DALLAS - With investment results down dramatically in 2008, the Texas Permanent School Fund may not be able to provide funds for the purchase of textbooks this year, forcing the Legislature to find money elsewhere.

At a brief meeting yesterday, the State Board of Education voted to send letters to all 181 state legislators asking them to buy reading books for elementary school children with general revenue if the PSF comes up short.

The value of the fund, which is made up of stocks, bonds, and other investments, has fallen to about $18 billion after reaching a high of more than $26 billion in fall 2007.

The PSF confers triple-A rated guarantees on bonds for qualifying local school districts, and it also provides a yearly infusion into the Available School Fund that is used to purchase textbooks. This year, the PSF is faltering on both fronts. The fund has reached the limits of its bond capacity, leaving local districts the choice of waiting for it to rebound or to issue on their own credit.

State officials deem it unlikely that the fund will produce the $1.2 billion from the trust that was being counted on to pay for books over the next two years.

Under the Texas Constitution, funds from the PSF are unavailable at certain thresholds.

At the San Angelo Independent School District in West Texas, officials are considering whether to wait for PSF backing to return to levels sufficient to back its $117 million of voter-approved bonds or to proceed on its own A-plus underlying credit from Standard & Poor's.

In the event that all $117 million in bonds were sold without the PSF guarantee, the extra cost to the district could be as much as $15 million over the life of the bonds, according to district estimates.

Tracy Hoake, chief financial officer at the Round Rock Independent School District north of Austin, said school officials are concerned that using general revenues for the textbooks could hurt other programs, such as plans to begin state funding for pre-kindergarten.

"We also need some money to cover inflation," she said.

The State Board of Education is awaiting an opinion from the attorney general's office on whether the board can delay ASF payments until the value of the fund improves. That opinion may not come for weeks, however.

Lieut. Gov. David Dewhurst and other legislative leaders have said they will consider some funding for textbooks should the PSF not regain value later this year.

Meanwhile, the board set the rate of transfer from the PSF to the ASF at 2.5%, a procedure that is required before the opening of the state legislative session, held every two years in odd-numbered years.

The legislative session opened at noon yesterday and the House quickly elected Rep. Joe Straus, R-San Antonio, to replace Speaker Tom Craddick, R-Midland, who has held the post for the past six years.

Coming just 11 days after Straus made his move to gather signatures, the vote was unanimous.

Straus urged collaboration as the key to success in the legislative session.

"The Texas House of Representatives cannot conduct the people's business if it is divided," he said in a prepared statement. "And this is why I became a candidate for speaker."

"We will create an atmosphere where everyone's voice can and should be heard," he said. "A place where we respect each other's points of view - Democrat and Republican, urban and rural, liberal and conservative."

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