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Rob Orr

School Land Board votes to transfer $300 million to Available School Fund

From the Trib:

The School Land Board voted Tuesday to release $300 million into the Available School Fund for public schools.

The money will be released in two $150 million installments, one in February and the other on June. The funds had been caught in a standoff between the Legislature and the School Land Board, which operates out of the General Land Office and oversees the state’s public school land.

A constitutional amendment proposed in 2011 by state Rep. Rob Orr, R-Burleson, allowed the board to put a portion of earnings from investments on real estate assets into the Available School Fund, which along with property and sales taxes helps pay for public education.

Voters passed the amendment last November, but the little-watched School Land Board decided not to distribute the money in July. Land Commissioner Jerry Patterson, who sits on the three-member board, said it wanted to protect the funds for upcoming investment opportunities.

“It’s the age-old question of whether you save the money to send your kids to college or borrowing when they do,” he said at a House appropriations meeting in December.

Usually the proceeds from the sale and management of public school lands would go into a $26 billion trust whose revenue feeds into the Available School Fund. Proposition 6 made it so that the School Land Board, if it chose, could bypass that step and put money directly into the fund.

Background here. Given Commissioner Patterson’s previous opposition to the transfer of these funds, I was curious how he voted, since the story didn’t specify. I sent an inquiry to his office to check, and was told that he did vote no. You can read Commissioner Patterson’s statement here, the crux of which is as follows:

Texas Land Commissioner Jerry Patterson, chairman of the board, cast the lone vote against the payment. He said the decision was frustrating because lawmakers passed a flawed budget last session that addressed short-term problems without providing a coherent long-term vision.

“We need to strive to do better,” Patterson said. “Spending down our kid’s trust fund to pay today’s bills is a path I don’t want to go down any further. Fortunately, the fund is healthy enough to protect Texas schools from one year of bad budgeting.”

I sympathize with that, but I don’t have a whole lot of optimism about better budgeting. Anyway, the money that the Lege assumed would be there after the constitutional amendment passed is now in fact there, so that’s one thing less to worry about.

Texas’ public pension funds are solvent through 2075

There was a hearing in the Lege this week about the state’s pension plans, and the good news is that they’re in pretty good shape. The better news is that the members of the Lege’s pension committee recognize that fact.

State Rep. Rob Orr, R-Burleson, who is said to be in the running to be chairman of the committee in the next legislative session, said state pension funds are in good financial shape and should not be lumped into the discussion about poorly run plans. Both plans have more than 80 percent of the assets they need to cover long-term benefits, which experts deem a critical threshold.

“It appears to me that the state is doing a superior job compared to a lot of the other pension plans, and the focus should be on the plans that are in trouble,” Orr said, adding that some of the municipal plans, in particular, are out of whack.

[…]

“Here in the Austin echo chamber you’re starting to hear it’s going to be a priority,” said state Rep. Rafael Anchía, D-Dallas, who is a member of the committee and opposes doing away with the guaranteed pensions.

Committee Chairwoman Vicki Truitt, R-Keller, who lost her bid for re-election in the primary, urged her returning colleagues not to get caught up in the national tumult around public pensions and instead keep the focus on Texas, where the statewide funds are in good financial shape.

“That is who we need to keep in mind the taxpaying public and the state employees and the welfare of the state in general,” Truitt said during a two-day hearing last week on pensions.

The state has avoided the mistakes that other pension plans have made because of constitutional and statutory provisions that require annual contributions from both the state and the members and that limit benefit increases. Members of both the teacher and employee retirement systems in Texas have not received an ongoing cost-of-living boost since 2001.

Even so, there is a lot of chatter that some powerful political forces will push the issue.

Forrest Wilder wrote about the plans and the reports that documented their good condition a couple of weeks ago.

You may recall that there is a campaign afoot to “reform” (i.e. radically change) Texas’ public pensions for teachers and other public employees. Basically, the reformers want to abandon the defined-benefit model, which guarantees certain retirement benefits, and replace it with a defined-contribution system built potentially on self-managed accounts such as 401(k)s. There’s also talk of raising the retirement age and other cuts to benefits.

The problem, though, is that Texas’ public pension systems are in pretty good shape, popular with workers and the alternative is risky. Still, the interests pushing for change are powerful and persistent. So, the Legislature ordered the Teacher Retirement System and the Employees Retirement System to take a closer look at their funds. The TRS report was released this week.

The study found that switching to a defined-contribution model would be more expensive, result in reduced benefits to retirees and is unnecessary.

As it is, the pension fund is solvent through 2075—a good sight better than, say, Social Security—and could be solvent indefinitely if the state would modestly increase its share from the current 6.4 percent to 8 percent, comparable to other states. Teachers could pay a slightly larger share too to help solve the problem.

If teachers were to invest their retirement benefits, TRS estimates that 92 percent would do worse than the current system. A typical 62-year-old retiree who made his or her own investments could expect to have income of just 28 percent of their teacher salary, about $12,500 a year. The federal poverty level for a household of one is $11,700.

The reason is simple: Professionally-managed investment pools perform significantly better than individual investors—8.6 percent vs. 5.3 percent, according to the TRS report.

2075 is a long way off. I’ll be 109 years old in 2075 if I live that long. Do we not have some more immediate priorities to talk about in this state? I mean seriously, TxDOT will run out of money in 2014 for new road construction. Texas’ long term water needs are woefully under-addressed. By comparison, the pension fund is the Rock of Gibraltor. Yet that’s what we’re talking about because the ideological visigoths that are calling the shots don’t like the pension fund and don’t like teachers. When I talk about a matter of priorities, this is the sort of thing I’m talking about. We’re never going to deal with the real problems of this state as long as the current crew is in charge.

UPDATE: The Statesman urges the Lege to leave the public pension plans alone.

Land Board throws the Lege a curveball on school finance

Oops.

In the waning days of the 82nd Legislature, state lawmakers came up with a plan to help cushion the blow of $5.4 billion in cuts to public education.

State Rep. Rob Orr, R-Burleson, proposed a constitutional amendment that he said could bring an additional $300 million to public schools. It unanimously cleared both the House and Senate. Orr’s measure became Proposition 6, which voters passed in November.

But that money has hit a roadblock on its way to public schools — and what looked like an easy fix for hard-pressed budget writers last May has turned into a headache that awaits their return in January.

The amendment allowed the School Land Board, which operates out of the General Land Office, to put a portion of earnings from investments on real estate assets into the Available School Fund, which along with property and sales taxes helps pay for public education. Last week, the little-watched board that oversees the state’s public school lands decided not to distribute the money. Commissioner Jerry Patterson, who sits on the three-member board, said it wanted to protect the funds for upcoming investment opportunities.

Usually the proceeds from the sale and management of public school lands would go into a $26 billion trust whose revenue feeds into what’s called the Available School Fund. Proposition 6 made it so the School Land Board, if it chose, could bypass that step and put money directly into the fund.

“We anticipated this funding for public education,” said Jason Embry, a spokesman for House Speaker Joe Straus, R-San Antonio. “We’re evaluating the impact on the budget and working with Commissioner Patterson to ensure there is no impact to public schools.”

Whether lawmakers should have expected the money is a matter of dispute. But the $300 million made it into the budget as part of general funds used to support school operations, contingent upon the constitutional amendment’s passage in November and the School Land Board’s approval of the transfer. During the special session last June, the Legislature added a provision to the appropriations bill that reduced general revenue funding to public education by $300 million if the amendment passed. It was to be replaced with the same amount from the Available School Fund with the board’s approval — but there was no provision to add that money back in if that didn’t happen.

“I was told that there would be $300 million going into the Available School Fund. Everything was put in place to allow to that to happen,” said Orr, who said the General Land Office agreed to transfer the money if the amendment passed. “I believe it needed to happen, so I’m not sure why it didn’t.”

Patterson said he did not recall committing to a transfer of the money and that his office had been unable to find “any evidence or documents or memos or testimony” that he did.

“I don’t have any control over what was written into the budget or what was made contingent. I don’t know who wrote that in there or why,” he said. “Somebody wrote a contingency rider assuming the answer would be yes.”

See here, here, and here for some background. If you look in the comments on those posts, you will see that Commissioner Patterson was never on board with this idea, so if the Lege was assuming that the School Land Board was going to go along with this idea, well, you know what they say about those who assume. I don’t think I realized till I read this story that the Lege had actually appropriated the $300 million based on that assumption; I must have been assuming that they would have made a supplemental appropriation at a later date once the Land Board signed off on it. Let that be a lesson to me. They’ll have to make a supplemental appropriation now, so you can add another $300 million to the Lege’s tab of unmet obligations from 2011. Good thing the Rainy Day Fund is full, because we’re really going to need it next year.

“Rather than trying a real solution to school finance they keep doing the little gimmicks and sleight of hands,” said David Bradley, the Beaumont Republican who chairs the Board of Education’s finance committee. “The Legislature is the problem. It’s totally improper for them to be pulling that kind of money out of these trust funds to use for general revenue funding.”

I hate having to agree with David Bradley, but he’s right. It’s on the Lege to fund school finance, and with the job they’ve been doing it’s no wonder we’re back in court a mere seven years after the last lawsuit was decided. I’m sure this seemed like free money to them – I admit, my first reaction was along those lines – and maybe that helped salve a bit of the guilt from having slashed $5.4 billion (and having voted to slash over $10 billion) from public education. But it was never a solution even if it did work.

House moves forward on school fund money

Last week, I noted a bill filed by Rep. Rob Orr that would direct some money from the Available School Fund into the public schools. His legislation has now been approved by committee and is likely on its way to passage; this will include a Constitutional amendment that you’ll see on your ballot this November. While I said this sounded good, not everyone agreed with that assessment:

Land Commissioner Jerry Patterson, who oversees the portfolio affected by the proposal, is among those who disagreed.

“They’re going to raid the fund that was established in 1854, and put in the Constitution as a permanent endowment in 1876, instead of having the (guts) to look at the rainy day fund,” Patterson said after the House Appropriations Committee voted 24-1 for the proposed constitutional amendment and accompanying bill by Rep. Rob Orr, R-Burleson.

State Board of Education member David Bradley, R-Beaumont, last week called the proposal “insane.”

“They want to cook the goose today rather than wait for a lifetime of golden eggs tomorrow,” Bradley said.

Orr noted the fund’s size: “How much is enough? I do not believe it will hamper the fund whatsoever.”

[…]

The only “no” vote on the House committee legislation Thursday was Rep. Mike Villarreal, D-San Antonio, who said he wanted more information.

“I want to make sure that we’re not making desperate, short-term decisions that jeopardize the ability of future generations to provide for our schoolchildren,” he said.

That’s a good question, and I don’t know nearly enough to answer it. Obviously, the only truly viable fix is to actually deal with the structural deficit, and we all know that ain’t happening. If this does endanger any of these funds, then we shouldn’t be doing this. I appreciate Commissioner Patterson’s perspective, but I would like to hear it from someone who doesn’t have a direct stake in it as well. Does the Comptroller have an opinion on this, or maybe someone like Ray Perryman? We need to hear more about this.

And on a related note, the SBOE gets in the act, too.

Today, Bob Craig, R-Lubbock, delivered a letter to Gov. Rick Perry, Lt. Gov. David Dewhurst, and Speaker Joe Straus signed by nine of his colleagues on the State Board of Education. In it, he said he had found the money — $2 billion — to save approximately 40,000 teaching jobs and fully fund new instructional materials for the state’s public schools.

Its source? The Permanent School Fund.

The board manages the $23 billion fund fed by revenue from taxes and offshore oil-drilling leases and whose interest goes to pay for textbooks and basic operations in public schools. The letter urges the Legislature to pass a resolution allowing the public to vote on a constitutional amendment that would transfer $1 billion each year of the biennium to fund public education.

Six members — the board’s conservative bloc — did not sign the letter. One of them, David Bradley, R-Beaumont, called the proposal “insanity” and emphasized that letter did not represent official action from the board. “Mr. Craig is acting in a rogue capacity,” he said, adding “[He] has delivered this letter without any due deligence and has used to the board’s name as an endorsement.”

Bradley said drawing $2 billion from the fund would “have an impact for generations.”

“By spending the money today, we will not have the four billion [in interest] in seven years, or the eight billion in 15 years,” he said, “It’s extremely short sighted.”

I’m inclined to agree with Bradley on this. This isn’t what the PSF is for. I greatly appreciate the desire of these SBOE members to offset the drastic cuts to public education, but that’s got to be the Legislature’s job. The fact that it ain’t gonna happen is deeply unfortunate and will also have a long-lasting impact, but that’s a problem that will need to be addressed in the next election. Trail Blazers has more.

The House finds a few extra bucks

Where has this been all along?

State Rep. Rob Orr, R-Burleson, introduced two bills to the House Appropriations Committee that could add several million dollars to the public schools budget over the next two years.

HB 2646 proposes allowing the School Land Board to transfer at least half of the net revenue it collects from a land trust it oversees to the Available School Fund (ASF), an endowment that puts money directly into public schools in Texas. Orr said that pot of money has risen to more than $2.5 billion in market value and contains more than $1 billion in cash. If that trend continues, the fund could supply the state with an additional $500 million in the next biennium.

“I think it’s irresponsible to have that much cash sitting around when our public schools need that money,” Orr said.

Getting this measure to pass requires companion legislation, so Orr is also sponsoring HJR 109, a constitutional amendment that would allow the General Land Office, which oversees land that belongs to the Permanent School Fund, to distribute revenue directly to the ASF. The resolution would be placed before voters during the Nov. 8 election.

I’m not terribly familiar with the details of these funds, but judging by the reaction to Orr’s bills, which range from “sounds OK to me” to “praise Jeebus!”, I welcome the legislation and hope there’s more where it came from.

There’s also this.

The House’s chief champion of giving poor, elderly and disabled Texans discounts on their utility bills is so frustrated, he wants to kill a surcharge funding the program and use all unspent money as a one-time fix for gaping holes in the state’s social services budget.

“The surcharge needs to be ended. You cannot redirect it … and be honest with the people who are paying,” Rep. Sylvester Turner, D-Houston, said Thursday.

Turner reacted coolly to Senate budget chief Steve Ogden’s suggestion earlier Thursday that the fee money could help pay for Texas’ Medicaid program, presumably on a continuing basis.

“Either you end it or you rename it and call it what it is — a utility tax,” said Turner, vice chairman of House Appropriations.

This is the System Benefit Fund, which is supposed to be used for the purpose of helping the needy pay their utility bills in the summertime but which never gets appropriated for it; the sizable balance of the fund is used to certify the budget. That would be one of the usual accounting tricks the Lege is known for. I too would prefer to see the SBF used for its intended purpose, but if that isn’t going to happen, and history strongly suggests it won’t be, then putting it to use elsewhere is far better than pretending it’s general revenue so it can help balance the budget.

On a more general note, Burka examines the role that House GOP Caucus Chair Larry Taylor may play in determining how far the House will go with ideas for extra revenue. None of this stuff will matter if the slash and burn crowd decides that it’s not really about “living within our means” but about cuts for the sake of cuts.

House committee passes SB1569

Good.

The House Business and Industry Committee wasted no time approving the Senate bill that would open the door for Texas to get $555 million in federal stimulus money to expand unemployment eligibility.

SB 1569 landed in the committee yesterday and the members passed it out Tuesday afternoon in a 6-2 vote. Republican Reps. Wayne Christian of Center and Rob Orr of Burleson were the nays.

Time is of the essence, of course, since there is a good chance Gov. Rick Perry will veto the measure and the chambers could try to override that veto. Perry has not said he will veto the legislation, which passed the Senate last week, but he has repeatedly objected to taking the money.

One significant change made to the bill in committee would undo an amendment proffered by Sen. Steve Ogden, R-Bryan, that would make the eligibility changes contingent upon getting the federal money.

The U.S. Department of Labor, however, indicated that Texas would not get the money if that provision remained so the House committee stripped it.

Committee Chairman Joe Deshotel, D-Beaumont, said the bill could come to the House floor next week.

If I’m reading the Constitution correctly, if the bill gets to Governor Perry more than ten days before sine die (Sundays excluded), then there would still be time to override a veto. Easier said than done, of course, but at least there’s a chance. Keep your fingers crossed.