DALLAS - The abrupt resignation of a University of Texas regent overseeing investments for the state's Permanent University Fund has become an issue in the political battle between Gov. Rick Perry and his presumed 2010 primary challenger, U.S. Sen. Kay Bailey Hutchison.
Robert Rowling, chairman of the University of Texas Investment Management Co., reacted to questioning from lawmakers about $3.4 million in bonuses to key executives last week by declaring he was quitting as UTIMCO chairman and as a UT regent.
On Tuesday, state Sen. Roger Ogden, R-Bryan, chairman of the Senate Finance Committee, called on the state's universities to explain how they determine bonuses, saying the system was "under the radar" and "we need to get it surfaced."
Perry, who can fill both of Rowling's former positions through appointment, came under attack from Hutchison for a letter criticizing the bonuses he and Lieut. Gov. David Dewhurst wrote to Rowling on the eve of his appearance before the state Senate Finance Committee. Hutchison told reporters in Austin that Rowling was "set up" because he supported her for governor.
Perry, in turn, denounced Hutchison for seeking the governor's office instead of tending to her Senate duties on the federal stimulus bill. Perry and Hutchison, both Republicans, opposed the stimulus bill, but Perry has denounced the "bailout" and tried to link Hutchison to the Democratic proposal.
In the letter, Perry and Dewhurst wrote that UTIMCO's awarding of bonuses at a time when investments in the Permanent University Fund had fallen dramatically was "irresponsible given the financial crisis that is spreading across our nation."
After receiving the letter from Perry, Rowling was sharply questioned about $3.38 million in bonuses to UTIMCO staff members, including a $1 million payout to chief executive Bruce Zimmerman.
Zimmerman also was grilled by lawmakers.
In response to comments from Sen. Kevin Eltife, R-Tyler, that the bonuses were "shameful," Rowling said: "You can have my job - I resign. I'm out of here," according to various news reports.
Following up in a letter of resignation to Perry and Dewhurst, Rowling explained that the bonuses were earned for investment results before the collapse of the financial and oil markets but were not paid until November.
The PUF, derived from royalties on oil-producing property in West Texas and invested in a portfolio of securities and other holdings, fell about 23%, or $3.7 billion, from Aug. 31, 2007, to Oct. 31, 2008, to about $8.8 billion, the lowest level since August 2004. However, the decline was in line with or slightly better than those of other endowments.
"You have characterized the payments as 'irresponsible' and 'hardly defensible,' " Rowling wrote to Perry and Dewhurst. "I completely disagree. It would be irresponsible and shameful to commit to an agreement with employees and then turn your back on the agreement. All of the nine UTIMCO directors (who volunteer countless hours and care about our state) voted for the payments.
"Watching the way Mr. Zimmerman was treated at this morning's hearing truly does meet the definition of 'shameful.' In the current environment, I do not know why any rational person would volunteer their time to serve."
UTIMCO is a nonprofit that has been managing investments for the University of Texas Board of Regents and the Permanent University Fund since 1996. The PUF backs bonds for the UT and Texas A&M systems and provides annual distributions to the universities based on a percentage of the fund's value. Perry appointed Rowling as UTIMCO chairman in 2004.
