Colleges and universities draw funds from various sources to sustain their operations, but it’s the state funding that often receives the most attention due to the complexities of the funding formula and the percentage of the funds provided. Unique to Texas is the distinction between institutions receiving dollars from the Permanent University Fund (PUF) and the Higher Education Fund (HEF), which helps explain why we see funding disparities among public higher education institutions in Texas.   The PUF is a constitutionally established public endowment dating back to 1876, supported by land grants previously appropriated to the University of Texas (UT), plus an additional 2.1 million acres located in West Texas. The land produces two lines of income—surface and mineral. A designated percentage of the PUF income is placed into the Annual University Fund (AUF) for the support of the UT System and the Texas A&M University (TAMU) System. The UT System receives two-thirds of the AUF while the TAMU System receives the remaining one-third. The estimated value of the PUF for the 2018-19 biennium was $22.8 billion with $1.8 billion distributed to the AUF.     The HEF was later established in 1984 by constitutional amendment as a counterpart to the PUF for Texas public institutions of higher education that are ineligible for drawing down funds from the AUF. The Constitution requires annual appropriations for the HEF until the corpus reaches $2 billion dollars, at which time 10% of any investment income will be added back to the fund as part of the corpus and appropriations will cease. The estimated value of the HEF funds for the 2018-19 biennium was $787.5 million.    Both the HEF and the PUF allocation (to the AUF) may be used to acquire land; construct, equip, repair, or rehabilitate buildings; and acquire capital equipment and library books and materials. Institutions may also use a portion of their funds to make debt service payments on authorized bonds. However, income from the PUF may also be used for support and maintenance of university programs at certain institutions; whereas, HEF funds may not. There are currently 22 HEF institutions statewide, including 5 in the Houston area, compared to 5 PUF Excellence institutions and 11 PUF-Debt Service Institutions statewide.   The sheer value of the PUF, the broader acceptable uses, and the fewer number of institutions with access to the funds have created a disparity in funding for HEF institutions, including those serving the Houston region. With an eye toward ensuring Houston higher education institutions have the same advantages as all other public universities in the state, the Partnership has launched the Greater Houston HUB (Higher Education United with Business). The HUB will serve as a platform to develop a better understand of the challenges facing the institutions and the needs of the business community; to find common areas for collaboration; and build awareness to address funding disparities.    To learn more about the Greater Houston HUB, click here. Connect with the Partnership's higher education policy team, Tiffani Tatum.

For decades, the Texas Legislature attempted to solve the complex issues in Texas public school finance, and for decades the body failed in that attempt. The systems that the Legislature and Supreme Court managed to create were riddled with inequities and failed to adequately prioritize the improvement of student outcomes. Instead, the system continued to support mediocre achievement gains for students of color, those experiencing poverty, and students with special needs. An overview of the previous funding system can be found here.    All of this changed during the 86th Texas Legislative Session with the passage of a landmark school finance reform bill, House Bill 3. The effort to overhaul the school finance system began with the creation of a School Finance Commission. Most interested parties were skeptical that any substantial change would be spurred on by the commission and most presumed that there was a lack of enthusiasm for true reform.    Guided by the leadership of State Representative Dan Huberty, State Representative Diego Bernal, and State Senator Larry Taylor, the commission produced a wholistic report that included recommendations for increasing equity and opportunity in all Texas public schools.    In lockstep with the Commission’s report, the legislature included nearly all of the recommendations in the final version of House Bill 3. In fact, all of the Partnership's school finance reform principles were included in the final legislation. Those principles include: Weighted formula funding for low-income and English language learner students. Additional dedicated funding for early education with an emphasis on programs that increase reading proficiency by third grade. Increase pay for the best teachers and incentivize those teachers to teach in the lowest-performing schools. Equitably reduce the burden of recapture and increase the state's share of public education funding. Ultimately, this legislation not only increased funding for all school systems, but also removed outdated formula elements and specifically included formula funding for traditionally underserved student populations.    This was a huge win for Texas and every generation of student that is or will be attending a public school. Now we must ensure that the new school finance system is maintained and fully funded this coming legislative session. This is why Public School Finance continues to be one of the top policy priorities for the Greater Houston Partnership. A statement submitted by Representatives Martinez Fischer, Beckley, J. Gonzalez, Goodwin, Israel, Meza, Morales, Muñoz, Ramos, Rodriguez, and Rosel to the House Journal at the passage of House Bill 3 sums this up well. HB 3 is one of the most significant bills to come before this body, but none of its provisions will matter, none of our work will matter unless there is a plan to sustain its investments in full beyond this biennium. Those of us voting in support of HB 3 today must hold ourselves accountable for finding those revenue streams in order for the 87th Legislature to honor this financial commitment. While COVID-19 is certainly a new reality for all of us, the legislature will be forced to confront hard financial decisions over the next several sessions. The Partnership will continue to play a lead role in advocating for the preservation of the reforms that were included in HB 3 and funding our public schools in their entirety this coming legislative session. Learn more about the Partnership's efforts around public school finance.