Paper by Margaret R. Bird
The name of the permanent school fund varies slightly by state and usually includes some combination of the words trust, common, school, public and fund. The correct title in Utah is State School Fund. Utah authorizes the State Treasurer or Commissioner of Revenue to invest the funds. Only Texas has the beneficiary, the Texas State Board of Education, invest its funds. Texas is also the state that generated the greatest return on their investments in FY 2005 - 14.18% total return.
Six of the states had the investments of the permanent school funds made by the state treasurer. Many of the state treasurers also have an advisory board that provides input and consultation on asset allocations and investment policy. Some of these advisory boards have highly qualified private investment experts serving, such as Utah. Their FY 2005 total return was the highest total return received by state treasurers - 9.53% total return.
The permanent school funds in the eighteen states that responded to the questionnaire contained $38.5 billion dollars at market value in FY 2005, seeing significant growth since FY 2001. Over the period from FY 2003 to FY 2005, there has been a 20% increase in the market value of the school funds in these eighteen states. The exceptions were Mississippi, Montana, and Washington that all saw significant decreases in the market value of their funds.
Though every state was to have entered the union on equal footing, there are great inequities in the value of the lands granted to each state for the support of schools. The most obvious inequity was the difference in the size of each state as a whole.
Consequently, each state would have received differing amounts of school trust lands even if Congress had stuck to the granting of only Section 16 for schools. Secondly, those states joining after 1850 received sections 16 and 36 compared to only section 16 for those joining earlier. Congress tried to correct the inequitable values for the arid states of Utah, Arizona, and New Mexico by granting four sections, Sections 2, 16, 32, and 36. In doing so, Congress failed to go back and grant two additional sections to Nevada that had joined previously and is the most arid state in the nation. Given Alaska's late union in the United States, their schools were seriously shortchanged and their issues are yet unresolved. Third, there are enormous inequities in terms of the mineral value contained in the various state grants. This inequity is, perhaps, the most significant determinant of the disparities between states in terms of the value of the permanent funds. Finally, the degree to which the deposits in the permanent funds were guarded, protected and prudently invested has resulted in some states having permanent funds shamefully less than what would be expected for the resources originally granted.
Permanent School Funds
Second Quartile States
(Market Value in Millions)
As evidenced in the graph above, Utah has made the most significant progress in building the market value of their permanent fund. Utah's permanent school fund increased 69%.
When market value is compared to cost at the end of FY 2005, Utah ranked fourth in making the greatest gains in percentage of the market value over the cost at 16%.