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A fight is brewing between Texas Land Commissioner George P. Bush and Republicans on the State Board of Education over investment funds they manage to generate school funding.

For the first time ever, the School Land Board — a three-person body headed by Bush, a Republican — declined to pass any money from its fund to the education board, instead opting to feed $600 million to schools directly.


In response, education board members say they will have to reduce their own contributions toward school funding. And they’re also calling for this complex investment system to be reformed in the next legislative session.

As each side argues over how to best manage the largest educational endowment in the country, their disagreement could affect funding for Texas schools.

The crux of their fight rests on whose investment portfolio is the most profitable.

Since 2001, the land office and the education board have each managed separate portfolios as part of the $40 billion Permanent School Fund, a massive endowment of land and investments set up to support public schools in the state. That money makes up one piece of a broader school finance system in Texas, which also uses funds from local property taxes, state taxes and federal programs to support public schools.

The land office, which manages the real estate and mineral leases on the fund’s land, passed along millions each year from its fund to the education board’s own fund for securities investments.

In the past eight funding cycles, it had twice contributed $300 million directly into school funding, in addition to giving the SBOE anywhere from $200 million to $500 million.

But for the first time, the School Land Board voted not to pass along any money at all to the education board. Instead, all three of the board’s members voted to put $600 million directly into school funding — the maximum allowed under state law.

“Our dollars are needed more than ever, and this was the most direct way to get the money to the schoolchildren of Texas,” Karina Erickson, a spokesperson for Bush, said.

Bush has insisted that the land office’s investment fund is more profitable, and thus where it makes the most financial sense to keep school money.

But state board members have disputed his claims, instead accusing the land commissioner of getting involved in school funding to boost his political profile. They said it is “unprecedented” to bypass their own fund — which they say will generate more money for schools overall — and said he is misrepresenting figures about the land office’s portfolio.

“We’re the goose that lays the golden eggs and now the [General Land Office] is not wanting to feed the goose,” board member David Bradley, R-Beaumont, said.

Without the money it had expected to receive, the board may have to reduce how much it gives schools, said State Board of Education Chair Donna Bahorich, R-Houston.

In the previous funding cycle, the education board received $490 million from the School Land Board and then passed along to schools 3.25 percent of its endowment — about $2.5 billion.

For the next cycle, Bahorich said that the board may have to release no more than 2.75 percent of its endowment — just over $2 billion — in order to ensure the endowment stays healthy.

“We had to cut out the expectation as to what we will be able to send over,” she said, “because we got no reinforcement from the state land office.”

That would reduce the amount the SBOE sends to schools from the endowment by about $540 million. While the School Land Board’s additional contribution might make up for some of that, education board members say the School Land Board’s overall contribution will go down by 24 percent from last year.

The money funneled by the School Land Board — as well as half of the money funneled by the State Board of Education — goes into a pool called the Available School Fund, which is then divvied up among school districts according to state funding formulas that take into account student populations.

But Keven Ellis, R-Lufkin, said that based on those formulas, the money sent directly to the Available School Fund could provide less of a benefit for property-poor districts.

Moreover, education board members allege that it makes more sense to keep those millions in their own investment fund, which they say is more profitable.

While the state education board has requested more funds from Bush, the land commissioner refused. In his response, he criticized the board for relying on his office, suggesting that the SBOE could simply provide more funding itself.

“This request is no less than a demand for the SBOE to be bailed out by the School Land Board,” he said in a letter to Bahorich Wednesday that was obtained by The Texas Tribune. “Again, this could be easily rectified by your board allocating more resources.”

Bahorich said that when choosing how much money to distribute, the board looks toward “intergenerational equity,” by dispensing some money directly and investing the rest to make sure the fund is sustainable.

“We want to make sure the level of spending is both fair to the students today and to the students 100 years from now,” she said. “You don’t want to rob from either generation.”

Disclosure: The General Land Office has been a financial supporter of The Texas Tribune, a nonprofit, nonpartisan news organization that is funded in part by donations from members, foundations and corporate sponsors. Financial supporters play no role in the Tribune’s journalism. Find a complete list of them here.

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