TEA News Releases Online
Feb. 8, 2011
Permanent School Fund hits $25 billion level
AUSTIN – A strong return on its investments has allowed the Permanent School Fund to rebound to a fair market value of $25 billion after posting a return of 13.14 percent in 2010.
The fund, which is the second largest educational endowment in the country behind only Harvard University, beat its benchmark by 0.40 percent.
Created in 1854 with a $2 million investment, the fund benefitted from the global financial recovery and continued to provide strong support to the state’s public schools. The fund was last valued at $25 billion in 2007. The financial upheaval in the market caused the fund’s value to plunge to $16 billion in 2009. The PSF quickly began to recover, with the total value of the fund growing by about $9 billion since 2009. Over the last two years, the fund return has been 18.99 percent per year and, for more than 20 years, the average annual return was 9.0 percent.
The fund, which is overseen by the State Board of Education, benefits the schools by helping to pay for basic education costs, including the purchase of textbooks and other instructional material. The PSF is scheduled to provide about $1.9 billion to the state budget for education during the 2012-2013 biennium.
The financial strength of the fund is also used to guarantee school district bonds issued by public schools. Districts that issue bonds backed by the PSF qualify for a AAA rating from the three major rating agencies, which in turn means the districts pay lower interest rates when they issue the debt, saving Texas taxpayers a significant amount of money.
“The State Board of Education in recent years has taken steps to diversify the fund’s portfolio and reduce risk. The results announced today show that this strategy is working well,” said Gail Lowe, chair of the board.
Holland Timmins, chief investment officer of the fund, said, “The fund is not immune from the uncertainty of the global markets but it has made a strong recovery in recent years and continues to be a great asset to the Texas public school system. Over the past year, each asset class has outperformed its benchmark.”
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