- Associated Press - Tuesday, September 30, 2014

AUSTIN, Texas (AP) - A fund Texas uses to buy instructional materials and cover some local school districts’ costs is now worth nearly $38 billion, officials announced Tuesday, making it the nation’s largest educational endowment.

Land Commissioner Jerry Patterson credited a booming natural gas industry for growing the Permanent School Fund, which was worth about $37.7 billion as of June 30.

It was started in 1854 with an initial investment of just $2 million.

The fund is overseen by Patterson’s office and the State Board of Education, among other state entities. It gets proceeds from the sale of state land and rental of mineral rights for oil and natural gas exploration.

In a statement, Patterson and Education Commissioner Michael Williams said the fund had outpaced Harvard University’s endowment, which they said was worth $36.4 billion through June 30.

The fund helps purchase instructional materials and pay a portion of each school district’s education costs. It also helps guarantee bonds for local school districts.

Because Texas has no state income tax, funding for daily operations of public schools relies heavily on local property taxes and is handled separately and within Texas’ 2-year state budget.

In 2011, the Legislature cut $5.4 billion from classrooms, prompting more than 600 school districts to sue. They argued that funding was no longer adequate to meet state constitutional guarantees.

A Texas judge declared the funding system unconstitutional in February 2013 and then reaffirmed that ruling last month. His decision is being appealed to the Texas Supreme Court, but if it holds, it will be up to the Legislature to devise a new system.

The Permanent School Fund, though, has faced no such shortfalls. Patterson said hydraulic fracturing and other state energy development helped generate a record $1.2 billion for the fund this year.

Since 1960, the fund has distributed more than $23 billion to the schools. During the current budgetary biennium, it is giving schools about $1.7 billion, with plans to award $2-plus billion in the next two-year cycle.

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