Dear friends, I strongly urge you to reverse your recommendation on Proposition 9. This amendment, if passed, will allow the state’s school endowment fund to earn higher returns without greater risk, and prevent the state from spending more than the fund earns. It will not, as you suggest ["Endorsements," Aug. 29], affect the equity of the school finance system in any way, because it does not affect how the funds are distributed. Right now, the state can spend every dollar that is earned by the fund from dividends and interest, but cannot spend anything that is earned by the growth in value of the fund’s holdings (capital gains). So, even when the principal of the fund is losing value, the state can keep spending by manipulating the holdings so that the fund receives dividends and interest, which can always be spent. That manipulation reduces the overall growth of the fund by moving money from investments with high earnings to lower-earning investments that just happen to pay out dividends. Proposition 9 would create a spending limit based on the fund’s actual earnings, instead of the amount of dividends and interest. And it would limit spending from the fund to 6% of the fund’s average value, even if the fund has short-term growth that is greater than that. All other Texas state endowments base their spending on total earnings, as do virtually all state and university endowments nationally. The school endowment is restricted only because of language in our constitution that dates from the 1800s, when most of the gains in the fund came from land revenues, which today provide only a small part of those gains. Failure to pass Proposition 9 will continue to keep the $16 billion fund performing below its potential, something our budget and our schools cannot afford.
Scott Hochberg State Representative District 137 (Houston)
[News editor Michael King replies: We welcome Rep. Hochberg's clarification of Proposition 9, which reads in its entirety, "The constitutional amendment relating to the use of income and appreciation of the permanent school fund." Rep. Hochberg's assurance that the amendment will increase school funding while not affecting equity is encouraging. For that reason, we might have endorsed Proposition 9, except that we could not in good conscience endorse a proposition that does not even pretend to tell voters what they are voting for. We encourage our readers to seriously consider Rep. Hochberg's comments when they go to the polls.]