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Broken Trust: Texas’ Huge School Endowment Pays Out Less And Less For Schoolchildren

AUSTIN— It was a grand promise, one our forefathers made 165 years ago to all Texas children, to theirs and ours and those not yet born.

With $2 million and the state’s most abundant and precious resource — its land — they created the Texas Permanent School Fund to forever support public education. It was called a “sacred trust.”

That trust, dedicated to K-12 schools, is now valued at $44 billion, bigger than even Harvard University’s endowment.

It is also broken.

The Permanent School Fund has failed to match the performance of peer endowments, missing out on as much as $12 billion in growth and amassing a risky asset allocation, a yearlong Houston Chronicle investigation reveals.

Outside fund managers have charged the endowment at least a billion dollars in fees during the past decade, records show. Some of them have had professional or personal relationships with Texas School Land Board members, who govern a portion of the fund.

And, critically, the fund is sending less money to schools than it did decades ago, in real dollars. The amount dropped to an average of $986 million annually over the past decade from an average of $1.14 billion in the previous 20 years, in inflation-adjusted dollars. Last year, the fund distributed only 2.8 percent of its value — roughly half the share paid out by many endowments.