The Texas Oil Boom Is A Boon for Texas Schools
Thursday, January 03, 2019
If you think the West Texas oil boom is irrelevant to your life beyond lower prices at the gas pump, let us introduce you to a couple of endowment funds that have boomed, too: The Permanent University Fund and the Permanent Schools Fund.
What many people may not realize is that Texas has a couple of endowments tied to oil and gas extraction that benefit its schools.
In the 1876 Texas Constitution, legislators showed unusual foresight by setting aside land in West Texas for each fund, stipulating that any sales or proceeds from the land should remain part of those funds. Little did they know the enormous underground riches of the Permian Basin.
“They expected that the land would be sold at some point and the proceeds of the sale invested to create an endowment. Striking oil changed everything, and that once-unpromising brush land has made the PUF and these two systems what they are today,” as former UT System Chancellor William McRaven said in testimony to a joint legislative committee in February.
The Permanent University Fund, PUF, is the principal endowment fund for the University of Texas and Texas A&M systems. Endowment assets for UT and A&M amounted to $32.9 billion in November, surpassing Yale University to become the second-largest university endowment in the country, just behind Harvard University, which has $39.2 billion. The size of the Texas endowment has expanded 20 percent over the past two years, and nearly doubled over the past decade, a time when new drilling techniques triggered an oil boom in West Texas and made the United States the world’s largest oil producing country.
The total assets of the Permanent Schools Fund, the PSF, an endowment for public K-12 schools, increased 14.7 percent in fiscal year 2017, thanks in part to a 27 percent increase in the value of the fund’s mineral interests.
This means that our state’s largest university systems and public schools have revenue streams that relieve the burden on taxpayers. Not entirely, of course. The PUF supports universities that educate around 376,000 students each year; Harvard has around 36,000 students. And anyone who pays property taxes can see that local schools rely heavily on local taxpayers and need better funding mechanisms from Austin.
A second benefit is that the funds are used to guarantee debt issued by the universities and local school districts. Debt rating agencies consider the funds very stable, and this allows schools and universities to borrow at low interest rates. That further reduces the ultimate cost for taxpayers.
This golden goose has been giving us eggs for 142 years. The responsibility for sustaining her lies with the fund managers to invest with care, and with the state oil and gas regulators, the Railroad Commission and the Texas Commission on Environmental Quality. As environmental activists demand Texas halt all drilling, it is up to these regulators to build public trust by enforcing firm, fair regulations and requiring absolute transparency. The education of Texas children is on the line.