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Nice! You are correct that the principal funding for Texas's Permanent School Fund (PSF) comes from leasing state-owned lands.
Background on the Permanent School Fund
The PSF's principal comes from leasing state-owned lands, including leasing mineral rights to oil and gas companies, grazing rights to ranchers, land to wind farms, and others. The Texas Board of Education and General Land Office manage the PSF. The revenue from leasing state-owned lands is invested in bonds, equities, such as corporate stocks. Some of the interest revenue, but not the principal, is allocated to education funds, including the Available School Fund (ASF), each year. The Texas Constitution dictates that no more than 6% of PSF investment returns can be transferred to the ASF; it also prohibits the PSF from distributing any proceeds if the principal of the fund falls below a certain benchmark. The ASF is then distributed on a per-student basis to school districts and charter schools.[1]
The Permanent School Fund is composed of two sources of funding: (1) returns from investments on the fund's principal (2) proceeds from state land and mineral investments. This amendment made accounting changes to how the second source of funding (land and mineral proceeds) are distributed to the PSF. The Permanent School Fund's endowment is composed of significant amounts of public land. Money is earned from these lands through a number of ways such as oil and gas revenues, sales, leases, etc. While the PSF owns the lands, the General Land Office is charged with the management, administration, and sale of the land. The State Land Board (SLB) is an entity responsible for handling General Land Office affairs as related to the Permanent School Fund. The SLB had the discretion to use proceeds and revenue earned from PSF land to invest in real estate if it deemed prudent.
The State Land Board decided how much of the proceeds from PSF land were transferred to the PSF. There were no minimum parameters or regulations stipulating how the State Land Board distributes those proceeds to the PSF. The SLB determined how much is distributed to the PSF for public education purposes and how much is reinvested.
Learn more about the Permanent School Fund here.
Funding
As of August 31, 2019, the PSF had a balance of $44.07 billion, with $4.05 billion in revenue for the fiscal year. Each year, $300 million can be allocated from the PSF to ASF. During the 2016 fiscal year, the maximum allowable distribution from the PSF was about 5% of total education spending.
See also
Footnotes
