UT System Regents Increase Permanent University Fund Distribution

AUSTIN – The distribution from The Permanent University Fund (PUF) was increased from $506.4 million in fiscal year 2011 to $575.5 million for fiscal year 2012 by the Board of Regents of The University of Texas System. The increased distribution amount was based on a distribution rate of 5.50 percent compared to 4.75 percent for the previous year.

The action to increase the payout this year was prompted by a record year of PUF royalty income; solid investment performance by The University of Texas Investment Management Co. (UTIMCO); and the tight state budget environment for the next biennium.  It also reflects the Board’s philosophy of providing eligible academic and health care institutions within the UT and Texas A&M University systems with additional financial assistance when it determines such resources are necessary and available.

“The University of Texas System is very fortunate to have access to the Permanent University Fund, an asset that has been managed carefully and creatively with an eye to the future,” Regents’ Chairman Gene Powell said.  “Because of current leasing activity and increased production, we have a bit more revenue than anticipated and are able to consider a recommended distribution for 2012 that will provide eligible institutions of the UT System and the Texas A&M University System with additional financial resources.”

"We are extremely grateful for the Board's action to commit these additional monies to help advance the education, health care, research and service missions at our institutions," UT System Chancellor Francisco G. Cigarroa, M.D., said.

The increase in the payout rate to 5.50 percent is expected to yield an additional $69.1million for fiscal year 2012.  UT Austin will see an increase of $20.7 million in fiscal year 2012, which will be used to expand services for students and assist in the recruitment and retention of faculty.

The action taken today does not represent a permanent change in the distribution policy.  The UT System Board of Regents will continue to determine the appropriate distribution amount each year.

The Texas Constitution of 1876 established the PUF through the appropriation of land grants previously designated to The University of Texas, as well as an additional 1 million acres.  Another state grant of 1 million acres was made in 1883.  PUF lands, which today consist of more than 2.1 million acres located primarily in West Texas, are managed by the UT System under direction of the Board of Regents.  The lands are managed to produce two income streams: one from oil, gas and mineral interests, and the other from surface interests, such as grazing.

The constitution restricts the income stream from the PUF to be used for the payment of principal and interest on bonds for capital construction at eligible UT System and Texas A&M University System institutions.  Any residual distributions after payment of the debt service on the bonds are used to fund academic excellence programs at UT Austin, Texas A&M University and Prairie View A&M University, as well as oversight responsibilities at the UT System administration.

The constitution directs the UT System Board of Regents to establish a distribution policy that provides stable, inflation-adjusted distributions to the Available University Fund (AUF) and preserves the real value of PUF investments over the long term.

About The University of Texas System

The University of Texas System is one of the nation’s largest higher education systems, with nine academic campuses and six health institutions. The UT System has an annual operating budget of $12.8 billion (FY 2011) including $2.3 billion in sponsored programs funded by federal, state, local and private sources. Preliminary student enrollment exceeded 211,000 in the 2010 academic year. The UT System confers more than one-third of the state's undergraduate degrees and educates nearly three-fourths of the state's health care professionals annually. With more than 68,000 employees, the UT System is one of the largest employers in the state.

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