By Ellis, et al.                                S.C.R. No. 15

      75R3372 MPC-D                           

                                CONCURRENT RESOLUTION

 1-1           WHEREAS, The Permanent School Fund (PSF), created in 1854 as

 1-2     a perpetual endowment to support Texas public schools, controls

 1-3     more than 46.5 million acres of Texas land, including the mineral

 1-4     interests from 7.1 million acres; and

 1-5           WHEREAS, Control of the PSF's assets is assigned to the State

 1-6     Board of Education (SBOE), while administrative duties related to

 1-7     the fund reside with the Commissioner of Education; and

 1-8           WHEREAS, Fund investments were managed entirely by the PSF's

 1-9     own fund managers until 1995, when the SBOE hired three private

1-10     firms to manage $3.5 billion of the total $13 billion in PSF

1-11     assets; and

1-12           WHEREAS,  Due to costly contract terms and fees, all three

1-13     external managers selected by the SBOE have produced lower rates of

1-14     return than the PSF's own internal managers and in the last 10

1-15     years have substantially underperformed the internal PSF staff; and

1-16           WHEREAS, Over the decade ending June 30, 1995, the PSF

1-17     managers outperformed on a total return basis the Teacher

1-18     Retirement Fund, the Permanent University Fund, and the Standard &

1-19     Poor's 500 Index, and the fund consistently ranked among the

1-20     nation's highest performing public funds; and

1-21           WHEREAS, No evidence exists that external money managers will

1-22     generate a higher return on PSF investments, and many studies have

1-23     shown that commissions and fees cause most active managers to

1-24     underperform; and

 2-1           WHEREAS, The use of external money managers removes much of

 2-2     SBOE's control over PSF investments by allowing managers to invest

 2-3     in any sector of the economy, even against the board's express

 2-4     wishes;  and

 2-5           WHEREAS, Internal management of PSF investments would assure

 2-6     that SBOE maintains close supervision over all securities and,

 2-7     according to figures produced by the comptroller of public

 2-8     accounts, would provide an additional $8.9 million for public

 2-9     education each year; and

2-10           WHEREAS, The 74th Legislature provided authorization for the

2-11     creation of the nonprofit Texas Permanent School Fund Management

2-12     Company, which laid the foundation for creating a high-quality,

2-13     well-paid internal staff to manage all PSF investments; now,

2-14     therefore, be it

2-15           RESOLVED, That the 75th Legislature of the State of Texas

2-16     hereby urge the State Board of Education to directly manage all

2-17     investments of the Permanent School Fund through the Texas

2-18     Permanent School Fund Management Company; and, be it further

2-19           RESOLVED, That the secretary of state forward official copies

2-20     of this resolution to all members of the State Board of Education

2-21     and the commissioner of the Texas Education Agency.