By Maxey                                        H.C.R. No. 30

      75R3374 PFG-D                           

                             HOUSE CONCURRENT RESOLUTION

 1-1           WHEREAS, The Permanent School Fund (PSF) was created to help

 1-2     finance public education for present and future generations of

 1-3     Texans and is a crucial component of our state's school finance

 1-4     system;  investment income from the fund's $13 billion in assets is

 1-5     deposited in the Available School Fund and distributed to public

 1-6     schools on a per capita basis; and

 1-7           WHEREAS, Administered by the State Board of Education, the

 1-8     majority of PSF assets are managed by internal staff members,

 1-9     although external firms have managed a portion of fund assets since

1-10     1995; and

1-11           WHEREAS, While the fund's internal managers have invested

1-12     nearly all the assets they manage in stocks that pay dividends, the

1-13     fund's external managers have invested a significant amount of

1-14     fund assets in nondividend-paying stocks that promise capital

1-15     growth; and       

1-16           WHEREAS, A close examination of the current PSF portfolio

1-17     reveals that dividend-paying stocks that possess an above-average

1-18     rate of return and earnings growth  provide superior investment

1-19     returns  in both dividends and capital gains; and

1-20           WHEREAS, Historically, stock dividends have accounted for

1-21     nearly half of the total return on stocks listed on the major U.S.

1-22     exchanges; in addition, stocks that pay dividends provide a steady

1-23     stream of current income, offer capital appreciation as well as

1-24     dividends, and outperform growth stocks in bear markets; and

 2-1           WHEREAS, By purchasing nondividend-paying stocks, the PSF's

 2-2     external managers are ignoring a primary reason for stock ownership

 2-3     by failing to capitalize on the growing stream of income generated

 2-4     by stocks that pay dividends; furthermore, money that finances such

 2-5     an essential program as public education in our state would be more

 2-6     wisely invested in dividend-paying stocks since these stocks have

 2-7     fared better than growth stocks during economic downturns; and

 2-8           WHEREAS, In the Texas comptroller's current performance

 2-9     review of Texas state government, Disturbing the Peace, it is

2-10     estimated that requiring the PSF to buy only stocks that pay a

2-11     current dividend would provide an additional $3.7 million for

2-12     public education during the 1998-99 biennium; now, therefore, be it

2-13           RESOLVED, That the 75th Legislature of the State of Texas

2-14     hereby encourage the State Board of Education to require that all

2-15     stocks purchased by the Permanent School Fund pay a current

2-16     dividend; and, be it further

2-17           RESOLVED, That the secretary of state forward an official

2-18     copy of this resolution to the chairman of the State Board of

2-19     Education.