DALLAS - Texas will use most of the nearly $2 billion of stabilization funds it expects to get soon for schools under the federal stimulus plan to pay for education-related expenses that normally would be footed by the state's Permanent School Fund.

The Legislature appropriated $1.38 billion of the stabilization funds in the 2010-11 budget to pay for expenses, such as textbooks, that normally are funded through the PSF. Due to investment losses, the PSF - which also provides a triple-A rated wrap for school bond issues - doesn't have the resources to pay for those expenses, according to Lisa Dawn-Fisher, director of school finance for the Texas Education Agency.

Its bond guarantee program has been suspended as well. In March, the TEA suspended the bond guarantee program for the state's more than 1,200 school districts, citing the declining value of the fund.

Joe Wisnoski, an associate with Austin-based school-consulting firm Moak, Casey & Associates, said the state's constitution prohibits using the federal funds to increase the PSF's capacity to back bonds, but the stabilization money should help plug some shortfalls in general operations.

"This prevents the state from taking more funds from the PSF as the Legislature was putting the budget together, but it's really a moot point because they can't do that anyway because the constitution prohibits it," he said.

Jon Graswich, chief financial office of Northwest Independent School District outside Fort Worth, said the federal funds are a good thing in terms of providing raises for teachers and increasing the level of funding per student that districts receive from the state.

"But the issue for the Legislature becomes, what are they going to do next time when the stabilization funds aren't there?" he said.

The most recent regular session of the Legislature adjourned June 1. The Legislature meets for 140 days every two years, as per the state constitution.

Overall, Texas anticipates receiving nearly $3.25 billion in stabilization funds for education, in addition to the $1.7 billion of federal education stimulus funds already allocated to the state.

Districts have to apply to the TEA to receive the stabilization funds, and the state agency expects the funds to start reaching districts Sept. 1, which is the beginning of the state's fiscal year.

Texas also plans to apply for another $1 billion in stabilization funds later this fall.

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