Texas

Texas — The Sovereign That Kept Its Own Land

Admitted 1845 (annexed as a republic; retained its own public domain) · Grant: none from Congress — Texas kept ~175 million acres and dedicated half the public domain to schools · Permanent School Fund ≈ $60.6 billion net (as of FY2025) (being confirmed) · Trustee: an elected State Board of Education and an elected Land Commissioner · Verdict: Built a trust with no federal land (and built the biggest one of all).

Telling fact: Texas is the one state that refused the federal school-land deal entirely — it walked into the Union owning its own ground — and it now runs the largest education endowment in the United States, larger than any private university’s.

Every other public-land state got its school endowment the same way: the federal government acquired the territory, surveyed it, and granted specified sections back to the new state. The United States was the settlor; the state was the trustee. Texas did none of that. It had been an independent republic for nine years, recognized by the United States, Britain, France, and the Netherlands, and when it joined the Union in 1845 the annexation deal let it keep “all the vacant and unappropriated lands lying within its limits” — roughly 175 million acres — to pay its own debts and then dispose of as it saw fit. No section 16, no section 36, no “in trust” clause from Congress. The federal government acquired no public land in Texas at all.

The seed money, oddly, was federal anyway: the Compromise of 1850 paid Texas $10 million in U.S. bonds to drop its claims on land out toward New Mexico and Wyoming, and in 1854 the legislature parked $2 million of those bonds in a “Special School Fund.” The real engine, though, was written into the 1876 Constitution, which dedicated “one half of the public domain of the State” to a Permanent School Fund — the largest single dedication of public land to schools in the nation’s history — and reserved to the fund the alternate sections of any land granted to railroads, producing the checkerboard of state-owned ground across West Texas and the Panhandle. Then the geology did the rest. Spindletop in 1901, the Permian Basin, and a 1939 law that handed the fund the mineral estate under every Texas riverbed, lake, and tideland turned a land trust into a mineral trust. When the U.S. Supreme Court ruled in 1960 that Texas alone among Gulf states could claim submerged land three marine leagues out — a quirk of its republic-era boundary — the offshore royalties flowed straight to the schools.

Texas guards all this with two separately elected fiduciaries: a fifteen-member State Board of Education over the financial assets and a single Land Commissioner over the land and minerals — the only state to split the trusteeship between two elected constitutional officers. A 2021 reform created a Permanent School Fund Corporation to unify the investing, but the dual-trustee structure survives in the constitution. The fund is even used to guarantee local school-district bonds, lending its AAA credit so districts borrow cheaply — a use no other state’s endowment matches at this scale.

Then→now: A republic’s 175 million acres → a Permanent School Fund of roughly $60.6 billion (as of FY2025) (being confirmed), with billions distributed to the Available School Fund each biennium.

Lesson: A school trust does not require a federal grant. It requires a settlor with land, a constitution that dedicates it, and the discipline to leave the principal alone. State text can do everything the federal compact did elsewhere. (See Ch. 2, “Trust Without the Land.”)

Sources & notes: Joint Resolution for Annexing Texas (1845); Compromise of 1850; Tex. Const. art. VII §§ 1–5; United States v. Louisiana (1960); Edgewood ISD v. Kirby (1989); Morath (2016).

Admission #28 (Dec. 29, 1845). Era: State-derived (annexation by joint resolution; retained own public domain). Draft: Pass 1, 2026-04-30.

Texas is the encyclopedia’s anchor case for a deceptively simple proposition: a state can refuse a federal school-land grant and still build the largest school endowment in the United States. As of fiscal year 2024, the Texas Permanent School Fund held investment assets of approximately $56.9 billion, with mineral and surface acreage valued at several billion more, and distributed roughly $2.16 billion per year to the Available School Fund.¹ By 2025–26 valuation reporting, the corpus was being described in the $67 billion range, with biennial distributions reaching a record $4.8 billion.² No private American university endowment is larger; the New Mexico Land Grant Permanent Fund, often the runner-up among public-purpose education endowments, is roughly half its size. And every dollar of it is state-derived. There is no Section 16, no Section 36, no “in trust” clause in a federal enabling act, no Congress-conferred fiduciary covenant of the kind that disciplines the New Mexico, Arizona, or Oregon trusts. What Texas has instead is a sovereign reservation, a constitutionalized irreducible fund, two independently elected fiduciaries, and 175 million acres of retained public domain that — over 180 years and through one of the most consequential mineral revolutions in American history — produced an asset base no other state can match. The Texas case is the encyclopedia’s structural answer to the question “what does a school trust look like when the federal floor is absent?” It looks like a state constitution doing the work that Congress did elsewhere — sometimes well, sometimes poorly, and always with the architecture located entirely in state law.

Annexation, Retention, and the Sovereign Reservation

The defining act of Texas school-trust history is the 1845 Joint Resolution for Annexing Texas to the United States.³ Approved by Congress on March 1, 1845, the Joint Resolution did something no admission act before or since has done: it left the public domain of the incoming territory in the hands of the incoming state, on the express condition that those lands be applied first to the Republic’s debts and then disposed of as the new state should direct. The operative paragraph, in the Resolution’s verbatim language, reads:

“Second, said State, when admitted into the Union, after ceding to the United States, all public edifices, fortifications, barracks, ports and harbors, navy and navy-yards, docks, magazines, arms, armaments, and all other property and means pertaining to the public defence belonging to said Republic of Texas, shall retain all the public funds, debts, taxes, and claims of every kind, which may belong to or be due and owing said Republic; and shall also retain all the vacant and unappropriated lands lying within its limits, to be applied to the payment of the debts and liabilities of said Republic of Texas, and the residue of said lands, after discharging said debts and liabilities, to be disposed of as said State may direct; but in no event are said debts and liabilities to become a charge upon the Government of the United States.”⁴

The legal mechanics are unique. In every other public-land state — Ohio, Indiana, Illinois, Missouri, Oregon, Colorado, the Dakotas, the Mountain West — admission to the Union was preceded by federal acquisition of the territory through purchase, treaty, or conquest, followed by congressional creation of a federal public domain, followed by an enabling act granting specified sections back to the new state for the support of common schools. The federal government was the settlor; the state was the trustee; the schoolchildren were the beneficiaries; and Congress retained, at least in theory, an enforcement role through its admission-act compact. The Supreme Court’s decisions in Cooper v. Roberts (1855) and Lassen v. Arizona Highway Department (1967) gave that compact-trust architecture its enforceable character.⁵

In Texas, the federal government was never the settlor. The Republic of Texas — an independent sovereign from 1836 to 1845, recognized by the United States, France, the United Kingdom, and the Netherlands — entered the Union with its own public lands intact, its own debts attached, and its own discretion over disposition reserved. The Republic of Texas formally consented to the annexation terms on July 4, 1845, by ordinance of the Texas Convention.⁶ The Joint Resolution for the Admission of the State of Texas, approved December 29, 1845, completed the transition and admitted Texas as the twenty-eighth state on an “equal footing” with the original states.⁷ But the equal-footing language has always been read in Texas alongside the retained-lands provision: Texas is on equal footing with the original thirteen in part because, like them, it owns its own public domain. The federal government acquired no public lands in Texas at admission, and — apart from later acquisition for federal installations and post offices — it never has.⁸

The historical record on the size of the retained domain is well established: roughly 175 million acres of vacant and unappropriated lands at annexation, of which a substantial fraction would, over the next four decades, become the corpus of the Permanent School Fund.⁹ The Texas Natural Resources Code today preserves the retained-lands principle as a continuing matter of state law.¹⁰ The point worth holding in mind is structural: every other school-trust state in the encyclopedia inherited its trust from federal land, with federal text supplying the trust’s contours. Texas inherited its trust from itself, with state text supplying the contours. Whether that produces a stronger or weaker fiduciary regime in practice is a question the rest of the entry takes up.

The 1854 Capitalization and the Compromise of 1850

The 1845 Joint Resolution gave Texas the capacity to fund schools from retained lands; it did not, by itself, create a school fund. The first major capitalization of what would become the Permanent School Fund came nine years later, and it came from a transaction that is itself an artifact of Texas’s anomalous statehood.

The Compromise of 1850 settled the boundary disputes that had followed Texas’s admission, particularly Texas’s expansive claims to territory in present-day New Mexico, Colorado, Wyoming, Kansas, and Oklahoma. Under the compromise, Texas relinquished its claims to those lands in exchange for $10 million in United States bonds.¹¹ Approximately $7 million of that sum was used to retire the remaining debt of the Republic of Texas, satisfying the condition the 1845 Joint Resolution had attached to the retained lands. That left $3 million in U.S. bonds in the state’s hands. In January 1854, the Texas Legislature appropriated $2 million of those bonds to a “Special School Fund” — the direct legal precursor of the Permanent School Fund.¹² The first distributions from the Special School Fund reached Texas common schools in 1855, at a rate of approximately $1.21 per school-age child.¹³

The 1854 capitalization is structurally important for two reasons. First, it disposes of the simplest possible reading of Texas’s school-trust history — the claim that the Texas PSF is purely a creature of land sales and mineral royalties from retained domain. The seed corpus was federal bonds, transferred to Texas as consideration for the cession of territorial claims. Second, the 1854 act established the principle that the school fund was an investment fund as well as a land fund. From its inception, the Texas school endowment was a hybrid: it held both real assets (the retained public domain dedicated to education) and financial assets (the U.S. bonds and their interest stream). The hybrid character would, more than 150 years later, become the architectural pivot for the dual-trustee structure the 1876 Constitution institutionalized.

Civil War Erosion and the 1873 Land Dedication

The Civil War subjected the young Special School Fund to the first directed-seizure pressure of its history. After Texas seceded in 1861, the Confederate government identified the school fund’s holdings of U.S. bonds as a potential source of war finance. According to the State Board of Education’s official history, Confederate Secretary of War Judah P. Benjamin proposed cashing the school fund’s U.S. bonds and replacing them with Confederate bonds — a transaction that, had it been completed, would have annihilated the corpus when the Confederacy collapsed.¹⁴ The bond-substitution proposal was never executed, but Texas war boards did access portions of the fund for military finance, and the corpus emerged from the war reduced to approximately $1.8 million.¹⁵ The fund also suffered from widespread defaults on prewar railroad loans that had been issued from PSF capital.¹⁶ The pattern is recognizable: in moments of acute fiscal pressure, school-trust assets are the assets governments reach for first. Margaret Bird’s “directed seizure” frame names the phenomenon; the 1861–65 Texas record is one of the cleaner antebellum examples of it.

The recovery of the fund began under Reconstruction Governor Edmund J. Davis. On March 18, 1873, Davis signed House Bill 283, which dedicated half of the remaining unallocated public domain — approximately 88 million acres at the time — to the school fund.¹⁷ The 1873 statute did two things at once. It restored the corpus on a scale that dwarfed the prewar capitalization. And it established the doctrinal pattern that the 1876 Constitution would three years later constitutionalize: the school fund’s claim on the retained public domain was not a one-time legislative grant but a structural commitment, expressed in fractions of the public domain itself.

The 1876 Constitution: Article VII as the Trust Indenture

The fiduciary architecture of the modern Texas school trust is found in Article VII of the 1876 Constitution, drafted in the wake of Reconstruction and characterized by deep skepticism of centralized authority and an insistence on funding public education through land wealth rather than direct taxation.¹⁸ Article VII, sections 1 through 5, constitute what Gemini Deep Research aptly calls the “trust indenture” of the Texas Permanent School Fund.¹⁹ Each section is worth pinning verbatim because each does specific architectural work.

Section 1 — the Efficiency Clause — places on the Legislature the duty that has become the doctrinal home of the Edgewood line of school-finance litigation:

“A general diffusion of knowledge being essential to the preservation of the liberties and rights of the people, it shall be the duty of the Legislature of the State to establish and make suitable provision for the support and maintenance of an efficient system of public free schools.”²⁰

Section 2 — the Permanent School Fund Clause — establishes the corpus and identifies its sources:

“All funds, lands and other property heretofore set apart and appropriated for the support of public schools; all the alternate sections of land reserved by the State out of grants heretofore made or that may hereafter be made to railroads or other corporations of any nature whatsoever; one half of the public domain of the State; and all sums of money that may come to the State from the sale of any portion of the same, shall constitute a permanent school fund.”²¹

The dedication of “one half of the public domain of the State” to the Permanent School Fund is the largest single dedication of public lands to common schools by any state in the history of the Union. The “alternate sections” provision — which reserved to the PSF the alternate sections of any state land granted to railroads or other corporations — was the institutional mechanism that produced the West Texas and Panhandle “checkerboard” of state-owned sections, and that, far more than any direct sale of school lands, populated the modern PSF land portfolio.²²

Section 3 — the Available School Fund Clause — establishes the distribution account and dedicates one-fourth of the state occupation taxes plus other revenues to it:

“(a) One-fourth of the revenue derived from the State occupation taxes shall be set apart annually for the benefit of the public free schools… (b) It shall be the duty of the State Board of Education to set aside a sufficient amount of available funds to provide free text books for the use of children attending the public free schools of this State… (e) The Legislature shall be authorized to pass laws for the assessment and collection of taxes in all school districts and for the management and control of the public school or schools of such districts….”²³

Section 4 — the Sale and Investment Clause — directs how PSF land sales and the resulting proceeds shall be handled:

“The lands herein set apart to the Permanent School Fund, shall be sold under such regulations, at such times, and on such terms as may be prescribed by law; and the Legislature shall not have power to grant any relief to purchasers thereof. The Comptroller shall invest the proceeds of such sales… as may be directed by the Board of Education herein provided for, in the bonds of the United States, the State of Texas, or counties in said State, or in such other securities, and under such restrictions as may be prescribed by law; and the State shall be responsible for all investments.”²⁴

Three features of Section 4 are worth noting. First, the express provision that the Legislature “shall not have power to grant any relief to purchasers” — a structural anti-rescission provision designed to protect the fund’s title to its land sales. Second, the requirement that the Comptroller invest proceeds, not the Land Commissioner — a separation of trustee functions that became the basis for the SBOE/GLO bifurcation. Third, the express assertion that “the State shall be responsible for all investments” — a state-as-fiduciary clause that, in modern fiduciary doctrine, would be read as a settlor’s confirmation of the trust character of the fund.

Section 5 — the Distribution Clause, as amended in 2003 to authorize total-return distribution — governs the relationship between the PSF and the ASF:

“(a) The permanent school fund consists of all land appropriated for public schools by this constitution or the other laws of this state, other properties belonging to the permanent school fund, and all revenue derived from the land or other properties. The available school fund consists of the distributions made to it from the total return on all investment assets of the permanent school fund…. (b) The expenses of managing permanent school fund land and investments shall be paid by appropriation from the permanent school fund.”²⁵

Section 5, as it stands today, is the product of a long series of amendments — most consequentially the 1983 Bond Guarantee amendment, the 2003 Total Return amendment (HJR 68), and the 2011/2019 amendments adjusting the GLO/School Land Board contribution to the ASF. The Texas Legislative Council maintains a comprehensive amendment history that pins each change to its joint resolution and election date.²⁶

What Article VII accomplishes, taken as a whole, is the construction in state constitutional law of every architectural feature that the Northwest Ordinance, the 1850 Oregon Donation Act, the 1875 Colorado Enabling Act, and the 1910 New Mexico-Arizona Enabling Act constructed in federal law for other states. The corpus is named, dedicated to a beneficiary class (“the children attending the public free schools of this State”), declared perpetual (“permanent school fund”), and segregated from general revenue. The fiduciary is named — the State Board of Education for investment, the Land Commissioner for land. Investment is constrained. The Legislature is barred from rescuing defaulting purchasers. Modern Texas Attorney General opinions read all of this as creating a fund that is constitutionally “nonspendable” except where Article VII expressly authorizes payments.²⁷ The federal compact-trust analogue is absent, but the architectural function is fully discharged in state text.

The Mineral Revolution: Spindletop, House Bill 9, and the Tidelands

The character of the Permanent School Fund shifted decisively in the first half of the twentieth century, from a land-disposal trust into a mineral-production trust. The Spindletop oil discovery of 1901, near Beaumont, opened the Texas petroleum era and made apparent that the alternate-section checkerboard of West Texas, the retained Republic-era public domain, and the submerged lands of the Texas Gulf coast were all potentially mineral-productive in ways that the framers of the 1876 Constitution had not anticipated.²⁸ By the 1930s, Permian Basin production was already shaping the fund.

The decisive twentieth-century legislation was House Bill 9 of 1939. The 46th Legislature dedicated the mineral estate in all riverbeds, lakes, channels, and tidelands to the Permanent School Fund, and created the School Land Board to oversee management of these submerged mineral assets.²⁹ HB 9 was a structural complement to the 1876 alternate-section architecture. Where the alternate-section provision had populated the fund with surface and subsurface acreage on dry land, HB 9 populated it with the submerged mineral estate offshore — a category that had never been formally allocated and that, given the geology of the Texas Gulf Coast, was potentially of enormous value. The School Land Board, as constituted in 1939, became the second of the dual-trustee structure that the 2021 reforms would only partially unify: the SBOE managing financial assets on shore, the GLO Commissioner and the School Land Board managing the land and submerged-mineral portfolios.

The third great mineral-era event was the Tidelands controversy of 1950–1960, which produced the most consequential title litigation in the fund’s history. In United States v. Texas (1950), the Supreme Court initially held that the federal government had paramount rights in Gulf submerged lands beyond the Texas low-water mark, displacing Texas’s claim to a Republic-era three-marine-league boundary.³⁰ The decision was understood by Texas political and educational leadership as a direct threat to the PSF’s mineral base, given the 1939 dedication of submerged minerals to the fund. The 1952 presidential election turned in part on the tidelands question; Eisenhower’s victory was followed in 1953 by the federal Submerged Lands Act, which restored state submerged-land title within statutory boundaries and set the stage for Texas’s three-league claim.³¹ In United States v. Louisiana (1960), the Supreme Court held that Texas — alone among the Gulf states, by virtue of its Republic-era boundary and annexation history — was entitled under the Submerged Lands Act to submerged lands and resources out to three marine leagues from the coast.³² The decision restored the Texas Gulf submerged-mineral estate to state title for domestic purposes, and because the 1939 HB 9 dedication had already locked submerged minerals to the PSF, the recovery flowed directly to the school fund. By 2010, offshore oil and gas royalties had contributed more than $9 billion to the corpus.³³

The Tidelands episode is sometimes described, in Texas political rhetoric, as a federal “theft” of school-fund assets later recovered. The legal record is more nuanced: United States v. Texas was a federal-paramount-rights holding under the Constitution’s Property and Commerce clauses; United States v. Louisiana was an interpretation of the Submerged Lands Act, an act of Congress that re-vested state title where it had previously belonged. For encyclopedia prose, the episode reads more accurately as a contested sovereign-title loss followed by a partial statutory recovery, with the school fund as the principal beneficiary on both ends.

The Dual-Trustee Architecture and Its 2021 Partial Unification

The Texas dual-trustee structure is one of the most distinctive features of the school-trust landscape in any U.S. state. From 1876 through 2023, the Permanent School Fund was managed by two entirely separate bodies of constitutional fiduciaries.

The State Board of Education (SBOE) — fifteen members elected from single-member territorial districts — held fiduciary responsibility for the financial-asset portfolio: the stocks, bonds, and cash generated from land sales and royalties.³⁴ The Commissioner of the General Land Office — a single statewide elected official — held fiduciary responsibility for the real-asset portfolio: the millions of acres of surface land, mineral interests, and (after 1939) submerged-mineral estates. The School Land Board, established by HB 9 in 1939, sat on the GLO side and managed the real-asset investments and land sales.³⁵ Both the SBOE and the GLO Commissioner are statewide-elected constitutional officers; neither is appointed; neither serves at the pleasure of the Governor. Among public-land and state-derived states, Texas is alone in vesting trust-management authority in two separately-elected constitutional fiduciaries with overlapping but distinct PSF authority.

The dual-trustee architecture had structural advantages and structural costs. On the advantage side, it placed real-asset and financial-asset management in the hands of officers whose qualifications and constituencies were appropriate to their respective portfolios — an SBOE structured around education-policy and investment-policy expertise, and a GLO Commissioner structured around land and resource management. It also created two independent points of political accountability for trust management. On the cost side, it bifurcated the investment function in ways that 21st-century total-return investment management was not designed to accommodate. The 2003 “Cortex Report” and a series of State Auditor reviews found that the bifurcated structure produced coordination friction, reduced asset-allocation flexibility, and limited the SBOE’s ability to hold PSF investment staff fully accountable.³⁶ Tensions sharpened in the early 2000s when the Legislature granted the School Land Board authority to invest royalty revenues directly in real estate and infrastructure rather than transferring them to the SBOE for financial investment, creating two parallel investment silos.³⁷

The 2021 reform — Senate Bill 1232, signed into law in the 87th Legislature — constituted the most significant structural change to the PSF management architecture since 1876. SB 1232 created the Texas Permanent School Fund Corporation, a special-purpose governmental corporation designed to unify management of the fund’s investment assets.³⁸ The Corporation became operational on January 1, 2023, and is governed by a nine-member board comprising five SBOE members, the GLO Commissioner, one expert appointed by the Commissioner, and two experts appointed by the Governor.³⁹ The 2021 reform did not abolish the dual-trustee structure: the GLO retains constitutional authority over the real-asset portfolio (the actual land and mineral titles), and the SBOE retains constitutional authority over distribution to the Available School Fund. What the Corporation does is unify the financial-investment function across what had previously been two parallel investment silos. The 150-year-old management schism is, at the operational level, substantially resolved; at the constitutional level, the dual-trustee architecture remains.

The PSF Bond Guarantee Program

One distinctive use of the Permanent School Fund corpus deserves separate treatment: the Bond Guarantee Program, authorized by a 1983 amendment to Article VII, Section 5.⁴⁰ Under the BGP, the State Board of Education, through the Texas Education Agency, can use the PSF corpus to guarantee bonds issued by Texas school districts. The guarantee converts what would be a district credit risk into a PSF credit risk, allowing participating districts to issue bonds at AAA ratings and at substantially lower interest rates than they could otherwise obtain. The mechanism leverages the corpus without spending it: the PSF does not transfer money to the districts; it stands behind their debt service.

By August 31, 2024, the BGP had guaranteed approximately $125.8 billion in school district and charter district bonds outstanding, certified by the Texas State Auditor.⁴¹ More recent reporting describes total guaranteed debt approaching $144 billion, with annual taxpayer interest savings estimated at approximately $425 million.⁴² The program supports credit enhancement for nearly thirty percent of all municipal debt in Texas. Charter districts, representing roughly 7.86% of the Texas student population, receive a proportional share of BGP capacity.⁴³

The BGP operates within federal tax-arbitrage constraints administered by the Internal Revenue Service. In 2009, after market declines reduced the PSF cost value, the program closed temporarily because outstanding guarantees approached the IRS-determined capacity limit; IRS Notice 2010-5 permitted reopening.⁴⁴ In 2022 and 2023, the program again ran near capacity, denying applications until IRS Notice 2023-39 substantially restored guarantee capacity by aligning the federal limit with current PSF cost value rather than the outdated 2009 reference.⁴⁵ The capacity-constraint episodes are not scandals; they are structural frictions between Texas’s very large endowment and federal tax-arbitrage rules. They are also, however, evidence of how distinctive the BGP is as a use of trust corpus. No other state school trust uses its endowment at this scale to guarantee local-district debt. The mechanism is unique to Texas, and it is structurally enabled by the size of the corpus the 1845 retention and the 1939 mineral dedication produced.

Edgewood, Morath, and the Absent PSF-Trust Enforcement Case

Texas’s legal record on school finance is dominated by a long line of state constitutional litigation under Article VII, Section 1 — the Efficiency Clause — and almost entirely silent on Article VII, Section 2 and Section 5. This asymmetry is one of the more analytically interesting features of the Texas case, and it requires careful framing.

The Edgewood line begins with Edgewood Independent School District v. Kirby (1989), in which the Texas Supreme Court held unanimously that the Texas school-finance system violated the “efficient” requirement of Article VII, Section 1, by producing extreme disparities in per-student spending tied to local property wealth.⁴⁶ Edgewood I was the foundational state-constitutional adequacy/equity ruling for Texas — analogous in posture to the Pennsylvania William Penn School District (2023) decision, the New Jersey Abbott line, and the Kentucky Rose v. Council for Better Education (1989) decision. It triggered three decades of recurring school-finance litigation: Edgewood II, Edgewood III, Edgewood IV, the West Orange-Cove litigation, and ultimately Morath v. Texas Taxpayer & Student Fairness Coalition (2016), in which the Texas Supreme Court held that the post-Edgewood school-finance system met minimum constitutional requirements, ending the modern Edgewood line at the state-supreme-court level and pushing funding-equity advocates back into the legislative arena.⁴⁷

The Edgewood line, however, is not a school-trust line. Plaintiffs sued under Section 1’s efficient-system duty on the Legislature, not under Section 2’s irreducible-fund or Section 5’s distribution architecture. The court’s focus throughout was the adequacy and equity of the overall funding system, not the fiduciary management of the PSF corpus by the SBOE or the GLO. Distinguishing the two lines is essential: Section 1 is a legislative-duty clause, enforceable through challenges to the school-finance formula and recapture system; Sections 2 and 5 are trust-architecture clauses, enforceable (in principle) through challenges to corpus management and distribution.

What is distinctive about Texas is that the second line — the Section 2/5 trust-enforcement line — is essentially absent. There is no Texas analogue to Lassen v. Arizona Highway Department (the 1967 federal-trust-enforcement case for Arizona PSF lands), no Texas analogue to Branson School District RE-82 v. Romer (the 1997 Colorado case where school districts sued to prevent alteration of trust principles), and no Texas analogue to the 2026 Oregon Court of Appeals standing victory in Advocates for School Trust Lands v. State of Oregon. The Texas case that comes closest — State v. Durham (1993) — concerned the Relinquishment Act of 1934 and the fiduciary duty owed by private surface owners acting as state agents in mineral leasing of PSF-derived lands. The Texas Supreme Court held that surface owners owe a fiduciary duty to the state to negotiate the best possible terms for mineral leases, a holding that, while not directly enforcing fiduciary duties on the SBOE or the GLO, established the principle that any actor managing PSF resources is bound by trust duties.⁴⁸

The earlier case law fills in some of the gap. Hogue v. Baker (1898) recognized that, after the 1876 Constitution and related legislation, the remaining public domain was dedicated to education — anchoring the proposition that the PSF corpus is state-derived from retained lands rather than from federal grants.⁴⁹ Cox v. Robison (1912) upheld the Legislature’s authority to reserve minerals in future sales of public school lands, an architectural precedent that enabled the mineral-royalty growth of the twentieth century.⁵⁰ Standard v. Sadler (1964) and its progeny — State v. Standard (1967), Duval Corp. v. Sadler (1966) — defined GLO authority and surface-owner agency in mineral leasing on PSF-derived lands.⁵¹ City of El Paso v. Simmons (1965) upheld Texas legislation limiting reinstatement rights under old public school land purchase contracts against a Contract Clause challenge, providing useful background on long-term PSF sale contracts and title-stabilization interests.⁵² Byers v. Patterson (Tex. App. 2007) more recently synthesized Texas school-land doctrine, explaining that the 1876 Constitution established a perpetual school fund including one-half of the public domain, and that neither the Legislature nor the Commissioner may relinquish sovereign title claims to alleged vacant land without constitutional authority.⁵³

The absence of a beneficiary-led PSF trust-enforcement suit — analogous to the OASTL litigation in Oregon — is itself a finding worth pausing on. Two structural explanations are plausible. The first is that the Texas trust, being purely state-derived, lacks the federal-court jurisdictional hook that public-land states enjoy: no federal compact, no federal AG enforcement role, no Supremacy Clause backing for the trust-character argument. The second is that Texas school districts and their constituencies have, for over a century, channeled their grievances through the Edgewood line — Section 1 adequacy/equity litigation — rather than through Section 2/5 trust-corpus litigation, perhaps because the relief framework was clearer (legislative funding formula adjustments) than it would have been under a trust-breach theory (corpus restoration, fiduciary removal). Whatever the explanation, the result is that Texas’s PSF-trust enforcement has come almost entirely from the Texas Attorney General rather than from the Texas courts.

The Texas Attorney General Opinions: PSF Boundary-Policing

Where the courts have been silent, the Attorney General’s office has filled in. Several modern opinions police the constitutional boundary between corpus and income, between SBOE-managed investment assets and GLO-managed land and mineral assets, and between PSF distributions and general-fund appropriations. Together they constitute Texas’s principal modern doctrinal record of fiduciary boundary-keeping.

Opinion V-839 (1949) construed the then-current Article VII, Section 5 transfer authority and addressed the mechanics required before corpus could be transferred to the Available School Fund — historically important because the 1891 one-percent transfer authority was later repealed by voters in 1964, strengthening the modern irreducibility norm.⁵⁴ Opinion GA-0293 (2005) addressed the constitutional and statutory treatment of PSF management expenses after the 2003 total-return amendment.⁵⁵ Opinion GA-0407 (2006) is the cleanest modern anti-diversion opinion in the Texas record: it concluded that a statute purporting to convey artificially reclaimed submerged lands belonging to the Permanent School Fund without compensation violated Article VII, Section 4, and that the General Land Office could not adopt rules effectuating it.⁵⁶ Opinion GA-0516 (2007) addressed accounting methodology for Article VII, Section 5 distributions.⁵⁷ Opinion GA-0617 (2008) held that the School Land Board could not transfer revenue from PSF lands directly to the Available School Fund, bypassing the constitutional Section 5 distribution process — an important dual-trustee opinion preserving the SBOE’s distribution authority.⁵⁸ Opinion GA-0707 (2009) is the central modern opinion on total-return distributions and the SBOE’s fiduciary role: it concluded that the SBOE determines the methodology for calculating total return; that the Section 5(a)(2) limitation applies annually; that distributions must comply with both the six-percent test and the ten-year total-return test; and that the SBOE is authorized to apply those limits.⁵⁹ Opinion GA-0848 (2011) addressed the SBOE’s authority to pay attorney fees on a contingent basis out of recoveries of PSF corpus.⁶⁰ Opinion GA-0998 (2013) concluded that the SBOE’s discretionary fiduciary investment selections are not subject to State Purchasing Act competitive-bidding requirements.⁶¹ And Opinion KP-0229 (2018) provided the strongest modern confirmation of the perpetual character of the corpus: the Permanent School Fund is nonspendable except for specific distributions and payments authorized by Article VII, Section 5.⁶²

Read together, the AG opinions establish that the PSF is constitutionally locked except where Article VII expressly authorizes payments; that the SBOE and GLO have distinct but constitutionally bounded authorities; that distributions must follow the constitutional formula and cannot be bypassed by either trustee; that PSF land cannot be transferred to private hands without compensation to the fund; and that the SBOE bears a discretionary fiduciary duty of the kind the common law of trusts attaches to ordinary trustees. The body of opinions is substantial — more substantial, in fact, than the corresponding body in Oregon or in many federal-grant states — and it reflects the centrality of the AG’s office to PSF boundary-policing where the courts have largely declined to play that role.

Contemporary Management: Figures, Distributions, and Frontier Transactions

By fiscal year 2024, the Texas Permanent School Fund Corporation reported approximately $56.9 billion in PSF investment assets as of August 31, 2024.⁶³ The State Board of Education reported a combined $2.16 billion PSF-to-ASF contribution for FY 2024 and another scheduled $2.16 billion for FY 2025, including the SBOE distribution plus the School Land Board’s direct contribution to the ASF.⁶⁴ More recent reporting describes total PSF assets in the $67 billion range, with a record $4.8 billion biennial distribution authorized for the 2026–2027 biennium.⁶⁵ The General Land Office portfolio includes approximately 768,000 surface acres and roughly 13 million mineral acres across the state, including significant Permian Basin oil-and-gas acreage that remains the dominant revenue driver on the real-asset side.⁶⁶ The Available School Fund flows to the per-capita apportionment, distributed to Texas school districts on a per-student basis, and to the Instructional Materials Allotment, which purchases textbooks and instructional materials for all Texas public schools — a distribution architecture that, unlike Oregon’s offset-against-general-fund formula, supplements rather than substitutes for legislative appropriations.

Two recent transactions on the GLO side have drawn attention beyond the routine portfolio reporting. In late 2024, the GLO announced what was reported as the largest carbon sequestration lease in U.S. history, an agreement with ExxonMobil covering 271,068 acres of offshore submerged land. Combined with six other carbon-capture-and-sequestration leases awarded in 2023, the program is estimated to produce $10 billion for the PSF over thirty years — a frontier shift in the fund’s revenue mix from traditional oil-and-gas extraction toward energy-transition land-use revenue.⁶⁷

In October 2024, the GLO acquired a 1,402-acre ranch in Starr County along the Rio Grande. While the GLO described the land as a future source of agricultural revenue for the PSF, the primary stated purpose was the construction of a 1.5-mile fortified border wall, and Commissioner Buckingham subsequently offered the land to the federal government for use as a deportation facility.⁶⁸ The transaction is contested in the secondary literature on fiduciary grounds: traditionalist trust analysts argue that border security is a general government function that should be paid for at market rates rather than subsidized by trust resources, and that the acquisition therefore represents a potential conversion of trust use without a clear market-rate compensation flow back to the fund. The transaction is recent enough that there is no developed legal record on it; it is flagged here as a contemporary point of contention rather than a settled finding.

Finally, the Texas PSF has been at the center of state-federal tension over ESG (Environmental, Social, and Governance) investment standards. Texas Senate Bill 13 (2021) required the PSF to divest from financial companies that “boycott” energy companies. In late 2024, a federal district court permanently enjoined enforcement of SB 13, holding that the statute’s “ideological classifications” impermissibly burdened protected speech and were unconstitutionally vague.⁶⁹ The ruling is significant because it underscores that the “Prudent Person” fiduciary duty to preserve and grow the corpus cannot be lightly overridden by political divestment mandates — an enforcement of fiduciary primacy that is consistent with the broader pattern of AG opinions policing PSF boundary integrity.

Texas in the Encyclopedia’s Argumentative Spine

Texas’s contribution to the encyclopedia’s argumentative spine is structural. The white paper’s claim — that the federal floor matters less than the secondary literature suggests, and that architecture plus constituency, more than the precise text of the federal admission act, determines outcome — finds its cleanest positive case in Texas.

The federal floor is, in Texas, entirely absent. There is no Section 16, no Section 36, no enabling-act trust language, no compact-trust doctrine reaching the Texas PSF, no federal AG enforcement authority. The doctrinal architecture that disciplines the New Mexico, Arizona, Idaho, and Oregon trusts simply does not apply. And yet Texas has built, through 180 years of state-constitutional commitment, alternate-section reservations, mineral dedication, and disciplined investment management, the largest school endowment in the United States — larger than every U.S. private university endowment individually, larger than the New Mexico Land Grant Permanent Fund by a factor of two, and operating a bond guarantee program no other state could begin to replicate. Architecture and constituency, in Texas, did the work that the federal floor does elsewhere. The 1876 Constitution constructed in state law every fiduciary feature that the 1910 New Mexico-Arizona Enabling Act would later construct in federal law for those states. The dual-trustee structure — SBOE plus GLO Commissioner, both constitutionally established and statewide elected — created two constituencies of accountability without relying on federal supervision. The Attorney General’s opinions policed the corpus boundary in lieu of the federal compact-trust enforcement that protects Lassen-state funds.

That Texas can do this should temper the pessimism that the encyclopedia’s federal-floor analysis sometimes invites. Federal admission-act text is helpful but not necessary. What is necessary is constitutionalized architecture — corpus, beneficiary class, fiduciary, segregation, perpetuity — combined with sufficient constituency interest to enforce the architecture across generations. Texas had both. Most of the original thirteen had neither, and built no comparable endowment. Oregon had the architecture but, by the time of the Elliott decoupling in 2017–22, was operating with a constituency too diffuse to defend the architecture from directed seizure. The Texas case demonstrates that the ceiling on a state’s school-trust performance is not set by federal text. It is set by what the state’s constitution does, and by who shows up to enforce it.

The asymmetry is also worth holding. Texas built the largest endowment in the country, and Texas has produced almost no trust-enforcement litigation. The two facts may be related: a fund that is large, conservatively managed, and politically undisputed has less litigation than a fund that is contested. Or they may simply reflect the Texas channel for school-finance grievance, which has flowed through Section 1 Edgewood litigation rather than Section 2/5 corpus litigation. Either way, the absence of a Texas Lassen — and the absence, so far, of a beneficiary-led trust-breach action against the SBOE or the GLO — leaves a doctrinal opening that the encyclopedia should mark. If the day comes that a Texas school district or schoolchildren’s coalition mounts a Section 2/5 trust-enforcement action against the SBOE, the GLO, or the State of Texas as trustee, the doctrinal architecture is in place to support it. The 1876 Constitution, the AG opinions, and the Standard v. Sadler–Durham fiduciary line would all be available. What has been missing is not the law. It has been the lawsuit.

Footnotes

Admission #28 (Dec. 29, 1845). Era: State-derived (annexation by joint resolution; retained own public domain). Draft: Pass 1, 2026-04-30.

Texas is the encyclopedia’s anchor case for a deceptively simple proposition: a state can refuse a federal school-land grant and still build the largest school endowment in the United States. As of fiscal year 2024, the Texas Permanent School Fund held investment assets of approximately $56.9 billion, with mineral and surface acreage valued at several billion more, and distributed roughly $2.16 billion per year to the Available School Fund.¹ By 2025–26 valuation reporting, the corpus was being described in the $67 billion range, with biennial distributions reaching a record $4.8 billion.² No private American university endowment is larger; the New Mexico Land Grant Permanent Fund, often the runner-up among public-purpose education endowments, is roughly half its size. And every dollar of it is state-derived. There is no Section 16, no Section 36, no “in trust” clause in a federal enabling act, no Congress-conferred fiduciary covenant of the kind that disciplines the New Mexico, Arizona, or Oregon trusts. What Texas has instead is a sovereign reservation, a constitutionalized irreducible fund, two independently elected fiduciaries, and 175 million acres of retained public domain that — over 180 years and through one of the most consequential mineral revolutions in American history — produced an asset base no other state can match. The Texas case is the encyclopedia’s structural answer to the question “what does a school trust look like when the federal floor is absent?” It looks like a state constitution doing the work that Congress did elsewhere — sometimes well, sometimes poorly, and always with the architecture located entirely in state law.

A state can refuse a federal school-land grant and still build the largest school endowment in the United States.

From the encyclopedia entry for Texas

Annexation, Retention, and the Sovereign Reservation

The defining act of Texas school-trust history is the 1845 Joint Resolution for Annexing Texas to the United States.³ Approved by Congress on March 1, 1845, the Joint Resolution did something no admission act before or since has done: it left the public domain of the incoming territory in the hands of the incoming state, on the express condition that those lands be applied first to the Republic’s debts and then disposed of as the new state should direct. The operative paragraph, in the Resolution’s verbatim language, reads:

“Second, said State, when admitted into the Union, after ceding to the United States, all public edifices, fortifications, barracks, ports and harbors, navy and navy-yards, docks, magazines, arms, armaments, and all other property and means pertaining to the public defence belonging to said Republic of Texas, shall retain all the public funds, debts, taxes, and claims of every kind, which may belong to or be due and owing said Republic; and shall also retain all the vacant and unappropriated lands lying within its limits, to be applied to the payment of the debts and liabilities of said Republic of Texas, and the residue of said lands, after discharging said debts and liabilities, to be disposed of as said State may direct; but in no event are said debts and liabilities to become a charge upon the Government of the United States.”⁴

The legal mechanics are unique. In every other public-land state — Ohio, Indiana, Illinois, Missouri, Oregon, Colorado, the Dakotas, the Mountain West — admission to the Union was preceded by federal acquisition of the territory through purchase, treaty, or conquest, followed by congressional creation of a federal public domain, followed by an enabling act granting specified sections back to the new state for the support of common schools. The federal government was the settlor; the state was the trustee; the schoolchildren were the beneficiaries; and Congress retained, at least in theory, an enforcement role through its admission-act compact. The Supreme Court’s decisions in Cooper v. Roberts (1855) and Lassen v. Arizona Highway Department (1967) gave that compact-trust architecture its enforceable character.⁵

In Texas, the federal government was never the settlor. The Republic of Texas — an independent sovereign from 1836 to 1845, recognized by the United States, France, the United Kingdom, and the Netherlands — entered the Union with its own public lands intact, its own debts attached, and its own discretion over disposition reserved. The Republic of Texas formally consented to the annexation terms on July 4, 1845, by ordinance of the Texas Convention.⁶ The Joint Resolution for the Admission of the State of Texas, approved December 29, 1845, completed the transition and admitted Texas as the twenty-eighth state on an “equal footing” with the original states.⁷ But the equal-footing language has always been read in Texas alongside the retained-lands provision: Texas is on equal footing with the original thirteen in part because, like them, it owns its own public domain. The federal government acquired no public lands in Texas at admission, and — apart from later acquisition for federal installations and post offices — it never has.⁸

The historical record on the size of the retained domain is well established: roughly 175 million acres of vacant and unappropriated lands at annexation, of which a substantial fraction would, over the next four decades, become the corpus of the Permanent School Fund.⁹ The Texas Natural Resources Code today preserves the retained-lands principle as a continuing matter of state law.¹⁰ The point worth holding in mind is structural: every other school-trust state in the encyclopedia inherited its trust from federal land, with federal text supplying the trust’s contours. Texas inherited its trust from itself, with state text supplying the contours. Whether that produces a stronger or weaker fiduciary regime in practice is a question the rest of the entry takes up.

The 1854 Capitalization and the Compromise of 1850

The 1845 Joint Resolution gave Texas the capacity to fund schools from retained lands; it did not, by itself, create a school fund. The first major capitalization of what would become the Permanent School Fund came nine years later, and it came from a transaction that is itself an artifact of Texas’s anomalous statehood.

The Compromise of 1850 settled the boundary disputes that had followed Texas’s admission, particularly Texas’s expansive claims to territory in present-day New Mexico, Colorado, Wyoming, Kansas, and Oklahoma. Under the compromise, Texas relinquished its claims to those lands in exchange for $10 million in United States bonds.¹¹ Approximately $7 million of that sum was used to retire the remaining debt of the Republic of Texas, satisfying the condition the 1845 Joint Resolution had attached to the retained lands. That left $3 million in U.S. bonds in the state’s hands. In January 1854, the Texas Legislature appropriated $2 million of those bonds to a “Special School Fund” — the direct legal precursor of the Permanent School Fund.¹² The first distributions from the Special School Fund reached Texas common schools in 1855, at a rate of approximately $1.21 per school-age child.¹³

The 1854 capitalization is structurally important for two reasons. First, it disposes of the simplest possible reading of Texas’s school-trust history — the claim that the Texas PSF is purely a creature of land sales and mineral royalties from retained domain. The seed corpus was federal bonds, transferred to Texas as consideration for the cession of territorial claims. Second, the 1854 act established the principle that the school fund was an investment fund as well as a land fund. From its inception, the Texas school endowment was a hybrid: it held both real assets (the retained public domain dedicated to education) and financial assets (the U.S. bonds and their interest stream). The hybrid character would, more than 150 years later, become the architectural pivot for the dual-trustee structure the 1876 Constitution institutionalized.

Civil War Erosion and the 1873 Land Dedication

The Civil War subjected the young Special School Fund to the first directed-seizure pressure of its history. After Texas seceded in 1861, the Confederate government identified the school fund’s holdings of U.S. bonds as a potential source of war finance. According to the State Board of Education’s official history, Confederate Secretary of War Judah P. Benjamin proposed cashing the school fund’s U.S. bonds and replacing them with Confederate bonds — a transaction that, had it been completed, would have annihilated the corpus when the Confederacy collapsed.¹⁴ The bond-substitution proposal was never executed, but Texas war boards did access portions of the fund for military finance, and the corpus emerged from the war reduced to approximately $1.8 million.¹⁵ The fund also suffered from widespread defaults on prewar railroad loans that had been issued from PSF capital.¹⁶ The pattern is recognizable: in moments of acute fiscal pressure, school-trust assets are the assets governments reach for first. Margaret Bird’s “directed seizure” frame names the phenomenon; the 1861–65 Texas record is one of the cleaner antebellum examples of it.

The recovery of the fund began under Reconstruction Governor Edmund J. Davis. On March 18, 1873, Davis signed House Bill 283, which dedicated half of the remaining unallocated public domain — approximately 88 million acres at the time — to the school fund.¹⁷ The 1873 statute did two things at once. It restored the corpus on a scale that dwarfed the prewar capitalization. And it established the doctrinal pattern that the 1876 Constitution would three years later constitutionalize: the school fund’s claim on the retained public domain was not a one-time legislative grant but a structural commitment, expressed in fractions of the public domain itself.

The 1876 Constitution: Article VII as the Trust Indenture

The fiduciary architecture of the modern Texas school trust is found in Article VII of the 1876 Constitution, drafted in the wake of Reconstruction and characterized by deep skepticism of centralized authority and an insistence on funding public education through land wealth rather than direct taxation.¹⁸ Article VII, sections 1 through 5, constitute what Gemini Deep Research aptly calls the “trust indenture” of the Texas Permanent School Fund.¹⁹ Each section is worth pinning verbatim because each does specific architectural work.

Section 1 — the Efficiency Clause — places on the Legislature the duty that has become the doctrinal home of the Edgewood line of school-finance litigation:

“A general diffusion of knowledge being essential to the preservation of the liberties and rights of the people, it shall be the duty of the Legislature of the State to establish and make suitable provision for the support and maintenance of an efficient system of public free schools.”²⁰

Section 2 — the Permanent School Fund Clause — establishes the corpus and identifies its sources:

“All funds, lands and other property heretofore set apart and appropriated for the support of public schools; all the alternate sections of land reserved by the State out of grants heretofore made or that may hereafter be made to railroads or other corporations of any nature whatsoever; one half of the public domain of the State; and all sums of money that may come to the State from the sale of any portion of the same, shall constitute a permanent school fund.”²¹

The dedication of “one half of the public domain of the State” to the Permanent School Fund is the largest single dedication of public lands to common schools by any state in the history of the Union. The “alternate sections” provision — which reserved to the PSF the alternate sections of any state land granted to railroads or other corporations — was the institutional mechanism that produced the West Texas and Panhandle “checkerboard” of state-owned sections, and that, far more than any direct sale of school lands, populated the modern PSF land portfolio.²²

Section 3 — the Available School Fund Clause — establishes the distribution account and dedicates one-fourth of the state occupation taxes plus other revenues to it:

“(a) One-fourth of the revenue derived from the State occupation taxes shall be set apart annually for the benefit of the public free schools… (b) It shall be the duty of the State Board of Education to set aside a sufficient amount of available funds to provide free text books for the use of children attending the public free schools of this State… (e) The Legislature shall be authorized to pass laws for the assessment and collection of taxes in all school districts and for the management and control of the public school or schools of such districts….”²³

Section 4 — the Sale and Investment Clause — directs how PSF land sales and the resulting proceeds shall be handled:

“The lands herein set apart to the Permanent School Fund, shall be sold under such regulations, at such times, and on such terms as may be prescribed by law; and the Legislature shall not have power to grant any relief to purchasers thereof. The Comptroller shall invest the proceeds of such sales… as may be directed by the Board of Education herein provided for, in the bonds of the United States, the State of Texas, or counties in said State, or in such other securities, and under such restrictions as may be prescribed by law; and the State shall be responsible for all investments.”²⁴

Three features of Section 4 are worth noting. First, the express provision that the Legislature “shall not have power to grant any relief to purchasers” — a structural anti-rescission provision designed to protect the fund’s title to its land sales. Second, the requirement that the Comptroller invest proceeds, not the Land Commissioner — a separation of trustee functions that became the basis for the SBOE/GLO bifurcation. Third, the express assertion that “the State shall be responsible for all investments” — a state-as-fiduciary clause that, in modern fiduciary doctrine, would be read as a settlor’s confirmation of the trust character of the fund.

Section 5 — the Distribution Clause, as amended in 2003 to authorize total-return distribution — governs the relationship between the PSF and the ASF:

“(a) The permanent school fund consists of all land appropriated for public schools by this constitution or the other laws of this state, other properties belonging to the permanent school fund, and all revenue derived from the land or other properties. The available school fund consists of the distributions made to it from the total return on all investment assets of the permanent school fund…. (b) The expenses of managing permanent school fund land and investments shall be paid by appropriation from the permanent school fund.”²⁵

Section 5, as it stands today, is the product of a long series of amendments — most consequentially the 1983 Bond Guarantee amendment, the 2003 Total Return amendment (HJR 68), and the 2011/2019 amendments adjusting the GLO/School Land Board contribution to the ASF. The Texas Legislative Council maintains a comprehensive amendment history that pins each change to its joint resolution and election date.²⁶

What Article VII accomplishes, taken as a whole, is the construction in state constitutional law of every architectural feature that the Northwest Ordinance, the 1850 Oregon Donation Act, the 1875 Colorado Enabling Act, and the 1910 New Mexico-Arizona Enabling Act constructed in federal law for other states. The corpus is named, dedicated to a beneficiary class (“the children attending the public free schools of this State”), declared perpetual (“permanent school fund”), and segregated from general revenue. The fiduciary is named — the State Board of Education for investment, the Land Commissioner for land. Investment is constrained. The Legislature is barred from rescuing defaulting purchasers. Modern Texas Attorney General opinions read all of this as creating a fund that is constitutionally “nonspendable” except where Article VII expressly authorizes payments.²⁷ The federal compact-trust analogue is absent, but the architectural function is fully discharged in state text.

The Mineral Revolution: Spindletop, House Bill 9, and the Tidelands

The character of the Permanent School Fund shifted decisively in the first half of the twentieth century, from a land-disposal trust into a mineral-production trust. The Spindletop oil discovery of 1901, near Beaumont, opened the Texas petroleum era and made apparent that the alternate-section checkerboard of West Texas, the retained Republic-era public domain, and the submerged lands of the Texas Gulf coast were all potentially mineral-productive in ways that the framers of the 1876 Constitution had not anticipated.²⁸ By the 1930s, Permian Basin production was already shaping the fund.

The decisive twentieth-century legislation was House Bill 9 of 1939. The 46th Legislature dedicated the mineral estate in all riverbeds, lakes, channels, and tidelands to the Permanent School Fund, and created the School Land Board to oversee management of these submerged mineral assets.²⁹ HB 9 was a structural complement to the 1876 alternate-section architecture. Where the alternate-section provision had populated the fund with surface and subsurface acreage on dry land, HB 9 populated it with the submerged mineral estate offshore — a category that had never been formally allocated and that, given the geology of the Texas Gulf Coast, was potentially of enormous value. The School Land Board, as constituted in 1939, became the second of the dual-trustee structure that the 2021 reforms would only partially unify: the SBOE managing financial assets on shore, the GLO Commissioner and the School Land Board managing the land and submerged-mineral portfolios.

The third great mineral-era event was the Tidelands controversy of 1950–1960, which produced the most consequential title litigation in the fund’s history. In United States v. Texas (1950), the Supreme Court initially held that the federal government had paramount rights in Gulf submerged lands beyond the Texas low-water mark, displacing Texas’s claim to a Republic-era three-marine-league boundary.³⁰ The decision was understood by Texas political and educational leadership as a direct threat to the PSF’s mineral base, given the 1939 dedication of submerged minerals to the fund. The 1952 presidential election turned in part on the tidelands question; Eisenhower’s victory was followed in 1953 by the federal Submerged Lands Act, which restored state submerged-land title within statutory boundaries and set the stage for Texas’s three-league claim.³¹ In United States v. Louisiana (1960), the Supreme Court held that Texas — alone among the Gulf states, by virtue of its Republic-era boundary and annexation history — was entitled under the Submerged Lands Act to submerged lands and resources out to three marine leagues from the coast.³² The decision restored the Texas Gulf submerged-mineral estate to state title for domestic purposes, and because the 1939 HB 9 dedication had already locked submerged minerals to the PSF, the recovery flowed directly to the school fund. By 2010, offshore oil and gas royalties had contributed more than $9 billion to the corpus.³³

The Tidelands episode is sometimes described, in Texas political rhetoric, as a federal “theft” of school-fund assets later recovered. The legal record is more nuanced: United States v. Texas was a federal-paramount-rights holding under the Constitution’s Property and Commerce clauses; United States v. Louisiana was an interpretation of the Submerged Lands Act, an act of Congress that re-vested state title where it had previously belonged. For encyclopedia prose, the episode reads more accurately as a contested sovereign-title loss followed by a partial statutory recovery, with the school fund as the principal beneficiary on both ends.

The Dual-Trustee Architecture and Its 2021 Partial Unification

The Texas dual-trustee structure is one of the most distinctive features of the school-trust landscape in any U.S. state. From 1876 through 2023, the Permanent School Fund was managed by two entirely separate bodies of constitutional fiduciaries.

The State Board of Education (SBOE) — fifteen members elected from single-member territorial districts — held fiduciary responsibility for the financial-asset portfolio: the stocks, bonds, and cash generated from land sales and royalties.³⁴ The Commissioner of the General Land Office — a single statewide elected official — held fiduciary responsibility for the real-asset portfolio: the millions of acres of surface land, mineral interests, and (after 1939) submerged-mineral estates. The School Land Board, established by HB 9 in 1939, sat on the GLO side and managed the real-asset investments and land sales.³⁵ Both the SBOE and the GLO Commissioner are statewide-elected constitutional officers; neither is appointed; neither serves at the pleasure of the Governor. Among public-land and state-derived states, Texas is alone in vesting trust-management authority in two separately-elected constitutional fiduciaries with overlapping but distinct PSF authority.

The dual-trustee architecture had structural advantages and structural costs. On the advantage side, it placed real-asset and financial-asset management in the hands of officers whose qualifications and constituencies were appropriate to their respective portfolios — an SBOE structured around education-policy and investment-policy expertise, and a GLO Commissioner structured around land and resource management. It also created two independent points of political accountability for trust management. On the cost side, it bifurcated the investment function in ways that 21st-century total-return investment management was not designed to accommodate. The 2003 “Cortex Report” and a series of State Auditor reviews found that the bifurcated structure produced coordination friction, reduced asset-allocation flexibility, and limited the SBOE’s ability to hold PSF investment staff fully accountable.³⁶ Tensions sharpened in the early 2000s when the Legislature granted the School Land Board authority to invest royalty revenues directly in real estate and infrastructure rather than transferring them to the SBOE for financial investment, creating two parallel investment silos.³⁷

The 2021 reform — Senate Bill 1232, signed into law in the 87th Legislature — constituted the most significant structural change to the PSF management architecture since 1876. SB 1232 created the Texas Permanent School Fund Corporation, a special-purpose governmental corporation designed to unify management of the fund’s investment assets.³⁸ The Corporation became operational on January 1, 2023, and is governed by a nine-member board comprising five SBOE members, the GLO Commissioner, one expert appointed by the Commissioner, and two experts appointed by the Governor.³⁹ The 2021 reform did not abolish the dual-trustee structure: the GLO retains constitutional authority over the real-asset portfolio (the actual land and mineral titles), and the SBOE retains constitutional authority over distribution to the Available School Fund. What the Corporation does is unify the financial-investment function across what had previously been two parallel investment silos. The 150-year-old management schism is, at the operational level, substantially resolved; at the constitutional level, the dual-trustee architecture remains.

The PSF Bond Guarantee Program

One distinctive use of the Permanent School Fund corpus deserves separate treatment: the Bond Guarantee Program, authorized by a 1983 amendment to Article VII, Section 5.⁴⁰ Under the BGP, the State Board of Education, through the Texas Education Agency, can use the PSF corpus to guarantee bonds issued by Texas school districts. The guarantee converts what would be a district credit risk into a PSF credit risk, allowing participating districts to issue bonds at AAA ratings and at substantially lower interest rates than they could otherwise obtain. The mechanism leverages the corpus without spending it: the PSF does not transfer money to the districts; it stands behind their debt service.

By August 31, 2024, the BGP had guaranteed approximately $125.8 billion in school district and charter district bonds outstanding, certified by the Texas State Auditor.⁴¹ More recent reporting describes total guaranteed debt approaching $144 billion, with annual taxpayer interest savings estimated at approximately $425 million.⁴² The program supports credit enhancement for nearly thirty percent of all municipal debt in Texas. Charter districts, representing roughly 7.86% of the Texas student population, receive a proportional share of BGP capacity.⁴³

The BGP operates within federal tax-arbitrage constraints administered by the Internal Revenue Service. In 2009, after market declines reduced the PSF cost value, the program closed temporarily because outstanding guarantees approached the IRS-determined capacity limit; IRS Notice 2010-5 permitted reopening.⁴⁴ In 2022 and 2023, the program again ran near capacity, denying applications until IRS Notice 2023-39 substantially restored guarantee capacity by aligning the federal limit with current PSF cost value rather than the outdated 2009 reference.⁴⁵ The capacity-constraint episodes are not scandals; they are structural frictions between Texas’s very large endowment and federal tax-arbitrage rules. They are also, however, evidence of how distinctive the BGP is as a use of trust corpus. No other state school trust uses its endowment at this scale to guarantee local-district debt. The mechanism is unique to Texas, and it is structurally enabled by the size of the corpus the 1845 retention and the 1939 mineral dedication produced.

Edgewood, Morath, and the Absent PSF-Trust Enforcement Case

Texas’s legal record on school finance is dominated by a long line of state constitutional litigation under Article VII, Section 1 — the Efficiency Clause — and almost entirely silent on Article VII, Section 2 and Section 5. This asymmetry is one of the more analytically interesting features of the Texas case, and it requires careful framing.

The Edgewood line begins with Edgewood Independent School District v. Kirby (1989), in which the Texas Supreme Court held unanimously that the Texas school-finance system violated the “efficient” requirement of Article VII, Section 1, by producing extreme disparities in per-student spending tied to local property wealth.⁴⁶ Edgewood I was the foundational state-constitutional adequacy/equity ruling for Texas — analogous in posture to the Pennsylvania William Penn School District (2023) decision, the New Jersey Abbott line, and the Kentucky Rose v. Council for Better Education (1989) decision. It triggered three decades of recurring school-finance litigation: Edgewood II, Edgewood III, Edgewood IV, the West Orange-Cove litigation, and ultimately Morath v. Texas Taxpayer & Student Fairness Coalition (2016), in which the Texas Supreme Court held that the post-Edgewood school-finance system met minimum constitutional requirements, ending the modern Edgewood line at the state-supreme-court level and pushing funding-equity advocates back into the legislative arena.⁴⁷

The Edgewood line, however, is not a school-trust line. Plaintiffs sued under Section 1’s efficient-system duty on the Legislature, not under Section 2’s irreducible-fund or Section 5’s distribution architecture. The court’s focus throughout was the adequacy and equity of the overall funding system, not the fiduciary management of the PSF corpus by the SBOE or the GLO. Distinguishing the two lines is essential: Section 1 is a legislative-duty clause, enforceable through challenges to the school-finance formula and recapture system; Sections 2 and 5 are trust-architecture clauses, enforceable (in principle) through challenges to corpus management and distribution.

What is distinctive about Texas is that the second line — the Section 2/5 trust-enforcement line — is essentially absent. There is no Texas analogue to Lassen v. Arizona Highway Department (the 1967 federal-trust-enforcement case for Arizona PSF lands), no Texas analogue to Branson School District RE-82 v. Romer (the 1997 Colorado case where school districts sued to prevent alteration of trust principles), and no Texas analogue to the 2026 Oregon Court of Appeals standing victory in Advocates for School Trust Lands v. State of Oregon. The Texas case that comes closest — State v. Durham (1993) — concerned the Relinquishment Act of 1934 and the fiduciary duty owed by private surface owners acting as state agents in mineral leasing of PSF-derived lands. The Texas Supreme Court held that surface owners owe a fiduciary duty to the state to negotiate the best possible terms for mineral leases, a holding that, while not directly enforcing fiduciary duties on the SBOE or the GLO, established the principle that any actor managing PSF resources is bound by trust duties.⁴⁸

The earlier case law fills in some of the gap. Hogue v. Baker (1898) recognized that, after the 1876 Constitution and related legislation, the remaining public domain was dedicated to education — anchoring the proposition that the PSF corpus is state-derived from retained lands rather than from federal grants.⁴⁹ Cox v. Robison (1912) upheld the Legislature’s authority to reserve minerals in future sales of public school lands, an architectural precedent that enabled the mineral-royalty growth of the twentieth century.⁵⁰ Standard v. Sadler (1964) and its progeny — State v. Standard (1967), Duval Corp. v. Sadler (1966) — defined GLO authority and surface-owner agency in mineral leasing on PSF-derived lands.⁵¹ City of El Paso v. Simmons (1965) upheld Texas legislation limiting reinstatement rights under old public school land purchase contracts against a Contract Clause challenge, providing useful background on long-term PSF sale contracts and title-stabilization interests.⁵² Byers v. Patterson (Tex. App. 2007) more recently synthesized Texas school-land doctrine, explaining that the 1876 Constitution established a perpetual school fund including one-half of the public domain, and that neither the Legislature nor the Commissioner may relinquish sovereign title claims to alleged vacant land without constitutional authority.⁵³

The absence of a beneficiary-led PSF trust-enforcement suit — analogous to the OASTL litigation in Oregon — is itself a finding worth pausing on. Two structural explanations are plausible. The first is that the Texas trust, being purely state-derived, lacks the federal-court jurisdictional hook that public-land states enjoy: no federal compact, no federal AG enforcement role, no Supremacy Clause backing for the trust-character argument. The second is that Texas school districts and their constituencies have, for over a century, channeled their grievances through the Edgewood line — Section 1 adequacy/equity litigation — rather than through Section 2/5 trust-corpus litigation, perhaps because the relief framework was clearer (legislative funding formula adjustments) than it would have been under a trust-breach theory (corpus restoration, fiduciary removal). Whatever the explanation, the result is that Texas’s PSF-trust enforcement has come almost entirely from the Texas Attorney General rather than from the Texas courts.

The Texas Attorney General Opinions: PSF Boundary-Policing

Where the courts have been silent, the Attorney General’s office has filled in. Several modern opinions police the constitutional boundary between corpus and income, between SBOE-managed investment assets and GLO-managed land and mineral assets, and between PSF distributions and general-fund appropriations. Together they constitute Texas’s principal modern doctrinal record of fiduciary boundary-keeping.

Opinion V-839 (1949) construed the then-current Article VII, Section 5 transfer authority and addressed the mechanics required before corpus could be transferred to the Available School Fund — historically important because the 1891 one-percent transfer authority was later repealed by voters in 1964, strengthening the modern irreducibility norm.⁵⁴ Opinion GA-0293 (2005) addressed the constitutional and statutory treatment of PSF management expenses after the 2003 total-return amendment.⁵⁵ Opinion GA-0407 (2006) is the cleanest modern anti-diversion opinion in the Texas record: it concluded that a statute purporting to convey artificially reclaimed submerged lands belonging to the Permanent School Fund without compensation violated Article VII, Section 4, and that the General Land Office could not adopt rules effectuating it.⁵⁶ Opinion GA-0516 (2007) addressed accounting methodology for Article VII, Section 5 distributions.⁵⁷ Opinion GA-0617 (2008) held that the School Land Board could not transfer revenue from PSF lands directly to the Available School Fund, bypassing the constitutional Section 5 distribution process — an important dual-trustee opinion preserving the SBOE’s distribution authority.⁵⁸ Opinion GA-0707 (2009) is the central modern opinion on total-return distributions and the SBOE’s fiduciary role: it concluded that the SBOE determines the methodology for calculating total return; that the Section 5(a)(2) limitation applies annually; that distributions must comply with both the six-percent test and the ten-year total-return test; and that the SBOE is authorized to apply those limits.⁵⁹ Opinion GA-0848 (2011) addressed the SBOE’s authority to pay attorney fees on a contingent basis out of recoveries of PSF corpus.⁶⁰ Opinion GA-0998 (2013) concluded that the SBOE’s discretionary fiduciary investment selections are not subject to State Purchasing Act competitive-bidding requirements.⁶¹ And Opinion KP-0229 (2018) provided the strongest modern confirmation of the perpetual character of the corpus: the Permanent School Fund is nonspendable except for specific distributions and payments authorized by Article VII, Section 5.⁶²

Read together, the AG opinions establish that the PSF is constitutionally locked except where Article VII expressly authorizes payments; that the SBOE and GLO have distinct but constitutionally bounded authorities; that distributions must follow the constitutional formula and cannot be bypassed by either trustee; that PSF land cannot be transferred to private hands without compensation to the fund; and that the SBOE bears a discretionary fiduciary duty of the kind the common law of trusts attaches to ordinary trustees. The body of opinions is substantial — more substantial, in fact, than the corresponding body in Oregon or in many federal-grant states — and it reflects the centrality of the AG’s office to PSF boundary-policing where the courts have largely declined to play that role.

Contemporary Management: Figures, Distributions, and Frontier Transactions

By fiscal year 2024, the Texas Permanent School Fund Corporation reported approximately $56.9 billion in PSF investment assets as of August 31, 2024.⁶³ The State Board of Education reported a combined $2.16 billion PSF-to-ASF contribution for FY 2024 and another scheduled $2.16 billion for FY 2025, including the SBOE distribution plus the School Land Board’s direct contribution to the ASF.⁶⁴ More recent reporting describes total PSF assets in the $67 billion range, with a record $4.8 billion biennial distribution authorized for the 2026–2027 biennium.⁶⁵ The General Land Office portfolio includes approximately 768,000 surface acres and roughly 13 million mineral acres across the state, including significant Permian Basin oil-and-gas acreage that remains the dominant revenue driver on the real-asset side.⁶⁶ The Available School Fund flows to the per-capita apportionment, distributed to Texas school districts on a per-student basis, and to the Instructional Materials Allotment, which purchases textbooks and instructional materials for all Texas public schools — a distribution architecture that, unlike Oregon’s offset-against-general-fund formula, supplements rather than substitutes for legislative appropriations.

Two recent transactions on the GLO side have drawn attention beyond the routine portfolio reporting. In late 2024, the GLO announced what was reported as the largest carbon sequestration lease in U.S. history, an agreement with ExxonMobil covering 271,068 acres of offshore submerged land. Combined with six other carbon-capture-and-sequestration leases awarded in 2023, the program is estimated to produce $10 billion for the PSF over thirty years — a frontier shift in the fund’s revenue mix from traditional oil-and-gas extraction toward energy-transition land-use revenue.⁶⁷

In October 2024, the GLO acquired a 1,402-acre ranch in Starr County along the Rio Grande. While the GLO described the land as a future source of agricultural revenue for the PSF, the primary stated purpose was the construction of a 1.5-mile fortified border wall, and Commissioner Buckingham subsequently offered the land to the federal government for use as a deportation facility.⁶⁸ The transaction is contested in the secondary literature on fiduciary grounds: traditionalist trust analysts argue that border security is a general government function that should be paid for at market rates rather than subsidized by trust resources, and that the acquisition therefore represents a potential conversion of trust use without a clear market-rate compensation flow back to the fund. The transaction is recent enough that there is no developed legal record on it; it is flagged here as a contemporary point of contention rather than a settled finding.

Finally, the Texas PSF has been at the center of state-federal tension over ESG (Environmental, Social, and Governance) investment standards. Texas Senate Bill 13 (2021) required the PSF to divest from financial companies that “boycott” energy companies. In late 2024, a federal district court permanently enjoined enforcement of SB 13, holding that the statute’s “ideological classifications” impermissibly burdened protected speech and were unconstitutionally vague.⁶⁹ The ruling is significant because it underscores that the “Prudent Person” fiduciary duty to preserve and grow the corpus cannot be lightly overridden by political divestment mandates — an enforcement of fiduciary primacy that is consistent with the broader pattern of AG opinions policing PSF boundary integrity.

Texas in the Encyclopedia’s Argumentative Spine

Texas’s contribution to the encyclopedia’s argumentative spine is structural. The white paper’s claim — that the federal floor matters less than the secondary literature suggests, and that architecture plus constituency, more than the precise text of the federal admission act, determines outcome — finds its cleanest positive case in Texas.

The federal floor is, in Texas, entirely absent. There is no Section 16, no Section 36, no enabling-act trust language, no compact-trust doctrine reaching the Texas PSF, no federal AG enforcement authority. The doctrinal architecture that disciplines the New Mexico, Arizona, Idaho, and Oregon trusts simply does not apply. And yet Texas has built, through 180 years of state-constitutional commitment, alternate-section reservations, mineral dedication, and disciplined investment management, the largest school endowment in the United States — larger than every U.S. private university endowment individually, larger than the New Mexico Land Grant Permanent Fund by a factor of two, and operating a bond guarantee program no other state could begin to replicate. Architecture and constituency, in Texas, did the work that the federal floor does elsewhere. The 1876 Constitution constructed in state law every fiduciary feature that the 1910 New Mexico-Arizona Enabling Act would later construct in federal law for those states. The dual-trustee structure — SBOE plus GLO Commissioner, both constitutionally established and statewide elected — created two constituencies of accountability without relying on federal supervision. The Attorney General’s opinions policed the corpus boundary in lieu of the federal compact-trust enforcement that protects Lassen-state funds.

That Texas can do this should temper the pessimism that the encyclopedia’s federal-floor analysis sometimes invites. Federal admission-act text is helpful but not necessary. What is necessary is constitutionalized architecture — corpus, beneficiary class, fiduciary, segregation, perpetuity — combined with sufficient constituency interest to enforce the architecture across generations. Texas had both. Most of the original thirteen had neither, and built no comparable endowment. Oregon had the architecture but, by the time of the Elliott decoupling in 2017–22, was operating with a constituency too diffuse to defend the architecture from directed seizure. The Texas case demonstrates that the ceiling on a state’s school-trust performance is not set by federal text. It is set by what the state’s constitution does, and by who shows up to enforce it.

The ceiling on a state’s school-trust performance is not set by federal text. It is set by what the state’s constitution does, and by who shows up to enforce it.

From the encyclopedia entry for Texas

The asymmetry is also worth holding. Texas built the largest endowment in the country, and Texas has produced almost no trust-enforcement litigation. The two facts may be related: a fund that is large, conservatively managed, and politically undisputed has less litigation than a fund that is contested. Or they may simply reflect the Texas channel for school-finance grievance, which has flowed through Section 1 Edgewood litigation rather than Section 2/5 corpus litigation. Either way, the absence of a Texas Lassen — and the absence, so far, of a beneficiary-led trust-breach action against the SBOE or the GLO — leaves a doctrinal opening that the encyclopedia should mark. If the day comes that a Texas school district or schoolchildren’s coalition mounts a Section 2/5 trust-enforcement action against the SBOE, the GLO, or the State of Texas as trustee, the doctrinal architecture is in place to support it. The 1876 Constitution, the AG opinions, and the Standard v. Sadler–Durham fiduciary line would all be available. What has been missing is not the law. It has been the lawsuit.

Footnotes

Admission #28 (Dec. 29, 1845). Era: State-derived (annexation by joint resolution; retained own public domain). Draft: Pass 1, 2026-04-30.

Texas is the encyclopedia’s anchor case for a deceptively simple proposition: a state can refuse a federal school-land grant and still build the largest school endowment in the United States. As of fiscal year 2024, the Texas Permanent School Fund held investment assets of approximately $56.9 billion, with mineral and surface acreage valued at several billion more, and distributed roughly $2.16 billion per year to the Available School Fund.¹ By 2025–26 valuation reporting, the corpus was being described in the $67 billion range, with biennial distributions reaching a record $4.8 billion.² No private American university endowment is larger; the New Mexico Land Grant Permanent Fund, often the runner-up among public-purpose education endowments, is roughly half its size. And every dollar of it is state-derived. There is no Section 16, no Section 36, no “in trust” clause in a federal enabling act, no Congress-conferred fiduciary covenant of the kind that disciplines the New Mexico, Arizona, or Oregon trusts. What Texas has instead is a sovereign reservation, a constitutionalized irreducible fund, two independently elected fiduciaries, and 175 million acres of retained public domain that — over 180 years and through one of the most consequential mineral revolutions in American history — produced an asset base no other state can match. The Texas case is the encyclopedia’s structural answer to the question “what does a school trust look like when the federal floor is absent?” It looks like a state constitution doing the work that Congress did elsewhere — sometimes well, sometimes poorly, and always with the architecture located entirely in state law.

A state can refuse a federal school-land grant and still build the largest school endowment in the United States.

From the encyclopedia entry for Texas

Annexation, Retention, and the Sovereign Reservation

The defining act of Texas school-trust history is the 1845 Joint Resolution for Annexing Texas to the United States.³ Approved by Congress on March 1, 1845, the Joint Resolution did something no admission act before or since has done: it left the public domain of the incoming territory in the hands of the incoming state, on the express condition that those lands be applied first to the Republic’s debts and then disposed of as the new state should direct. The operative paragraph, in the Resolution’s verbatim language, reads:

“Second, said State, when admitted into the Union, after ceding to the United States, all public edifices, fortifications, barracks, ports and harbors, navy and navy-yards, docks, magazines, arms, armaments, and all other property and means pertaining to the public defence belonging to said Republic of Texas, shall retain all the public funds, debts, taxes, and claims of every kind, which may belong to or be due and owing said Republic; and shall also retain all the vacant and unappropriated lands lying within its limits, to be applied to the payment of the debts and liabilities of said Republic of Texas, and the residue of said lands, after discharging said debts and liabilities, to be disposed of as said State may direct; but in no event are said debts and liabilities to become a charge upon the Government of the United States.”⁴

The legal mechanics are unique. In every other public-land state — Ohio, Indiana, Illinois, Missouri, Oregon, Colorado, the Dakotas, the Mountain West — admission to the Union was preceded by federal acquisition of the territory through purchase, treaty, or conquest, followed by congressional creation of a federal public domain, followed by an enabling act granting specified sections back to the new state for the support of common schools. The federal government was the settlor; the state was the trustee; the schoolchildren were the beneficiaries; and Congress retained, at least in theory, an enforcement role through its admission-act compact. The Supreme Court’s decisions in Cooper v. Roberts (1855) and Lassen v. Arizona Highway Department (1967) gave that compact-trust architecture its enforceable character.⁵

In Texas, the federal government was never the settlor. The Republic of Texas — an independent sovereign from 1836 to 1845, recognized by the United States, France, the United Kingdom, and the Netherlands — entered the Union with its own public lands intact, its own debts attached, and its own discretion over disposition reserved. The Republic of Texas formally consented to the annexation terms on July 4, 1845, by ordinance of the Texas Convention.⁶ The Joint Resolution for the Admission of the State of Texas, approved December 29, 1845, completed the transition and admitted Texas as the twenty-eighth state on an “equal footing” with the original states.⁷ But the equal-footing language has always been read in Texas alongside the retained-lands provision: Texas is on equal footing with the original thirteen in part because, like them, it owns its own public domain. The federal government acquired no public lands in Texas at admission, and — apart from later acquisition for federal installations and post offices — it never has.⁸

The historical record on the size of the retained domain is well established: roughly 175 million acres of vacant and unappropriated lands at annexation, of which a substantial fraction would, over the next four decades, become the corpus of the Permanent School Fund.⁹ The Texas Natural Resources Code today preserves the retained-lands principle as a continuing matter of state law.¹⁰ The point worth holding in mind is structural: every other school-trust state in the encyclopedia inherited its trust from federal land, with federal text supplying the trust’s contours. Texas inherited its trust from itself, with state text supplying the contours. Whether that produces a stronger or weaker fiduciary regime in practice is a question the rest of the entry takes up.

The 1854 Capitalization and the Compromise of 1850

The 1845 Joint Resolution gave Texas the capacity to fund schools from retained lands; it did not, by itself, create a school fund. The first major capitalization of what would become the Permanent School Fund came nine years later, and it came from a transaction that is itself an artifact of Texas’s anomalous statehood.

The Compromise of 1850 settled the boundary disputes that had followed Texas’s admission, particularly Texas’s expansive claims to territory in present-day New Mexico, Colorado, Wyoming, Kansas, and Oklahoma. Under the compromise, Texas relinquished its claims to those lands in exchange for $10 million in United States bonds.¹¹ Approximately $7 million of that sum was used to retire the remaining debt of the Republic of Texas, satisfying the condition the 1845 Joint Resolution had attached to the retained lands. That left $3 million in U.S. bonds in the state’s hands. In January 1854, the Texas Legislature appropriated $2 million of those bonds to a “Special School Fund” — the direct legal precursor of the Permanent School Fund.¹² The first distributions from the Special School Fund reached Texas common schools in 1855, at a rate of approximately $1.21 per school-age child.¹³

The 1854 capitalization is structurally important for two reasons. First, it disposes of the simplest possible reading of Texas’s school-trust history — the claim that the Texas PSF is purely a creature of land sales and mineral royalties from retained domain. The seed corpus was federal bonds, transferred to Texas as consideration for the cession of territorial claims. Second, the 1854 act established the principle that the school fund was an investment fund as well as a land fund. From its inception, the Texas school endowment was a hybrid: it held both real assets (the retained public domain dedicated to education) and financial assets (the U.S. bonds and their interest stream). The hybrid character would, more than 150 years later, become the architectural pivot for the dual-trustee structure the 1876 Constitution institutionalized.

Civil War Erosion and the 1873 Land Dedication

The Civil War subjected the young Special School Fund to the first directed-seizure pressure of its history. After Texas seceded in 1861, the Confederate government identified the school fund’s holdings of U.S. bonds as a potential source of war finance. According to the State Board of Education’s official history, Confederate Secretary of War Judah P. Benjamin proposed cashing the school fund’s U.S. bonds and replacing them with Confederate bonds — a transaction that, had it been completed, would have annihilated the corpus when the Confederacy collapsed.¹⁴ The bond-substitution proposal was never executed, but Texas war boards did access portions of the fund for military finance, and the corpus emerged from the war reduced to approximately $1.8 million.¹⁵ The fund also suffered from widespread defaults on prewar railroad loans that had been issued from PSF capital.¹⁶ The pattern is recognizable: in moments of acute fiscal pressure, school-trust assets are the assets governments reach for first. Margaret Bird’s “directed seizure” frame names the phenomenon; the 1861–65 Texas record is one of the cleaner antebellum examples of it.

The recovery of the fund began under Reconstruction Governor Edmund J. Davis. On March 18, 1873, Davis signed House Bill 283, which dedicated half of the remaining unallocated public domain — approximately 88 million acres at the time — to the school fund.¹⁷ The 1873 statute did two things at once. It restored the corpus on a scale that dwarfed the prewar capitalization. And it established the doctrinal pattern that the 1876 Constitution would three years later constitutionalize: the school fund’s claim on the retained public domain was not a one-time legislative grant but a structural commitment, expressed in fractions of the public domain itself.

The 1876 Constitution: Article VII as the Trust Indenture

The fiduciary architecture of the modern Texas school trust is found in Article VII of the 1876 Constitution, drafted in the wake of Reconstruction and characterized by deep skepticism of centralized authority and an insistence on funding public education through land wealth rather than direct taxation.¹⁸ Article VII, sections 1 through 5, constitute what Gemini Deep Research aptly calls the “trust indenture” of the Texas Permanent School Fund.¹⁹ Each section is worth pinning verbatim because each does specific architectural work.

Section 1 — the Efficiency Clause — places on the Legislature the duty that has become the doctrinal home of the Edgewood line of school-finance litigation:

“A general diffusion of knowledge being essential to the preservation of the liberties and rights of the people, it shall be the duty of the Legislature of the State to establish and make suitable provision for the support and maintenance of an efficient system of public free schools.”²⁰

Section 2 — the Permanent School Fund Clause — establishes the corpus and identifies its sources:

“All funds, lands and other property heretofore set apart and appropriated for the support of public schools; all the alternate sections of land reserved by the State out of grants heretofore made or that may hereafter be made to railroads or other corporations of any nature whatsoever; one half of the public domain of the State; and all sums of money that may come to the State from the sale of any portion of the same, shall constitute a permanent school fund.”²¹

The dedication of “one half of the public domain of the State” to the Permanent School Fund is the largest single dedication of public lands to common schools by any state in the history of the Union. The “alternate sections” provision — which reserved to the PSF the alternate sections of any state land granted to railroads or other corporations — was the institutional mechanism that produced the West Texas and Panhandle “checkerboard” of state-owned sections, and that, far more than any direct sale of school lands, populated the modern PSF land portfolio.²²

Section 3 — the Available School Fund Clause — establishes the distribution account and dedicates one-fourth of the state occupation taxes plus other revenues to it:

“(a) One-fourth of the revenue derived from the State occupation taxes shall be set apart annually for the benefit of the public free schools… (b) It shall be the duty of the State Board of Education to set aside a sufficient amount of available funds to provide free text books for the use of children attending the public free schools of this State… (e) The Legislature shall be authorized to pass laws for the assessment and collection of taxes in all school districts and for the management and control of the public school or schools of such districts….”²³

Section 4 — the Sale and Investment Clause — directs how PSF land sales and the resulting proceeds shall be handled:

“The lands herein set apart to the Permanent School Fund, shall be sold under such regulations, at such times, and on such terms as may be prescribed by law; and the Legislature shall not have power to grant any relief to purchasers thereof. The Comptroller shall invest the proceeds of such sales… as may be directed by the Board of Education herein provided for, in the bonds of the United States, the State of Texas, or counties in said State, or in such other securities, and under such restrictions as may be prescribed by law; and the State shall be responsible for all investments.”²⁴

Three features of Section 4 are worth noting. First, the express provision that the Legislature “shall not have power to grant any relief to purchasers” — a structural anti-rescission provision designed to protect the fund’s title to its land sales. Second, the requirement that the Comptroller invest proceeds, not the Land Commissioner — a separation of trustee functions that became the basis for the SBOE/GLO bifurcation. Third, the express assertion that “the State shall be responsible for all investments” — a state-as-fiduciary clause that, in modern fiduciary doctrine, would be read as a settlor’s confirmation of the trust character of the fund.

Section 5 — the Distribution Clause, as amended in 2003 to authorize total-return distribution — governs the relationship between the PSF and the ASF:

“(a) The permanent school fund consists of all land appropriated for public schools by this constitution or the other laws of this state, other properties belonging to the permanent school fund, and all revenue derived from the land or other properties. The available school fund consists of the distributions made to it from the total return on all investment assets of the permanent school fund…. (b) The expenses of managing permanent school fund land and investments shall be paid by appropriation from the permanent school fund.”²⁵

Section 5, as it stands today, is the product of a long series of amendments — most consequentially the 1983 Bond Guarantee amendment, the 2003 Total Return amendment (HJR 68), and the 2011/2019 amendments adjusting the GLO/School Land Board contribution to the ASF. The Texas Legislative Council maintains a comprehensive amendment history that pins each change to its joint resolution and election date.²⁶

What Article VII accomplishes, taken as a whole, is the construction in state constitutional law of every architectural feature that the Northwest Ordinance, the 1850 Oregon Donation Act, the 1875 Colorado Enabling Act, and the 1910 New Mexico-Arizona Enabling Act constructed in federal law for other states. The corpus is named, dedicated to a beneficiary class (“the children attending the public free schools of this State”), declared perpetual (“permanent school fund”), and segregated from general revenue. The fiduciary is named — the State Board of Education for investment, the Land Commissioner for land. Investment is constrained. The Legislature is barred from rescuing defaulting purchasers. Modern Texas Attorney General opinions read all of this as creating a fund that is constitutionally “nonspendable” except where Article VII expressly authorizes payments.²⁷ The federal compact-trust analogue is absent, but the architectural function is fully discharged in state text.

The Mineral Revolution: Spindletop, House Bill 9, and the Tidelands

The character of the Permanent School Fund shifted decisively in the first half of the twentieth century, from a land-disposal trust into a mineral-production trust. The Spindletop oil discovery of 1901, near Beaumont, opened the Texas petroleum era and made apparent that the alternate-section checkerboard of West Texas, the retained Republic-era public domain, and the submerged lands of the Texas Gulf coast were all potentially mineral-productive in ways that the framers of the 1876 Constitution had not anticipated.²⁸ By the 1930s, Permian Basin production was already shaping the fund.

The decisive twentieth-century legislation was House Bill 9 of 1939. The 46th Legislature dedicated the mineral estate in all riverbeds, lakes, channels, and tidelands to the Permanent School Fund, and created the School Land Board to oversee management of these submerged mineral assets.²⁹ HB 9 was a structural complement to the 1876 alternate-section architecture. Where the alternate-section provision had populated the fund with surface and subsurface acreage on dry land, HB 9 populated it with the submerged mineral estate offshore — a category that had never been formally allocated and that, given the geology of the Texas Gulf Coast, was potentially of enormous value. The School Land Board, as constituted in 1939, became the second of the dual-trustee structure that the 2021 reforms would only partially unify: the SBOE managing financial assets on shore, the GLO Commissioner and the School Land Board managing the land and submerged-mineral portfolios.

The third great mineral-era event was the Tidelands controversy of 1950–1960, which produced the most consequential title litigation in the fund’s history. In United States v. Texas (1950), the Supreme Court initially held that the federal government had paramount rights in Gulf submerged lands beyond the Texas low-water mark, displacing Texas’s claim to a Republic-era three-marine-league boundary.³⁰ The decision was understood by Texas political and educational leadership as a direct threat to the PSF’s mineral base, given the 1939 dedication of submerged minerals to the fund. The 1952 presidential election turned in part on the tidelands question; Eisenhower’s victory was followed in 1953 by the federal Submerged Lands Act, which restored state submerged-land title within statutory boundaries and set the stage for Texas’s three-league claim.³¹ In United States v. Louisiana (1960), the Supreme Court held that Texas — alone among the Gulf states, by virtue of its Republic-era boundary and annexation history — was entitled under the Submerged Lands Act to submerged lands and resources out to three marine leagues from the coast.³² The decision restored the Texas Gulf submerged-mineral estate to state title for domestic purposes, and because the 1939 HB 9 dedication had already locked submerged minerals to the PSF, the recovery flowed directly to the school fund. By 2010, offshore oil and gas royalties had contributed more than $9 billion to the corpus.³³

The Tidelands episode is sometimes described, in Texas political rhetoric, as a federal “theft” of school-fund assets later recovered. The legal record is more nuanced: United States v. Texas was a federal-paramount-rights holding under the Constitution’s Property and Commerce clauses; United States v. Louisiana was an interpretation of the Submerged Lands Act, an act of Congress that re-vested state title where it had previously belonged. For encyclopedia prose, the episode reads more accurately as a contested sovereign-title loss followed by a partial statutory recovery, with the school fund as the principal beneficiary on both ends.

The Dual-Trustee Architecture and Its 2021 Partial Unification

The Texas dual-trustee structure is one of the most distinctive features of the school-trust landscape in any U.S. state. From 1876 through 2023, the Permanent School Fund was managed by two entirely separate bodies of constitutional fiduciaries.

The State Board of Education (SBOE) — fifteen members elected from single-member territorial districts — held fiduciary responsibility for the financial-asset portfolio: the stocks, bonds, and cash generated from land sales and royalties.³⁴ The Commissioner of the General Land Office — a single statewide elected official — held fiduciary responsibility for the real-asset portfolio: the millions of acres of surface land, mineral interests, and (after 1939) submerged-mineral estates. The School Land Board, established by HB 9 in 1939, sat on the GLO side and managed the real-asset investments and land sales.³⁵ Both the SBOE and the GLO Commissioner are statewide-elected constitutional officers; neither is appointed; neither serves at the pleasure of the Governor. Among public-land and state-derived states, Texas is alone in vesting trust-management authority in two separately-elected constitutional fiduciaries with overlapping but distinct PSF authority.

The dual-trustee architecture had structural advantages and structural costs. On the advantage side, it placed real-asset and financial-asset management in the hands of officers whose qualifications and constituencies were appropriate to their respective portfolios — an SBOE structured around education-policy and investment-policy expertise, and a GLO Commissioner structured around land and resource management. It also created two independent points of political accountability for trust management. On the cost side, it bifurcated the investment function in ways that 21st-century total-return investment management was not designed to accommodate. The 2003 “Cortex Report” and a series of State Auditor reviews found that the bifurcated structure produced coordination friction, reduced asset-allocation flexibility, and limited the SBOE’s ability to hold PSF investment staff fully accountable.³⁶ Tensions sharpened in the early 2000s when the Legislature granted the School Land Board authority to invest royalty revenues directly in real estate and infrastructure rather than transferring them to the SBOE for financial investment, creating two parallel investment silos.³⁷

The 2021 reform — Senate Bill 1232, signed into law in the 87th Legislature — constituted the most significant structural change to the PSF management architecture since 1876. SB 1232 created the Texas Permanent School Fund Corporation, a special-purpose governmental corporation designed to unify management of the fund’s investment assets.³⁸ The Corporation became operational on January 1, 2023, and is governed by a nine-member board comprising five SBOE members, the GLO Commissioner, one expert appointed by the Commissioner, and two experts appointed by the Governor.³⁹ The 2021 reform did not abolish the dual-trustee structure: the GLO retains constitutional authority over the real-asset portfolio (the actual land and mineral titles), and the SBOE retains constitutional authority over distribution to the Available School Fund. What the Corporation does is unify the financial-investment function across what had previously been two parallel investment silos. The 150-year-old management schism is, at the operational level, substantially resolved; at the constitutional level, the dual-trustee architecture remains.

The PSF Bond Guarantee Program

One distinctive use of the Permanent School Fund corpus deserves separate treatment: the Bond Guarantee Program, authorized by a 1983 amendment to Article VII, Section 5.⁴⁰ Under the BGP, the State Board of Education, through the Texas Education Agency, can use the PSF corpus to guarantee bonds issued by Texas school districts. The guarantee converts what would be a district credit risk into a PSF credit risk, allowing participating districts to issue bonds at AAA ratings and at substantially lower interest rates than they could otherwise obtain. The mechanism leverages the corpus without spending it: the PSF does not transfer money to the districts; it stands behind their debt service.

By August 31, 2024, the BGP had guaranteed approximately $125.8 billion in school district and charter district bonds outstanding, certified by the Texas State Auditor.⁴¹ More recent reporting describes total guaranteed debt approaching $144 billion, with annual taxpayer interest savings estimated at approximately $425 million.⁴² The program supports credit enhancement for nearly thirty percent of all municipal debt in Texas. Charter districts, representing roughly 7.86% of the Texas student population, receive a proportional share of BGP capacity.⁴³

The BGP operates within federal tax-arbitrage constraints administered by the Internal Revenue Service. In 2009, after market declines reduced the PSF cost value, the program closed temporarily because outstanding guarantees approached the IRS-determined capacity limit; IRS Notice 2010-5 permitted reopening.⁴⁴ In 2022 and 2023, the program again ran near capacity, denying applications until IRS Notice 2023-39 substantially restored guarantee capacity by aligning the federal limit with current PSF cost value rather than the outdated 2009 reference.⁴⁵ The capacity-constraint episodes are not scandals; they are structural frictions between Texas’s very large endowment and federal tax-arbitrage rules. They are also, however, evidence of how distinctive the BGP is as a use of trust corpus. No other state school trust uses its endowment at this scale to guarantee local-district debt. The mechanism is unique to Texas, and it is structurally enabled by the size of the corpus the 1845 retention and the 1939 mineral dedication produced.

Edgewood, Morath, and the Absent PSF-Trust Enforcement Case

Texas’s legal record on school finance is dominated by a long line of state constitutional litigation under Article VII, Section 1 — the Efficiency Clause — and almost entirely silent on Article VII, Section 2 and Section 5. This asymmetry is one of the more analytically interesting features of the Texas case, and it requires careful framing.

The Edgewood line begins with Edgewood Independent School District v. Kirby (1989), in which the Texas Supreme Court held unanimously that the Texas school-finance system violated the “efficient” requirement of Article VII, Section 1, by producing extreme disparities in per-student spending tied to local property wealth.⁴⁶ Edgewood I was the foundational state-constitutional adequacy/equity ruling for Texas — analogous in posture to the Pennsylvania William Penn School District (2023) decision, the New Jersey Abbott line, and the Kentucky Rose v. Council for Better Education (1989) decision. It triggered three decades of recurring school-finance litigation: Edgewood II, Edgewood III, Edgewood IV, the West Orange-Cove litigation, and ultimately Morath v. Texas Taxpayer & Student Fairness Coalition (2016), in which the Texas Supreme Court held that the post-Edgewood school-finance system met minimum constitutional requirements, ending the modern Edgewood line at the state-supreme-court level and pushing funding-equity advocates back into the legislative arena.⁴⁷

The Edgewood line, however, is not a school-trust line. Plaintiffs sued under Section 1’s efficient-system duty on the Legislature, not under Section 2’s irreducible-fund or Section 5’s distribution architecture. The court’s focus throughout was the adequacy and equity of the overall funding system, not the fiduciary management of the PSF corpus by the SBOE or the GLO. Distinguishing the two lines is essential: Section 1 is a legislative-duty clause, enforceable through challenges to the school-finance formula and recapture system; Sections 2 and 5 are trust-architecture clauses, enforceable (in principle) through challenges to corpus management and distribution.

What is distinctive about Texas is that the second line — the Section 2/5 trust-enforcement line — is essentially absent. There is no Texas analogue to Lassen v. Arizona Highway Department (the 1967 federal-trust-enforcement case for Arizona PSF lands), no Texas analogue to Branson School District RE-82 v. Romer (the 1997 Colorado case where school districts sued to prevent alteration of trust principles), and no Texas analogue to the 2026 Oregon Court of Appeals standing victory in Advocates for School Trust Lands v. State of Oregon. The Texas case that comes closest — State v. Durham (1993) — concerned the Relinquishment Act of 1934 and the fiduciary duty owed by private surface owners acting as state agents in mineral leasing of PSF-derived lands. The Texas Supreme Court held that surface owners owe a fiduciary duty to the state to negotiate the best possible terms for mineral leases, a holding that, while not directly enforcing fiduciary duties on the SBOE or the GLO, established the principle that any actor managing PSF resources is bound by trust duties.⁴⁸

The earlier case law fills in some of the gap. Hogue v. Baker (1898) recognized that, after the 1876 Constitution and related legislation, the remaining public domain was dedicated to education — anchoring the proposition that the PSF corpus is state-derived from retained lands rather than from federal grants.⁴⁹ Cox v. Robison (1912) upheld the Legislature’s authority to reserve minerals in future sales of public school lands, an architectural precedent that enabled the mineral-royalty growth of the twentieth century.⁵⁰ Standard v. Sadler (1964) and its progeny — State v. Standard (1967), Duval Corp. v. Sadler (1966) — defined GLO authority and surface-owner agency in mineral leasing on PSF-derived lands.⁵¹ City of El Paso v. Simmons (1965) upheld Texas legislation limiting reinstatement rights under old public school land purchase contracts against a Contract Clause challenge, providing useful background on long-term PSF sale contracts and title-stabilization interests.⁵² Byers v. Patterson (Tex. App. 2007) more recently synthesized Texas school-land doctrine, explaining that the 1876 Constitution established a perpetual school fund including one-half of the public domain, and that neither the Legislature nor the Commissioner may relinquish sovereign title claims to alleged vacant land without constitutional authority.⁵³

The absence of a beneficiary-led PSF trust-enforcement suit — analogous to the OASTL litigation in Oregon — is itself a finding worth pausing on. Two structural explanations are plausible. The first is that the Texas trust, being purely state-derived, lacks the federal-court jurisdictional hook that public-land states enjoy: no federal compact, no federal AG enforcement role, no Supremacy Clause backing for the trust-character argument. The second is that Texas school districts and their constituencies have, for over a century, channeled their grievances through the Edgewood line — Section 1 adequacy/equity litigation — rather than through Section 2/5 trust-corpus litigation, perhaps because the relief framework was clearer (legislative funding formula adjustments) than it would have been under a trust-breach theory (corpus restoration, fiduciary removal). Whatever the explanation, the result is that Texas’s PSF-trust enforcement has come almost entirely from the Texas Attorney General rather than from the Texas courts.

The Texas Attorney General Opinions: PSF Boundary-Policing

Where the courts have been silent, the Attorney General’s office has filled in. Several modern opinions police the constitutional boundary between corpus and income, between SBOE-managed investment assets and GLO-managed land and mineral assets, and between PSF distributions and general-fund appropriations. Together they constitute Texas’s principal modern doctrinal record of fiduciary boundary-keeping.

Opinion V-839 (1949) construed the then-current Article VII, Section 5 transfer authority and addressed the mechanics required before corpus could be transferred to the Available School Fund — historically important because the 1891 one-percent transfer authority was later repealed by voters in 1964, strengthening the modern irreducibility norm.⁵⁴ Opinion GA-0293 (2005) addressed the constitutional and statutory treatment of PSF management expenses after the 2003 total-return amendment.⁵⁵ Opinion GA-0407 (2006) is the cleanest modern anti-diversion opinion in the Texas record: it concluded that a statute purporting to convey artificially reclaimed submerged lands belonging to the Permanent School Fund without compensation violated Article VII, Section 4, and that the General Land Office could not adopt rules effectuating it.⁵⁶ Opinion GA-0516 (2007) addressed accounting methodology for Article VII, Section 5 distributions.⁵⁷ Opinion GA-0617 (2008) held that the School Land Board could not transfer revenue from PSF lands directly to the Available School Fund, bypassing the constitutional Section 5 distribution process — an important dual-trustee opinion preserving the SBOE’s distribution authority.⁵⁸ Opinion GA-0707 (2009) is the central modern opinion on total-return distributions and the SBOE’s fiduciary role: it concluded that the SBOE determines the methodology for calculating total return; that the Section 5(a)(2) limitation applies annually; that distributions must comply with both the six-percent test and the ten-year total-return test; and that the SBOE is authorized to apply those limits.⁵⁹ Opinion GA-0848 (2011) addressed the SBOE’s authority to pay attorney fees on a contingent basis out of recoveries of PSF corpus.⁶⁰ Opinion GA-0998 (2013) concluded that the SBOE’s discretionary fiduciary investment selections are not subject to State Purchasing Act competitive-bidding requirements.⁶¹ And Opinion KP-0229 (2018) provided the strongest modern confirmation of the perpetual character of the corpus: the Permanent School Fund is nonspendable except for specific distributions and payments authorized by Article VII, Section 5.⁶²

Read together, the AG opinions establish that the PSF is constitutionally locked except where Article VII expressly authorizes payments; that the SBOE and GLO have distinct but constitutionally bounded authorities; that distributions must follow the constitutional formula and cannot be bypassed by either trustee; that PSF land cannot be transferred to private hands without compensation to the fund; and that the SBOE bears a discretionary fiduciary duty of the kind the common law of trusts attaches to ordinary trustees. The body of opinions is substantial — more substantial, in fact, than the corresponding body in Oregon or in many federal-grant states — and it reflects the centrality of the AG’s office to PSF boundary-policing where the courts have largely declined to play that role.

Contemporary Management: Figures, Distributions, and Frontier Transactions

By fiscal year 2024, the Texas Permanent School Fund Corporation reported approximately $56.9 billion in PSF investment assets as of August 31, 2024.⁶³ The State Board of Education reported a combined $2.16 billion PSF-to-ASF contribution for FY 2024 and another scheduled $2.16 billion for FY 2025, including the SBOE distribution plus the School Land Board’s direct contribution to the ASF.⁶⁴ The most recent reporting from the field, by Tonia Day at Advocates for School Trust Lands as of FY 2024, sharpens the operating-side picture: the General Land Office generated $1,630,030,661 from school trust lands in FY 2024 — oil and gas the largest line, followed by surface uses and minerals — and the total weighted return on all PSF investments for FY 2024 was 7.31 percent, among the highest reported by any U.S. school-trust fund that year.⁶⁵ Day frames Texas as the country’s leading exemplar of the “save-don’t-spend” model of trust management — the principle that states which invest all school-land revenue in the permanent corpus, rather than skimming current-year proceeds for operating support, generate materially greater long-run returns to schools.⁶⁶ More recent reporting describes total PSF assets in the $67 billion range, with a record $4.8 billion biennial distribution authorized for the 2026–2027 biennium.⁶⁷ The General Land Office portfolio includes approximately 768,000 surface acres and roughly 13 million mineral acres across the state, including significant Permian Basin oil-and-gas acreage that remains the dominant revenue driver on the real-asset side.⁶⁸ The Available School Fund flows to the per-capita apportionment, distributed to Texas school districts on a per-student basis, and to the Instructional Materials Allotment, which purchases textbooks and instructional materials for all Texas public schools — a distribution architecture that, unlike Oregon’s offset-against-general-fund formula, supplements rather than substitutes for legislative appropriations.

Two recent transactions on the GLO side have drawn attention beyond the routine portfolio reporting. In late 2024, the GLO announced what was reported as the largest carbon sequestration lease in U.S. history, an agreement with ExxonMobil covering 271,068 acres of offshore submerged land. Combined with six other carbon-capture-and-sequestration leases awarded in 2023, the program is estimated to produce $10 billion for the PSF over thirty years — a frontier shift in the fund’s revenue mix from traditional oil-and-gas extraction toward energy-transition land-use revenue.⁶⁹

In October 2024, the GLO acquired a 1,402-acre ranch in Starr County along the Rio Grande. While the GLO described the land as a future source of agricultural revenue for the PSF, the primary stated purpose was the construction of a 1.5-mile fortified border wall, and Commissioner Buckingham subsequently offered the land to the federal government for use as a deportation facility.⁷⁰ The transaction is contested in the secondary literature on fiduciary grounds: traditionalist trust analysts argue that border security is a general government function that should be paid for at market rates rather than subsidized by trust resources, and that the acquisition therefore represents a potential conversion of trust use without a clear market-rate compensation flow back to the fund. The transaction is recent enough that there is no developed legal record on it; it is flagged here as a contemporary point of contention rather than a settled finding.

Finally, the Texas PSF has been at the center of state-federal tension over ESG (Environmental, Social, and Governance) investment standards. Texas Senate Bill 13 (2021) required the PSF to divest from financial companies that “boycott” energy companies. In late 2024, a federal district court permanently enjoined enforcement of SB 13, holding that the statute’s “ideological classifications” impermissibly burdened protected speech and were unconstitutionally vague.⁷¹ The ruling is significant because it underscores that the “Prudent Person” fiduciary duty to preserve and grow the corpus cannot be lightly overridden by political divestment mandates — an enforcement of fiduciary primacy that is consistent with the broader pattern of AG opinions policing PSF boundary integrity.

Texas in the Encyclopedia’s Argumentative Spine

Texas’s contribution to the encyclopedia’s argumentative spine is structural. The white paper’s claim — that the federal floor matters less than the secondary literature suggests, and that architecture plus constituency, more than the precise text of the federal admission act, determines outcome — finds its cleanest positive case in Texas.

The federal floor is, in Texas, entirely absent. There is no Section 16, no Section 36, no enabling-act trust language, no compact-trust doctrine reaching the Texas PSF, no federal AG enforcement authority. The doctrinal architecture that disciplines the New Mexico, Arizona, Idaho, and Oregon trusts simply does not apply. And yet Texas has built, through 180 years of state-constitutional commitment, alternate-section reservations, mineral dedication, and disciplined investment management, the largest school endowment in the United States — larger than every U.S. private university endowment individually, larger than the New Mexico Land Grant Permanent Fund by a factor of two, and operating a bond guarantee program no other state could begin to replicate. Architecture and constituency, in Texas, did the work that the federal floor does elsewhere. The 1876 Constitution constructed in state law every fiduciary feature that the 1910 New Mexico-Arizona Enabling Act would later construct in federal law for those states. The dual-trustee structure — SBOE plus GLO Commissioner, both constitutionally established and statewide elected — created two constituencies of accountability without relying on federal supervision. The Attorney General’s opinions policed the corpus boundary in lieu of the federal compact-trust enforcement that protects Lassen-state funds.

That Texas can do this should temper the pessimism that the encyclopedia’s federal-floor analysis sometimes invites. Federal admission-act text is helpful but not necessary. What is necessary is constitutionalized architecture — corpus, beneficiary class, fiduciary, segregation, perpetuity — combined with sufficient constituency interest to enforce the architecture across generations. Texas had both. Most of the original thirteen had neither, and built no comparable endowment. Oregon had the architecture but, by the time of the Elliott decoupling in 2017–22, was operating with a constituency too diffuse to defend the architecture from directed seizure. The Texas case demonstrates that the ceiling on a state’s school-trust performance is not set by federal text. It is set by what the state’s constitution does, and by who shows up to enforce it.

The ceiling on a state’s school-trust performance is not set by federal text. It is set by what the state’s constitution does, and by who shows up to enforce it.

From the encyclopedia entry for Texas

The asymmetry is also worth holding. Texas built the largest endowment in the country, and Texas has produced almost no trust-enforcement litigation. The two facts may be related: a fund that is large, conservatively managed, and politically undisputed has less litigation than a fund that is contested. Or they may simply reflect the Texas channel for school-finance grievance, which has flowed through Section 1 Edgewood litigation rather than Section 2/5 corpus litigation. Either way, the absence of a Texas Lassen — and the absence, so far, of a beneficiary-led trust-breach action against the SBOE or the GLO — leaves a doctrinal opening that the encyclopedia should mark. If the day comes that a Texas school district or schoolchildren’s coalition mounts a Section 2/5 trust-enforcement action against the SBOE, the GLO, or the State of Texas as trustee, the doctrinal architecture is in place to support it. The 1876 Constitution, the AG opinions, and the Standard v. Sadler–Durham fiduciary line would all be available. What has been missing is not the law. It has been the lawsuit.

Footnotes

Admission #28 (Dec. 29, 1845). Era: State-derived (annexation by joint resolution; retained own public domain). Draft: Pass 1, 2026-04-30.

Texas is the library’s anchor case for a deceptively simple proposition: a state can refuse a federal school-land grant and still build the largest school endowment in the United States. As of fiscal year 2024, the Texas Permanent School Fund held investment assets of approximately $56.9 billion, with mineral and surface acreage valued at several billion more, and distributed roughly $2.16 billion per year to the Available School Fund.¹ By 2025–26 valuation reporting, the corpus was being described in the $67 billion range, with biennial distributions reaching a record $4.8 billion.² No private American university endowment is larger; the New Mexico Land Grant Permanent Fund, often the runner-up among public-purpose education endowments, is roughly half its size. And every dollar of it is state-derived. There is no Section 16, no Section 36, no “in trust” clause in a federal enabling act, no Congress-conferred fiduciary covenant of the kind that disciplines the New Mexico, Arizona, or Oregon trusts. What Texas has instead is a sovereign reservation, a constitutionalized irreducible fund, two independently elected fiduciaries, and 175 million acres of retained public domain that — over 180 years and through one of the most consequential mineral revolutions in American history — produced an asset base no other state can match. The Texas case is the library’s structural answer to the question “what does a school trust look like when the federal floor is absent?” It looks like a state constitution doing the work that Congress did elsewhere — sometimes well, sometimes poorly, and always with the architecture located entirely in state law.

A state can refuse a federal school-land grant and still build the largest school endowment in the United States.

From the state dossier for Texas

Annexation, Retention, and the Sovereign Reservation

The defining act of Texas school-trust history is the 1845 Joint Resolution for Annexing Texas to the United States.³ Approved by Congress on March 1, 1845, the Joint Resolution did something no admission act before or since has done: it left the public domain of the incoming territory in the hands of the incoming state, on the express condition that those lands be applied first to the Republic’s debts and then disposed of as the new state should direct. The operative paragraph, in the Resolution’s verbatim language, reads:

“Second, said State, when admitted into the Union, after ceding to the United States, all public edifices, fortifications, barracks, ports and harbors, navy and navy-yards, docks, magazines, arms, armaments, and all other property and means pertaining to the public defence belonging to said Republic of Texas, shall retain all the public funds, debts, taxes, and claims of every kind, which may belong to or be due and owing said Republic; and shall also retain all the vacant and unappropriated lands lying within its limits, to be applied to the payment of the debts and liabilities of said Republic of Texas, and the residue of said lands, after discharging said debts and liabilities, to be disposed of as said State may direct; but in no event are said debts and liabilities to become a charge upon the Government of the United States.”⁴

The legal mechanics are unique. In every other public-land state — Ohio, Indiana, Illinois, Missouri, Oregon, Colorado, the Dakotas, the Mountain West — admission to the Union was preceded by federal acquisition of the territory through purchase, treaty, or conquest, followed by congressional creation of a federal public domain, followed by an enabling act granting specified sections back to the new state for the support of common schools. The federal government was the settlor; the state was the trustee; the schoolchildren were the beneficiaries; and Congress retained, at least in theory, an enforcement role through its admission-act compact. The Supreme Court’s decisions in Cooper v. Roberts (1855) and Lassen v. Arizona Highway Department (1967) gave that compact-trust architecture its enforceable character.⁵

In Texas, the federal government was never the settlor. The Republic of Texas — an independent sovereign from 1836 to 1845, recognized by the United States, France, the United Kingdom, and the Netherlands — entered the Union with its own public lands intact, its own debts attached, and its own discretion over disposition reserved. The Republic of Texas formally consented to the annexation terms on July 4, 1845, by ordinance of the Texas Convention.⁶ The Joint Resolution for the Admission of the State of Texas, approved December 29, 1845, completed the transition and admitted Texas as the twenty-eighth state on an “equal footing” with the original states.⁷ But the equal-footing language has always been read in Texas alongside the retained-lands provision: Texas is on equal footing with the original thirteen in part because, like them, it owns its own public domain. The federal government acquired no public lands in Texas at admission, and — apart from later acquisition for federal installations and post offices — it never has.⁸

The historical record on the size of the retained domain is well established: roughly 175 million acres of vacant and unappropriated lands at annexation, of which a substantial fraction would, over the next four decades, become the corpus of the Permanent School Fund.⁹ The Texas Natural Resources Code today preserves the retained-lands principle as a continuing matter of state law.¹⁰ The point worth holding in mind is structural: every other school-trust state in the library inherited its trust from federal land, with federal text supplying the trust’s contours. Texas inherited its trust from itself, with state text supplying the contours. Whether that produces a stronger or weaker fiduciary regime in practice is a question the rest of the entry takes up.

The 1854 Capitalization and the Compromise of 1850

The 1845 Joint Resolution gave Texas the capacity to fund schools from retained lands; it did not, by itself, create a school fund. The first major capitalization of what would become the Permanent School Fund came nine years later, and it came from a transaction that is itself an artifact of Texas’s anomalous statehood.

The Compromise of 1850 settled the boundary disputes that had followed Texas’s admission, particularly Texas’s expansive claims to territory in present-day New Mexico, Colorado, Wyoming, Kansas, and Oklahoma. Under the compromise, Texas relinquished its claims to those lands in exchange for $10 million in United States bonds.¹¹ Approximately $7 million of that sum was used to retire the remaining debt of the Republic of Texas, satisfying the condition the 1845 Joint Resolution had attached to the retained lands. That left $3 million in U.S. bonds in the state’s hands. In January 1854, the Texas Legislature appropriated $2 million of those bonds to a “Special School Fund” — the direct legal precursor of the Permanent School Fund.¹² The first distributions from the Special School Fund reached Texas common schools in 1855, at a rate of approximately $1.21 per school-age child.¹³

The 1854 capitalization is structurally important for two reasons. First, it disposes of the simplest possible reading of Texas’s school-trust history — the claim that the Texas PSF is purely a creature of land sales and mineral royalties from retained domain. The seed corpus was federal bonds, transferred to Texas as consideration for the cession of territorial claims. Second, the 1854 act established the principle that the school fund was an investment fund as well as a land fund. From its inception, the Texas school endowment was a hybrid: it held both real assets (the retained public domain dedicated to education) and financial assets (the U.S. bonds and their interest stream). The hybrid character would, more than 150 years later, become the architectural pivot for the dual-trustee structure the 1876 Constitution institutionalized.

Civil War Erosion and the 1873 Land Dedication

The Civil War subjected the young Special School Fund to the first directed-seizure pressure of its history. After Texas seceded in 1861, the Confederate government identified the school fund’s holdings of U.S. bonds as a potential source of war finance. According to the State Board of Education’s official history, Confederate Secretary of War Judah P. Benjamin proposed cashing the school fund’s U.S. bonds and replacing them with Confederate bonds — a transaction that, had it been completed, would have annihilated the corpus when the Confederacy collapsed.¹⁴ The bond-substitution proposal was never executed, but Texas war boards did access portions of the fund for military finance, and the corpus emerged from the war reduced to approximately $1.8 million.¹⁵ The fund also suffered from widespread defaults on prewar railroad loans that had been issued from PSF capital.¹⁶ The pattern is recognizable: in moments of acute fiscal pressure, school-trust assets are the assets governments reach for first. Margaret Bird’s “directed seizure” frame names the phenomenon; the 1861–65 Texas record is one of the cleaner antebellum examples of it.

The recovery of the fund began under Reconstruction Governor Edmund J. Davis. On March 18, 1873, Davis signed House Bill 283, which dedicated half of the remaining unallocated public domain — approximately 88 million acres at the time — to the school fund.¹⁷ The 1873 statute did two things at once. It restored the corpus on a scale that dwarfed the prewar capitalization. And it established the doctrinal pattern that the 1876 Constitution would three years later constitutionalize: the school fund’s claim on the retained public domain was not a one-time legislative grant but a structural commitment, expressed in fractions of the public domain itself.

The 1876 Constitution: Article VII as the Trust Indenture

The fiduciary architecture of the modern Texas school trust is found in Article VII of the 1876 Constitution, drafted in the wake of Reconstruction and characterized by deep skepticism of centralized authority and an insistence on funding public education through land wealth rather than direct taxation.¹⁸ Article VII, sections 1 through 5, constitute what Gemini Deep Research aptly calls the “trust indenture” of the Texas Permanent School Fund.¹⁹ Each section is worth pinning verbatim because each does specific architectural work.

Section 1 — the Efficiency Clause — places on the Legislature the duty that has become the doctrinal home of the Edgewood line of school-finance litigation:

“A general diffusion of knowledge being essential to the preservation of the liberties and rights of the people, it shall be the duty of the Legislature of the State to establish and make suitable provision for the support and maintenance of an efficient system of public free schools.”²⁰

Section 2 — the Permanent School Fund Clause — establishes the corpus and identifies its sources:

“All funds, lands and other property heretofore set apart and appropriated for the support of public schools; all the alternate sections of land reserved by the State out of grants heretofore made or that may hereafter be made to railroads or other corporations of any nature whatsoever; one half of the public domain of the State; and all sums of money that may come to the State from the sale of any portion of the same, shall constitute a permanent school fund.”²¹

The dedication of “one half of the public domain of the State” to the Permanent School Fund is the largest single dedication of public lands to common schools by any state in the history of the Union. The “alternate sections” provision — which reserved to the PSF the alternate sections of any state land granted to railroads or other corporations — was the institutional mechanism that produced the West Texas and Panhandle “checkerboard” of state-owned sections, and that, far more than any direct sale of school lands, populated the modern PSF land portfolio.²²

Section 3 — the Available School Fund Clause — establishes the distribution account and dedicates one-fourth of the state occupation taxes plus other revenues to it:

“(a) One-fourth of the revenue derived from the State occupation taxes shall be set apart annually for the benefit of the public free schools… (b) It shall be the duty of the State Board of Education to set aside a sufficient amount of available funds to provide free text books for the use of children attending the public free schools of this State… (e) The Legislature shall be authorized to pass laws for the assessment and collection of taxes in all school districts and for the management and control of the public school or schools of such districts….”²³

Section 4 — the Sale and Investment Clause — directs how PSF land sales and the resulting proceeds shall be handled:

“The lands herein set apart to the Permanent School Fund, shall be sold under such regulations, at such times, and on such terms as may be prescribed by law; and the Legislature shall not have power to grant any relief to purchasers thereof. The Comptroller shall invest the proceeds of such sales… as may be directed by the Board of Education herein provided for, in the bonds of the United States, the State of Texas, or counties in said State, or in such other securities, and under such restrictions as may be prescribed by law; and the State shall be responsible for all investments.”²⁴

Three features of Section 4 are worth noting. First, the express provision that the Legislature “shall not have power to grant any relief to purchasers” — a structural anti-rescission provision designed to protect the fund’s title to its land sales. Second, the requirement that the Comptroller invest proceeds, not the Land Commissioner — a separation of trustee functions that became the basis for the SBOE/GLO bifurcation. Third, the express assertion that “the State shall be responsible for all investments” — a state-as-fiduciary clause that, in modern fiduciary doctrine, would be read as a settlor’s confirmation of the trust character of the fund.

Section 5 — the Distribution Clause, as amended in 2003 to authorize total-return distribution — governs the relationship between the PSF and the ASF:

“(a) The permanent school fund consists of all land appropriated for public schools by this constitution or the other laws of this state, other properties belonging to the permanent school fund, and all revenue derived from the land or other properties. The available school fund consists of the distributions made to it from the total return on all investment assets of the permanent school fund…. (b) The expenses of managing permanent school fund land and investments shall be paid by appropriation from the permanent school fund.”²⁵

Section 5, as it stands today, is the product of a long series of amendments — most consequentially the 1983 Bond Guarantee amendment, the 2003 Total Return amendment (HJR 68), and the 2011/2019 amendments adjusting the GLO/School Land Board contribution to the ASF. The Texas Legislative Council maintains a comprehensive amendment history that pins each change to its joint resolution and election date.²⁶

What Article VII accomplishes, taken as a whole, is the construction in state constitutional law of every architectural feature that the Northwest Ordinance, the 1850 Oregon Donation Act, the 1875 Colorado Enabling Act, and the 1910 New Mexico-Arizona Enabling Act constructed in federal law for other states. The corpus is named, dedicated to a beneficiary class (“the children attending the public free schools of this State”), declared perpetual (“permanent school fund”), and segregated from general revenue. The fiduciary is named — the State Board of Education for investment, the Land Commissioner for land. Investment is constrained. The Legislature is barred from rescuing defaulting purchasers. Modern Texas Attorney General opinions read all of this as creating a fund that is constitutionally “nonspendable” except where Article VII expressly authorizes payments.²⁷ The federal compact-trust analogue is absent, but the architectural function is fully discharged in state text.

The Mineral Revolution: Spindletop, House Bill 9, and the Tidelands

The character of the Permanent School Fund shifted decisively in the first half of the twentieth century, from a land-disposal trust into a mineral-production trust. The Spindletop oil discovery of 1901, near Beaumont, opened the Texas petroleum era and made apparent that the alternate-section checkerboard of West Texas, the retained Republic-era public domain, and the submerged lands of the Texas Gulf coast were all potentially mineral-productive in ways that the framers of the 1876 Constitution had not anticipated.²⁸ By the 1930s, Permian Basin production was already shaping the fund.

The decisive twentieth-century legislation was House Bill 9 of 1939. The 46th Legislature dedicated the mineral estate in all riverbeds, lakes, channels, and tidelands to the Permanent School Fund, and created the School Land Board to oversee management of these submerged mineral assets.²⁹ HB 9 was a structural complement to the 1876 alternate-section architecture. Where the alternate-section provision had populated the fund with surface and subsurface acreage on dry land, HB 9 populated it with the submerged mineral estate offshore — a category that had never been formally allocated and that, given the geology of the Texas Gulf Coast, was potentially of enormous value. The School Land Board, as constituted in 1939, became the second of the dual-trustee structure that the 2021 reforms would only partially unify: the SBOE managing financial assets on shore, the GLO Commissioner and the School Land Board managing the land and submerged-mineral portfolios.

The third great mineral-era event was the Tidelands controversy of 1950–1960, which produced the most consequential title litigation in the fund’s history. In United States v. Texas (1950), the Supreme Court initially held that the federal government had paramount rights in Gulf submerged lands beyond the Texas low-water mark, displacing Texas’s claim to a Republic-era three-marine-league boundary.³⁰ The decision was understood by Texas political and educational leadership as a direct threat to the PSF’s mineral base, given the 1939 dedication of submerged minerals to the fund. The 1952 presidential election turned in part on the tidelands question; Eisenhower’s victory was followed in 1953 by the federal Submerged Lands Act, which restored state submerged-land title within statutory boundaries and set the stage for Texas’s three-league claim.³¹ In United States v. Louisiana (1960), the Supreme Court held that Texas — alone among the Gulf states, by virtue of its Republic-era boundary and annexation history — was entitled under the Submerged Lands Act to submerged lands and resources out to three marine leagues from the coast.³² The decision restored the Texas Gulf submerged-mineral estate to state title for domestic purposes, and because the 1939 HB 9 dedication had already locked submerged minerals to the PSF, the recovery flowed directly to the school fund. By 2010, offshore oil and gas royalties had contributed more than $9 billion to the corpus.³³

The Tidelands episode is sometimes described, in Texas political rhetoric, as a federal “theft” of school-fund assets later recovered. The legal record is more nuanced: United States v. Texas was a federal-paramount-rights holding under the Constitution’s Property and Commerce clauses; United States v. Louisiana was an interpretation of the Submerged Lands Act, an act of Congress that re-vested state title where it had previously belonged. For the library’s prose, the episode reads more accurately as a contested sovereign-title loss followed by a partial statutory recovery, with the school fund as the principal beneficiary on both ends.

The Dual-Trustee Architecture and Its 2021 Partial Unification

The Texas dual-trustee structure is one of the most distinctive features of the school-trust landscape in any U.S. state. From 1876 through 2023, the Permanent School Fund was managed by two entirely separate bodies of constitutional fiduciaries.

The State Board of Education (SBOE) — fifteen members elected from single-member territorial districts — held fiduciary responsibility for the financial-asset portfolio: the stocks, bonds, and cash generated from land sales and royalties.³⁴ The Commissioner of the General Land Office — a single statewide elected official — held fiduciary responsibility for the real-asset portfolio: the millions of acres of surface land, mineral interests, and (after 1939) submerged-mineral estates. The School Land Board, established by HB 9 in 1939, sat on the GLO side and managed the real-asset investments and land sales.³⁵ Both the SBOE and the GLO Commissioner are statewide-elected constitutional officers; neither is appointed; neither serves at the pleasure of the Governor. Among public-land and state-derived states, Texas is alone in vesting trust-management authority in two separately-elected constitutional fiduciaries with overlapping but distinct PSF authority.

The dual-trustee architecture had structural advantages and structural costs. On the advantage side, it placed real-asset and financial-asset management in the hands of officers whose qualifications and constituencies were appropriate to their respective portfolios — an SBOE structured around education-policy and investment-policy expertise, and a GLO Commissioner structured around land and resource management. It also created two independent points of political accountability for trust management. On the cost side, it bifurcated the investment function in ways that 21st-century total-return investment management was not designed to accommodate. The 2003 “Cortex Report” and a series of State Auditor reviews found that the bifurcated structure produced coordination friction, reduced asset-allocation flexibility, and limited the SBOE’s ability to hold PSF investment staff fully accountable.³⁶ Tensions sharpened in the early 2000s when the Legislature granted the School Land Board authority to invest royalty revenues directly in real estate and infrastructure rather than transferring them to the SBOE for financial investment, creating two parallel investment silos.³⁷

The 2021 reform — Senate Bill 1232, signed into law in the 87th Legislature — constituted the most significant structural change to the PSF management architecture since 1876. SB 1232 created the Texas Permanent School Fund Corporation, a special-purpose governmental corporation designed to unify management of the fund’s investment assets.³⁸ The Corporation became operational on January 1, 2023, and is governed by a nine-member board comprising five SBOE members, the GLO Commissioner, one expert appointed by the Commissioner, and two experts appointed by the Governor.³⁹ The 2021 reform did not abolish the dual-trustee structure: the GLO retains constitutional authority over the real-asset portfolio (the actual land and mineral titles), and the SBOE retains constitutional authority over distribution to the Available School Fund. What the Corporation does is unify the financial-investment function across what had previously been two parallel investment silos. The 150-year-old management schism is, at the operational level, substantially resolved; at the constitutional level, the dual-trustee architecture remains.

The PSF Bond Guarantee Program

One distinctive use of the Permanent School Fund corpus deserves separate treatment: the Bond Guarantee Program, authorized by a 1983 amendment to Article VII, Section 5.⁴⁰ Under the BGP, the State Board of Education, through the Texas Education Agency, can use the PSF corpus to guarantee bonds issued by Texas school districts. The guarantee converts what would be a district credit risk into a PSF credit risk, allowing participating districts to issue bonds at AAA ratings and at substantially lower interest rates than they could otherwise obtain. The mechanism leverages the corpus without spending it: the PSF does not transfer money to the districts; it stands behind their debt service.

By August 31, 2024, the BGP had guaranteed approximately $125.8 billion in school district and charter district bonds outstanding, certified by the Texas State Auditor.⁴¹ More recent reporting describes total guaranteed debt approaching $144 billion, with annual taxpayer interest savings estimated at approximately $425 million.⁴² The program supports credit enhancement for nearly thirty percent of all municipal debt in Texas. Charter districts, representing roughly 7.86% of the Texas student population, receive a proportional share of BGP capacity.⁴³

The BGP operates within federal tax-arbitrage constraints administered by the Internal Revenue Service. In 2009, after market declines reduced the PSF cost value, the program closed temporarily because outstanding guarantees approached the IRS-determined capacity limit; IRS Notice 2010-5 permitted reopening.⁴⁴ In 2022 and 2023, the program again ran near capacity, denying applications until IRS Notice 2023-39 substantially restored guarantee capacity by aligning the federal limit with current PSF cost value rather than the outdated 2009 reference.⁴⁵ The capacity-constraint episodes are not scandals; they are structural frictions between Texas’s very large endowment and federal tax-arbitrage rules. They are also, however, evidence of how distinctive the BGP is as a use of trust corpus. No other state school trust uses its endowment at this scale to guarantee local-district debt. The mechanism is unique to Texas, and it is structurally enabled by the size of the corpus the 1845 retention and the 1939 mineral dedication produced.

Edgewood, Morath, and the Absent PSF-Trust Enforcement Case

Texas’s legal record on school finance is dominated by a long line of state constitutional litigation under Article VII, Section 1 — the Efficiency Clause — and almost entirely silent on Article VII, Section 2 and Section 5. This asymmetry is one of the more analytically interesting features of the Texas case, and it requires careful framing.

The Edgewood line begins with Edgewood Independent School District v. Kirby (1989), in which the Texas Supreme Court held unanimously that the Texas school-finance system violated the “efficient” requirement of Article VII, Section 1, by producing extreme disparities in per-student spending tied to local property wealth.⁴⁶ Edgewood I was the foundational state-constitutional adequacy/equity ruling for Texas — analogous in posture to the Pennsylvania William Penn School District (2023) decision, the New Jersey Abbott line, and the Kentucky Rose v. Council for Better Education (1989) decision. It triggered three decades of recurring school-finance litigation: Edgewood II, Edgewood III, Edgewood IV, the West Orange-Cove litigation, and ultimately Morath v. Texas Taxpayer & Student Fairness Coalition (2016), in which the Texas Supreme Court held that the post-Edgewood school-finance system met minimum constitutional requirements, ending the modern Edgewood line at the state-supreme-court level and pushing funding-equity advocates back into the legislative arena.⁴⁷

The Edgewood line, however, is not a school-trust line. Plaintiffs sued under Section 1’s efficient-system duty on the Legislature, not under Section 2’s irreducible-fund or Section 5’s distribution architecture. The court’s focus throughout was the adequacy and equity of the overall funding system, not the fiduciary management of the PSF corpus by the SBOE or the GLO. Distinguishing the two lines is essential: Section 1 is a legislative-duty clause, enforceable through challenges to the school-finance formula and recapture system; Sections 2 and 5 are trust-architecture clauses, enforceable (in principle) through challenges to corpus management and distribution.

What is distinctive about Texas is that the second line — the Section 2/5 trust-enforcement line — is essentially absent. There is no Texas analogue to Lassen v. Arizona Highway Department (the 1967 federal-trust-enforcement case for Arizona PSF lands), no Texas analogue to Branson School District RE-82 v. Romer (the 1997 Colorado case where school districts sued to prevent alteration of trust principles), and no Texas analogue to the 2026 Oregon Court of Appeals standing victory in Advocates for School Trust Lands v. State of Oregon. The Texas case that comes closest — State v. Durham (1993) — concerned the Relinquishment Act of 1934 and the fiduciary duty owed by private surface owners acting as state agents in mineral leasing of PSF-derived lands. The Texas Supreme Court held that surface owners owe a fiduciary duty to the state to negotiate the best possible terms for mineral leases, a holding that, while not directly enforcing fiduciary duties on the SBOE or the GLO, established the principle that any actor managing PSF resources is bound by trust duties.⁴⁸

The earlier case law fills in some of the gap. Hogue v. Baker (1898) recognized that, after the 1876 Constitution and related legislation, the remaining public domain was dedicated to education — anchoring the proposition that the PSF corpus is state-derived from retained lands rather than from federal grants.⁴⁹ Cox v. Robison (1912) upheld the Legislature’s authority to reserve minerals in future sales of public school lands, an architectural precedent that enabled the mineral-royalty growth of the twentieth century.⁵⁰ Standard v. Sadler (1964) and its progeny — State v. Standard (1967), Duval Corp. v. Sadler (1966) — defined GLO authority and surface-owner agency in mineral leasing on PSF-derived lands.⁵¹ City of El Paso v. Simmons (1965) upheld Texas legislation limiting reinstatement rights under old public school land purchase contracts against a Contract Clause challenge, providing useful background on long-term PSF sale contracts and title-stabilization interests.⁵² Byers v. Patterson (Tex. App. 2007) more recently synthesized Texas school-land doctrine, explaining that the 1876 Constitution established a perpetual school fund including one-half of the public domain, and that neither the Legislature nor the Commissioner may relinquish sovereign title claims to alleged vacant land without constitutional authority.⁵³

The absence of a beneficiary-led PSF trust-enforcement suit — analogous to the OASTL litigation in Oregon — is itself a finding worth pausing on. Two structural explanations are plausible. The first is that the Texas trust, being purely state-derived, lacks the federal-court jurisdictional hook that public-land states enjoy: no federal compact, no federal AG enforcement role, no Supremacy Clause backing for the trust-character argument. The second is that Texas school districts and their constituencies have, for over a century, channeled their grievances through the Edgewood line — Section 1 adequacy/equity litigation — rather than through Section 2/5 trust-corpus litigation, perhaps because the relief framework was clearer (legislative funding formula adjustments) than it would have been under a trust-breach theory (corpus restoration, fiduciary removal). Whatever the explanation, the result is that Texas’s PSF-trust enforcement has come almost entirely from the Texas Attorney General rather than from the Texas courts.

The Texas Attorney General Opinions: PSF Boundary-Policing

Where the courts have been silent, the Attorney General’s office has filled in. Several modern opinions police the constitutional boundary between corpus and income, between SBOE-managed investment assets and GLO-managed land and mineral assets, and between PSF distributions and general-fund appropriations. Together they constitute Texas’s principal modern doctrinal record of fiduciary boundary-keeping.

Opinion V-839 (1949) construed the then-current Article VII, Section 5 transfer authority and addressed the mechanics required before corpus could be transferred to the Available School Fund — historically important because the 1891 one-percent transfer authority was later repealed by voters in 1964, strengthening the modern irreducibility norm.⁵⁴ Opinion GA-0293 (2005) addressed the constitutional and statutory treatment of PSF management expenses after the 2003 total-return amendment.⁵⁵ Opinion GA-0407 (2006) is the cleanest modern anti-diversion opinion in the Texas record: it concluded that a statute purporting to convey artificially reclaimed submerged lands belonging to the Permanent School Fund without compensation violated Article VII, Section 4, and that the General Land Office could not adopt rules effectuating it.⁵⁶ Opinion GA-0516 (2007) addressed accounting methodology for Article VII, Section 5 distributions.⁵⁷ Opinion GA-0617 (2008) held that the School Land Board could not transfer revenue from PSF lands directly to the Available School Fund, bypassing the constitutional Section 5 distribution process — an important dual-trustee opinion preserving the SBOE’s distribution authority.⁵⁸ Opinion GA-0707 (2009) is the central modern opinion on total-return distributions and the SBOE’s fiduciary role: it concluded that the SBOE determines the methodology for calculating total return; that the Section 5(a)(2) limitation applies annually; that distributions must comply with both the six-percent test and the ten-year total-return test; and that the SBOE is authorized to apply those limits.⁵⁹ Opinion GA-0848 (2011) addressed the SBOE’s authority to pay attorney fees on a contingent basis out of recoveries of PSF corpus.⁶⁰ Opinion GA-0998 (2013) concluded that the SBOE’s discretionary fiduciary investment selections are not subject to State Purchasing Act competitive-bidding requirements.⁶¹ And Opinion KP-0229 (2018) provided the strongest modern confirmation of the perpetual character of the corpus: the Permanent School Fund is nonspendable except for specific distributions and payments authorized by Article VII, Section 5.⁶²

Read together, the AG opinions establish that the PSF is constitutionally locked except where Article VII expressly authorizes payments; that the SBOE and GLO have distinct but constitutionally bounded authorities; that distributions must follow the constitutional formula and cannot be bypassed by either trustee; that PSF land cannot be transferred to private hands without compensation to the fund; and that the SBOE bears a discretionary fiduciary duty of the kind the common law of trusts attaches to ordinary trustees. The body of opinions is substantial — more substantial, in fact, than the corresponding body in Oregon or in many federal-grant states — and it reflects the centrality of the AG’s office to PSF boundary-policing where the courts have largely declined to play that role.

Contemporary Management: Figures, Distributions, and Frontier Transactions

By fiscal year 2024, the Texas Permanent School Fund Corporation reported approximately $56.9 billion in PSF investment assets as of August 31, 2024.⁶³ The State Board of Education reported a combined $2.16 billion PSF-to-ASF contribution for FY 2024 and another scheduled $2.16 billion for FY 2025, including the SBOE distribution plus the School Land Board’s direct contribution to the ASF.⁶⁴ The most recent reporting from the field, by Tonia Day at Advocates for School Trust Lands as of FY 2024, sharpens the operating-side picture: the General Land Office generated $1,630,030,661 from school trust lands in FY 2024 — oil and gas the largest line, followed by surface uses and minerals — and the total weighted return on all PSF investments for FY 2024 was 7.31 percent, among the highest reported by any U.S. school-trust fund that year.⁶⁵ Day frames Texas as the country’s leading exemplar of the “save-don’t-spend” model of trust management — the principle that states which invest all school-land revenue in the permanent corpus, rather than skimming current-year proceeds for operating support, generate materially greater long-run returns to schools.⁶⁶ More recent reporting describes total PSF assets in the $67 billion range, with a record $4.8 billion biennial distribution authorized for the 2026–2027 biennium.⁶⁷ The General Land Office portfolio includes approximately 768,000 surface acres and roughly 13 million mineral acres across the state, including significant Permian Basin oil-and-gas acreage that remains the dominant revenue driver on the real-asset side.⁶⁸ The Available School Fund flows to the per-capita apportionment, distributed to Texas school districts on a per-student basis, and to the Instructional Materials Allotment, which purchases textbooks and instructional materials for all Texas public schools — a distribution architecture that, unlike Oregon’s offset-against-general-fund formula, supplements rather than substitutes for legislative appropriations.

Two recent transactions on the GLO side have drawn attention beyond the routine portfolio reporting. In late 2024, the GLO announced what was reported as the largest carbon sequestration lease in U.S. history, an agreement with ExxonMobil covering 271,068 acres of offshore submerged land. Combined with six other carbon-capture-and-sequestration leases awarded in 2023, the program is estimated to produce $10 billion for the PSF over thirty years — a frontier shift in the fund’s revenue mix from traditional oil-and-gas extraction toward energy-transition land-use revenue.⁶⁹

In October 2024, the GLO acquired a 1,402-acre ranch in Starr County along the Rio Grande. While the GLO described the land as a future source of agricultural revenue for the PSF, the primary stated purpose was the construction of a 1.5-mile fortified border wall, and Commissioner Buckingham subsequently offered the land to the federal government for use as a deportation facility.⁷⁰ The transaction is contested in the secondary literature on fiduciary grounds: traditionalist trust analysts argue that border security is a general government function that should be paid for at market rates rather than subsidized by trust resources, and that the acquisition therefore represents a potential conversion of trust use without a clear market-rate compensation flow back to the fund. The transaction is recent enough that there is no developed legal record on it; it is flagged here as a contemporary point of contention rather than a settled finding.

Finally, the Texas PSF has been at the center of state-federal tension over ESG (Environmental, Social, and Governance) investment standards. Texas Senate Bill 13 (2021) required the PSF to divest from financial companies that “boycott” energy companies. In late 2024, a federal district court permanently enjoined enforcement of SB 13, holding that the statute’s “ideological classifications” impermissibly burdened protected speech and were unconstitutionally vague.⁷¹ The ruling is significant because it underscores that the “Prudent Person” fiduciary duty to preserve and grow the corpus cannot be lightly overridden by political divestment mandates — an enforcement of fiduciary primacy that is consistent with the broader pattern of AG opinions policing PSF boundary integrity.

Texas in the Library’s Argumentative Spine

Texas’s contribution to the library’s argumentative spine is structural. The white paper’s claim — that the federal floor matters less than the secondary literature suggests, and that architecture plus constituency, more than the precise text of the federal admission act, determines outcome — finds its cleanest positive case in Texas.

The federal floor is, in Texas, entirely absent. There is no Section 16, no Section 36, no enabling-act trust language, no compact-trust doctrine reaching the Texas PSF, no federal AG enforcement authority. The doctrinal architecture that disciplines the New Mexico, Arizona, Idaho, and Oregon trusts simply does not apply. And yet Texas has built, through 180 years of state-constitutional commitment, alternate-section reservations, mineral dedication, and disciplined investment management, the largest school endowment in the United States — larger than every U.S. private university endowment individually, larger than the New Mexico Land Grant Permanent Fund by a factor of two, and operating a bond guarantee program no other state could begin to replicate. Architecture and constituency, in Texas, did the work that the federal floor does elsewhere. The 1876 Constitution constructed in state law every fiduciary feature that the 1910 New Mexico-Arizona Enabling Act would later construct in federal law for those states. The dual-trustee structure — SBOE plus GLO Commissioner, both constitutionally established and statewide elected — created two constituencies of accountability without relying on federal supervision. The Attorney General’s opinions policed the corpus boundary in lieu of the federal compact-trust enforcement that protects Lassen-state funds.

That Texas can do this should temper the pessimism that the library’s federal-floor analysis sometimes invites. Federal admission-act text is helpful but not necessary. What is necessary is constitutionalized architecture — corpus, beneficiary class, fiduciary, segregation, perpetuity — combined with sufficient constituency interest to enforce the architecture across generations. Texas had both. Most of the original thirteen had neither, and built no comparable endowment. Oregon had the architecture but, by the time of the Elliott decoupling in 2017–22, was operating with a constituency too diffuse to defend the architecture from directed seizure. The Texas case demonstrates that the ceiling on a state’s school-trust performance is not set by federal text. It is set by what the state’s constitution does, and by who shows up to enforce it.

The ceiling on a state’s school-trust performance is not set by federal text. It is set by what the state’s constitution does, and by who shows up to enforce it.

From the state dossier for Texas

The asymmetry is also worth holding. Texas built the largest endowment in the country, and Texas has produced almost no trust-enforcement litigation. The two facts may be related: a fund that is large, conservatively managed, and politically undisputed has less litigation than a fund that is contested. Or they may simply reflect the Texas channel for school-finance grievance, which has flowed through Section 1 Edgewood litigation rather than Section 2/5 corpus litigation. Either way, the absence of a Texas Lassen — and the absence, so far, of a beneficiary-led trust-breach action against the SBOE or the GLO — leaves a doctrinal opening that the library should mark. If the day comes that a Texas school district or schoolchildren’s coalition mounts a Section 2/5 trust-enforcement action against the SBOE, the GLO, or the State of Texas as trustee, the doctrinal architecture is in place to support it. The 1876 Constitution, the AG opinions, and the Standard v. Sadler–Durham fiduciary line would all be available. What has been missing is not the law. It has been the lawsuit.

Footnotes