By Kate Alexander | AMERICAN-STATESMAN STAFF
Friday, July 23, 2010
tate Board of Education members muscled through a proposal Friday to invest public school endowment dollars in charter school facilities.
But there could be a push back next year from legislators who say political aims are overtaking the board's responsibility to manage prudently the $22 billion Permanent School Fund. The endowment was created in 1876 for the benefit of Texas public schools.
On Friday, the board reversed a preliminary vote from the previous day and dedicated $100 million of the fund to developing and leasing buildings for charter schools, which are privately managed public schools.
Charter schools deserve assistance similar to what the state provides traditional public school districts, said board member David Bradley, R-Beaumont. The fund helps school districts by guarantying debt used to build classrooms and other facilities, which reduces the districts' borrowing costs.
"We're trying to be fair," Bradley said.
State Sen. Robert Duncan, R-Lubbock, said the board appears to be overstepping its role.
"Their job is to prudently invest the fund so that the constitutional objectives of the fund can be maximized, and providing facilities for charter schools is not one of those functions," said Duncan, chairman of the State Affairs Committee. "This appears to be a political decision and not a decision that is based upon the board exercising its fiduciary responsibility under the constitution."
Duncan and state Rep. Donna Howard , D-Austin, carried legislation last year that would have placed investment oversight of the endowment with an appointed board of financial professionals.
That measure cleared the House of Representatives with the 100 votes needed to put a constitutional amendment on the ballot, but it never got a hearing in the Senate.
Howard said she intends to file the legislation again in 2011 and believes that lawmakers from across the political spectrum will agree that Friday's decision "is not conservative management of this fund."
Chairwoman Gail Lowe , R-Lampasas, has her own reservations about whether the charter school investment would pass constitutional muster. But she said having an elected board overseeing the fund does serve the public well.
The constitutional issue in question is whether a charter school facility investment would meet the "prudent person" standard that generally says an investment's return must be commensurate with its risk.
The board's investment adviser described the charter school investment as low-return and high-risk and declined to make a recommendation for or against the investment approach.
Board member Cynthia Dunbar , R-Richmond, said the board members are meeting their legal obligations to vet investments thoroughly.
There is also a benefit to the overall fund as well as to education as a whole, Dunbar said.
No investment will be made until the attorney general weighs in on the "prudent person" question or the Legislature gives clear authority for the board to proceed, the board stated in its approval of the asset allocation.
Education Commissioner Robert Scott said he will instruct staff members who oversee the Permanent School Fund and charter school policy to tackle many lingering questions about the plan.
On Thursday, the board split 7 to 7 on a vote to include the charter school proposal in the overall investment mix of the endowment. The tie sank the proposal.
But when the final vote was taken Friday, one opponent from Thursday, Rick Agosto, was gone. The San Antonio Democrat had left the meeting shortly after roll call earlier in the morning.
Agosto's absence gave supporters of the charter school proposal the one-vote margin needed to include it in the overall investment mix of the endowment.
Agosto said any suggestion that he left the meeting to flip the vote's outcome is "preposterous."