SBOE Reviews State of PSF Corp Investments

Desks in a classroom | Image by Mint Images/Getty Images

The Texas State Board of Education met with the Texas Permanent School Fund Corporation on Thursday to discuss the annual report on the status of the bond guarantee program.

Mark Shewmaker, senior investment officer and director of special projects at the Texas Permanent School Fund Corporation (PSF), provided Texas State Board of Education (SBOE) members with a detailed report that included data until March 2024.

The PSF was created in 1845 as a perpetual fund to support the state’s public schools and has grown to comprise over $53 billion in assets. It distributes nearly $2.2 billion annually to Texas K-12 schools, according to the organization’s website.

This year is the 40th anniversary of the PSF’s Bond Guarantee Program, which allows school districts to pay a lower interest rate on their debt, allowing more money to go toward school improvements.

“Sometimes, in this board room, we get [caught] up in numbers and policies,” said SBOE Member Tom Maynard (R-Florence). “At the end of the day, what we’re doing is working for 5.5 million students and young Texans and doing everything we can to support the ones that teach them every day.”

PSF provided a brief overview of its private equity program, which launched in 2010. The fund has grown from $26 billion to approximately $54 billion in private equity, with allocations rising from 6% to 20%.

Nick Tramontana, senior managing director of PSF, touched on the corporation’s real estate investment performance. As of December 31, 2023, PSF’s real estate team achieved $442.6 million in value in excess of benchmark returns.

The team is working on future projects such as building high-quality student living facilities, senior housing facilities, and expanding onto Harvard’s campus.

“The PSF team does an average of 373 meetings and calls per year with credit investment managers,” said John Newell, senior managing director of PSF’s private credit team. “We’ve done 100 meetings and calls with 53 unique managers in quarter one of 2024.”

Private credit accounts for nearly 30% of PSF’s hedge fund portfolio.

Representatives from each PSF team acknowledged the goal of having fewer but more meaningful relationships.

“None of this is any good without the talent to do it. We need to nurture, grow, and retain that talent,” said Robert Borden, PSF’s CEO and chief investment officer. “It’s an open market for talent out there. We’re out there competing for other funds and management groups. We’ve got to be able to attract talent and keep our talent here. If we don’t, this will systematically decay in its success. It’s a critical step in order to be able to execute our plan.”

In addition to meeting with PSF, the SBOE discussed various items throughout its day-long meetings.

A proposal was discussed that would allow a trustee of a military reservation school district who retires from active duty or civilian service while serving as a member of the board of trustees to continue to serve for the remainder of their term.

The proposal was initially brought to the board at the February meeting. However, consideration was postponed until this week. The measure also proposed that to be eligible to serve in a military reservation school district, one must either live or be employed on the reservation.

The board also discussed revisions to the Texas school safety training curriculum and the creation of new teacher training certificates in areas like bilingual special education and pre-K-3.

The mention of more teacher training certificates followed a lengthy discussion during Wednesday’s SBOE meetings about a lack of teacher preparedness leading to low teacher retention.

“Teachers are quitting the profession in higher numbers than they have historically,” said Mike Morath, commissioner of education for the Texas Education Agency (TEA), at Wednesday’s meeting.

Morath claimed that a lack of teacher-preparedness was to blame.

Of the 49,200 new Texan teachers in 2023, only 12% had traditional university certifications, and 34% were not certified, the highest rate ever.

Dallas ISD fared worse, with some 38.8% of its educators working without certification, according to TEA data. The district has struggled with producing quality outcomes in student achievement. Only 41% of students scored at grade level on their STAAR exams during the 2021-2022 school year, and nearly 20% of its graduating Class of 2022 failed to graduate in four years.

Multiple members of the public faced the committee in today’s meetings, echoing similar frustrations.

“Certification of teachers is disintegrating in the State of Texas,” said Michael Marder, director of physics at the University of Texas at Austin. Marder described his 20 years of teaching in which the lack of teacher training has slowly become the new normal.

The SBOE will convene on Friday at 9 a.m. for a final day of meetings. The next covering of SBOE will take place June 25-28.

The meetings can be watched live here.

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