On Tuesday, Texas voters will go to the polls to say yea or nay to ten proposed constitutional amendments. Truthfully, our state constitution stinks. Written in 1876, it’s now almost 90,000 words long and has been amended almost 500 times. According to the Handbook of Texas, some of the constitution’s passages “are so poorly drafted as to need clarification for understanding, and others have been declared by the Texas Supreme Court to be beyond interpreting,” which is one thing you don’t want to be true about a constitution. At this point it’s essentially a poorly maintained Wikipedia page.
Each raft of new amendments usually contains a few good ideas, a handful of trivial fixes, and at least one controversy. This year, most of the debate has focused on Proposition 4, a redundant measure to super-duper ban a state income tax. But there’s another line on the ballot, Proposition 7, that’s arguably more interesting, even though it’s been the subject of very little attention. It’s not a partisan issue, and it’s not self-evidently good or bad. But it says something important about how state government works right now.
The way Proposition 7 is described on the ballot is as a “constitutional amendment allowing increased distributions to the available school fund.” That sounds fine! Schools are good, and schools need funds. A person who’s been following along pretty closely might know that the Legislature passed a big school finance overhaul bill earlier this year that lawmakers haven’t, strictly speaking, found a way to fully fund. Prop 7 is connected to that. But look up the “Available School Fund,” and things quickly get confusing. (Here’s a flowchart, which looks like some kind of HVAC unit.)
The (relatively) simple version is this: The state government owns a lot of land, under which exists a lot of oil and gas. A state agency called the General Land Office, currently led by George P. Bush, oversees that land, and gives the money it earns from oil and gas royalties and other activities to another state entity, the Permanent School Fund, to invest in stocks and bonds. The money invested in the Permanent School Fund, which is run not by the Land Office but by the State Board of Education, grows over time. Every year some of the proceeds of those investments are directed to the Available School Fund, which provides part of the money that Texas needs to fund its school system. Still following along?
In short, the Permanent School Fund is a machine to turn the state’s money into more money over the long term. It’s a sovereign wealth fund, of the kind that has recently become popular in oil-rich countries, except that Texas leaders had the foresight to set up its predecessor all the way back in 1854.
In the 19th century, Texas was a desperately poor place, and it would have been easy for lawmakers at the time to take money earned from state lands and plow it into the general budget—to build schools, roads, whatever. But they instead decided to put off the immediate needs of the state for the benefit of its future, which is a pretty remarkable thing. They created a public institution that would help their distant descendants much more than them.
Today, interest from the $44 billion fund helps backstop education spending in the state to the tune of billions of dollars every year—and the fund also guarantees the bonds that school districts issue, which saves them a lot of money when they need to borrow. The larger the fund gets, the more money it can provide for education spending.
But there’s a wrinkle. Right now, the Land Office can decide, each year, to send up to $300 million in proceeds from state-owned land directly to the Available School Fund, skipping the Permanent School Fund. That money, up to $600 million each biennium, isn’t invested for the future; it’s used for immediate needs. That may help plug urgent needs in the school system, but it represents a long-term loss to the state, because the money never has the chance to grow.
In 2018, Commissioner Bush did exactly this, routing $600 million to the Available School Fund, angering Republicans and Democrats on the State Board of Education. Members of the SBOE accused Bush of “empire-building” by using the money in a way he could take maximum credit for; Bush’s spokesperson said the money was more urgently needed by the schools now.
This brings us back to Prop 7. The proposed constitutional amendment doubles the amount of money Bush and the Land Office can send to the Available School Fund from $600 million to $1.2 billion every biennium. Lawmakers were grateful for the money they got from Bush while writing the 2020-21 budget, particularly because they were scrambling to figure out how to pay for their school finance and property tax packages. They invited him, cordially, to do more of it. It was not a controversial ask: In committee, nobody testified against the resolution that became Prop 7, and it was approved unanimously.
The case for doing so has been strengthened by the fact that the Permanent School Fund is sickly these days because of mismanagement. In a series of damning reports earlier this year, the Houston Chronicle explored the ways the fund has become a machine to make bonuses and commissions for politically connected financial managers hired to run it. Adjusting for inflation, the fund is producing less money for schools than it did decades ago—partly because so much is getting skimmed off the top. (Full disclosure: My dad worked at the Permanent School Fund many years ago, and I grew up hearing an indictment of the current fund that pretty much matches the Chronicle’s findings.)
It might well be right, then, to use the money now, instead of saving it for later. That’s for the voters to decide. Proposition 7 will most likely be approved, and the money will go to good use. But it’s worth taking a moment to admire this whole thing as a minor tragedy. Many generations of Texas lawmakers eschewed short-term gain for long-term benefit by continuing to plow money into the Permanent School Fund, and trying to take good care of it. Then, in recent decades, the fund was overtaken by mismanagement and rent-seeking. People lost faith in it. In the absence of any real effort to reform the fund, the argument for prioritizing long-term benefit weakened, and it becomes easier for lawmakers to ask for the money for their own needs. Now that this door has been opened, it will become easier to ask for more in the future.
You can see this kind of weakening of institutions in multiple parts of state government. The Texas Tribune recently had a great story about the nonpartisan Legislative Budget Board, a cadre of wonks and number-crunchers that provides information for lawmakers as they go about their work. The LBB is currently being emptied out, seemingly at the behest of Lieutenant Governor Dan Patrick, and losing a lot of institutional knowledge and expertise in the process that will be difficult to replace. The LBB’s decline will have consequences across state government, which will have other consequences, etc., etc.
Institutions are very hard to build, and very easy to dismantle. If “politics” is often about conflict over divisive issues and group interests, “governing,” when done well, is the art of inheriting institutions and passing them along in stronger shape than when you found them. If that’s the case, something went wrong here.