SPI Insights

According to a report released from the Texas Education Agency, the Texas Permanent School Fund (PSF) has approximately $652.6 million, down from $3 billion at the end of September. If the cap is reached, school districts would be forced to rely solely on taxpayers to fulfill bonds.

When a bond is approved by voters for the school district, the PSF provides a safety net for lenders who purchase bonds that the state will pay back if the school districts are unable to do so.

The PSF’s guarantee program has a limit on how much debt it can cover at any given time. The IRS, which has jurisdiction over tax-exempt municipal bonds, has set that limit at about $117 billion. As of Oct. 31, the PSF only has about $652.6 million left in capacity before the program shuts down.

The PSF is a state endowment of about $56 billion funded through investments and land holdings. The PSF was conceived in 1845 as a perpetual fund to support Texas public schools, to which 10% of all tax revenue would be devoted. In 1876, it was added that certain lands and all proceeds from the sale or lease of these lands also would provide money to the PSF. These lands, including the leasing of surface and mineral rights to them, are managed by the General Land Office and overseen by the School Land Board.

A Texas Permanent School Fund Corporation (Texas PSF) was formed in December 2021 by the Texas State Board of Education. The Texas PSF was created from the 87th Legislative Session to unify the governance and management of the state’s endowment fund for public schools. The Texas PSF has released its first Legislative Appropriations Request (LAR) for FYs 2024-2025.