11/19/2010 11:48 AM
The State Board of Education voted to increase the payout rate for the Permanent School Fund today. The rate helps fund the state's public school obligations, which in turn helps balance the state budget.
The board agreed to spend 4.2 percent of the value of the fund over the past 16 quarters. That works out to $1.58 billion plus an additional $300 million from the General Land Office (GLO). This is an increase from a previously adopted 3.5 percent rate.
The board made its higher rate contingent on action of the School Land Board to send an additional $500 million from its land accounts to the State Board of Education's accounts. Land Commissioner Jerry Patterson, chairman of the School Land Board, agreed in writing to support such a transfer.
The State Board of Education has a challenging role in managing the Permament School Fund. Legislative leadership is constantly pressuring the board to raise the payout rate because it provides more funds in the short-term to balance the state budget. But the board also has a duty to preserve the fund for future generations, and setting a payout rate too high depletes the funds for future generations. Because of current conditions in the investment markets, the board set a 3.5 percent rate. But once Patterson agreed to support transferring an additional $500 million into the fund, the board reconsidered, figuring that money will address concerns about depletion of the long-term assets of the fund.
Board member David Bradley (R-Beaumont) said that the board was working as a "transfer agent,' sending GLO money to the state to go toward public schools. Bradley also noted that just sending the extra GLO money to the state budget would have resulted in a 4.16 percent rate, but the State Board decided to go to 4.2 percent.
"We put a little bow on it," said Bradley of the extra money for public schools.
Raising the payout rate on the Permanent School Fund does not necessarily increase the amount of money public schools get. There is a dollar-for-dollar offset between state general revenue and Available School Fund dollars. (The Available School Fund is the amount paid out of the Permanent School Fund.) The beneficiary of an increase in the payout rate is lawmakers, because it reduces the amount of money they have to spend to pay for existing school finance formulas. Money for schools only increases when the Legislature increases state funding formulas.