DALLAS -- The Texas Permanent School Fund, which backs school bond debt in the state, achieved a record high market value of $29 billion at the end of 2013, officials said.

The PSF, which also posted the highest return of any major Texas state investment fund for the fiscal year, has grown from $18 billion five years earlier.

The fund, administered by the Texas Education Agency, is the second largest educational endowment in the country and distributes money annually to help pay a portion of education costs in each school district in Texas. It also provides a guarantee for bonds issued by local school districts.

The fund's AAA bond rating allows qualified districts to pay lower interest when issuing debt. At the end of 2013, the fund's assets guaranteed $55.2 billion in bonds for 810 districts.

For fiscal year 2013, which ended Aug. 31, the fund earned a return of 10.16%. It was also the best performing major state fund over a three-year period ending on Aug. 31, with an 11.07% return.

Pat Hardy, chair of the State Board of Education's Committee on School Finance/Permanent School Fund, called 2013 a "golden year" for the fund with "top-of-the-line" returns from a diverse portfolio that translated into good news for public schools.

During the 2012-2013 biennium, the fund distributed more than $2 billion to the schools and has distributed more than $23 billion to the schools since 1960.

The Texas Constitution of 1876 set aside half of Texas' remaining public lands to establish a Permanent School Fund to help finance public schools.

Legislators intended for the land to be sold and the proceeds be deposited into the PSF. Deposits to the PSF would be an inexhaustible source of revenue because only interest income from the fund could be spent and would be apportioned among the state's public schools.

The Texas Land Office is responsible for managing the lands, including sales, trades, leases and improvements, as well as administration of contracts, mineral royalty rates, and other transactions. The lands generate revenues primarily through oil and gas revenues, but also through land sales and leases for surface uses.

Interest earned on the PSF investments is distributed by the State Board of Education to every school district in Texas on a per-pupil basis.

Beginning in 2005, the Land Office was given the authority to invest in real estate using proceeds received from the sale of PSF lands and revenue from PSF mineral leases and royalties. Professional fund management firms oversee the funds on behalf of the Texas Education Agency.

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