustainable payout.
The Permanent School Fund is serious business. It's a fund with tens of billions of dollars in it. Given the history on this subject, there are lots of questions that ought to be asked when such a major change is considered.
1 comment(s) so far...
By Cathie Adams on
4/27/2009 3:21 PM
Why in the world would Legislators be so upset that the ELECTED State Board of Education listens to and is responsive to parents and educators? Could it be that the Education Committee members are mere puppets to the highly paid LOBBY? It is SHAMEFUL that Legislators have stripped so much authority from the elected SBOE because each loss of their authority is a STAB in the backs of the parents and teachers who elected them.
I am eagerly awaiting the brave Legislators who will work to restore authority to the SBOE. And to restore the only perk that was removed last session: health insurance benefits that are provided to ALL other elected state officials.