Article VII, Section 5 of the Texas Constitution

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As amended November 5, 2019:

(a) The permanent school fund consists of all land appropriated for public schools by this constitution or the other laws of this state, other properties belonging to the permanent school fund, and all revenue derived from the land or other properties. The available school fund consists of the distributions made to it from the total return on all investment assets of the permanent school fund, the taxes authorized by this constitution or general law to be part of the available school fund, and appropriations made to the available school fund by the legislature. The total amount distributed from the permanent school fund to the available school fund: (1) in each year of a state fiscal biennium must be an amount that is not more than six percent of the average of the market value of the permanent school fund, excluding real property belonging to the fund that is managed, sold, or acquired under Section 4 of this article, but including discretionary real assets investments and cash in the State Treasury derived from property belonging to the fund, on the last day of each of the 16 state fiscal quarters preceding the regular session of the legislature that begins before that state fiscal biennium, in accordance with the rate adopted by: (A) a vote of two-thirds of the total membership of the State Board of Education, taken before the regular session of the legislature convenes; or (B) the legislature by general law or appropriation, if the State Board of Education does not adopt a rate as provided by Paragraph (A) of this subdivision; and (2) over the 10-year period consisting of the current state fiscal year and the nine preceding state fiscal years may not exceed the total return on all investment assets of the permanent school fund over the same 10-year period.

(b) The expenses of managing permanent school fund land and investments shall be paid by appropriation from the permanent school fund.

(c) The available school fund shall be applied annually to the support of the public free schools. Except as provided by this section, the legislature may not enact a law appropriating any part of the permanent school fund or available school fund to any other purpose. The permanent school fund and the available school fund may not be appropriated to or used for the support of any sectarian school. The available school fund shall be distributed to the several counties according to their scholastic population and applied in the manner provided by law.

(d) The legislature by law may provide for using the permanent school fund to guarantee bonds issued by school districts or by the state for the purpose of making loans to or purchasing the bonds of school districts for the purpose of acquisition, construction, or improvement of instructional facilities including all furnishings thereto. If any payment is required to be made by the permanent school fund as a result of its guarantee of bonds issued by the state, an amount equal to this payment shall be immediately paid by the state from the Treasury to the permanent school fund. An amount owed by the state to the permanent school fund under this section shall be a general obligation of the state until paid. The amount of bonds authorized hereunder shall not exceed $750 million or a higher amount authorized by a two-thirds record vote of both houses of the legislature. If the proceeds of bonds issued by the state are used to provide a loan to a school district and the district becomes delinquent on the loan payments, the amount of the delinquent payments shall be offset against state aid to which the district is otherwise entitled.

(e) The legislature may appropriate part of the available school fund for administration of a bond guarantee program established under this section.

(f) Notwithstanding any other provision of this constitution, in managing the assets of the permanent school fund, the State Board of Education may acquire, exchange, sell, supervise, manage, or retain, through procedures and subject to restrictions it establishes and in amounts it considers appropriate, any kind of investment, including investments in the Texas growth fund created by Article XVI, Section 70, of this constitution, that persons of ordinary prudence, discretion, and intelligence, exercising the judgment and care under the circumstances then prevailing, acquire or retain for their own account in the management of their affairs, not in regard to speculation but in regard to the permanent disposition of their funds, considering the probable income as well as the probable safety of their capital.

(g) Notwithstanding any other provision of this constitution or of a statute, the State Board of Education, the General Land Office, or another entity that has responsibility for the management of revenues derived from permanent school fund land or other properties may, in its sole discretion and in addition to other distributions authorized under this constitution or a statute, distribute to the available school fund each year revenue derived during that year from the land or properties, not to exceed $600 million by each entity each year.

Editor Comments

As adopted in 1876, this section read: "The principal of all bonds and other funds, and the principal arising from the sale of land herein before set apart to said school fund, shall be the permanent school fund, and all the interest derivable therefrom and the taxes herein authorized and levied shall be the available school fund, which shall be applied annually to the support of the public free schools. And no law shall ever be enacted appropriating any part of the permanent or available school fund to any other purpose whatever; nor shall the same or any part thereof ever be appropriated to or used for the support of any sectarian school; and the available school fund herein provided shall be distributed to the several counties according to their scholastic population and applied in [such] manner as may be provided by law."

In 1935, voters narrowly rejected a constitutional amendment that inter alia authorized the provision by the state of free text books to children attending private schools.

The section has been amended eight times. The most recent amendment increased the annual distribution authorized by Subsection (g) from $300 million to $1.2 billion.

—Attorney Steve Smith

Recent Decisions

None.

Historic Decisions

  • Mumme v. Marrs, 40 S.W.2d 31, 33 (Tex. 1931) ("This system now has five general sources of support expressly provided for in the Constitution: (1) The income from the permanent school fund; (2) one-fourth of the revenue from occupation taxes and poll taxes; (3) local school taxes by districts; (4) an ad valorem state school tax; and (5) appropriations by the Legislature from the general funds of the state. The insistence is made that all appropriations from the general revenue must necessarily be made a part of the available school fund, and be apportioned to the counties in accordance with their scholastic population . . . . We cannot agree with this interpretation of the organic law.")
  • Greene v. Robison, 210 S.W. 498, 505 (Tex. 1919) ("While these lands were by the Constitution dedicated to the school fund, the school fund acquired no title to them as against the State. The State did not thereby become a mere trustee. As the sovereignty, it continued to own the lands just as fully as before their dedication. This has been definitely settled. Chief Justice Stayton settled it in . . . . The State, not the school fund, is the source of titles to school lands. And if the Legislature wished to place it beyond doubt that a purchaser of school land had bought and acquired in the purchase of the land all that was in the land, that was in our opinion an authority within its lawful powers.")

Library Resources

Online Resources

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