From the Office of State Senator Rodney Ellis

For Immediate Release
March 5, 2001
Contact: Jeremy Warren, (512) 463-8393

Chairman Ellis, Chairman Junell Urge Adoption of Total Return Plan
SB 490/SJR 19 will generate $700 million in additional revenue for education priorities

(Austin)// Senator Rodney Ellis (D-Houston) and Representative Robert Junell (D-San Angelo) today urged adoption of SB 490/SJR 19, legislation that will generate additional revenue to fund a teacher's health insurance plan.

Senate Bill 490/SJR 19 will allow Texas to tap capital gains from stocks within the $22 billion Permanent School Fund and apply them to the Available School Fund and to a new teacher health insurance fund. Under current law, any capital gains earned must go back into the Fund. The trust fund -- made up of stocks, bonds and oil and gas royalties from state owned lands -- generates approximately $700 million in capital gains every two years.

"The Permanent School Fund was not meant to just look good on an annual report, it was designed to create better schools for our children," said Senator Ellis. "This plan will maximize the fund to ensure we get the best bang for the buck now while still protecting the fund for future generations."

By adopting a total return plan, Texas will generate over $700 million in additional available revenue for education over the biennium. Under SB 490/SJR 19, 80 percent of the Permanent School Fund proceeds would flow to augument and maintain the current commitment by the Available School Fund to provide free textbooks and technology funding and provide basic educational support. The remaining twenty percent -- over $225 million a year -- would assist districts in meeting health insurance needs through the Public School Employee Health Insurance Fund (PSEHIF), created by this legislation.

Adoption of a total return strategy is needed because, despite tremendous growth in the Permanent School Fund (199 percent) over the last ten years, benefits to schools have remained flat and appear to be declining. Distributions to the Available School Fund from the Permanent School Fund have risen only 3 percent since 1990. Since then, realized capital gains in the Permanent School Fund have increased by 806 percent and unrealized gains have increased by 221 percent. Per student funding earned using the income concept has actually declined by 36 percent since 1990. Because of this decline, the amount per student provided to Texas schools was $1 less in 2000 than in 1990.

"Teachers Health Insurance is a top priority of this legislature," said Ellis. "A total return strategy will help us make a significant downpayment on a strong, stable teacher's health insurance plan. "

Texas has already utilized a total return plan for higher education. In 1999, the legislature passed and Texas voters approved 61 percent to 39 percent, a similar plan that allowed Texas to utilize the capital gains earned on the $7.5 billion Permanent University Fund -- the pool of resources dedicated to fund academic programs, construction and capital costs in the University of Texas and Texas A&M Systems -- for other higher education priorities. In the current biennium, the change has increased the yield benefitting Texas colleges and universities by more than $100 million.

"We have already seen how adopting a total return strategy can help Texas generate additional dollars for higher education," said Ellis. "If it is good enough for the University of Texas and Texas A&M University, it is good enough for our children."

Senate Bill 490 and SJR 19 were left pending until further action on the 2002-03 budget is completed.