It's Bad When They Won't Take Your Money

by Molly Ivins

How we got into this pickle is a little complicated, but it's part of the ongoing snafu at the Board of Ed.

Here's the political dynamic: On the 15-member elected board for many years now we have had Republicans, we have had Democrats and we have had Others -- the Others being Republicans so far to the right that they have a peculiar effect on their fellow Republicans.

You've heard of people being "radicalized" by some experience like getting beaten up by cops? Well, normal Republicans on the board have a similar reaction after working with Christian-right board members like David Bradley and Bob Offutt -- they often run screaming into the arms of the Democrats. Then Bradley and Offutt accuse them of being liberals.

As Mary Helen Berlanga, a Democratic board member, said with perhaps impolitic frankness to the magazine Pensions and Investments, "You can always count on six weirdo votes." Democrat Will Davis, who has been on the board for 13 years and survived many an earlier weirdo attack unflapped, said genially that he's never seen the board this screwed up: To borrow a phrase from "Alice in Wonderland," "it just gets curiouser and curiouser."

The good news is that the school fund itself is doing jim-dandy. Or at least it was until we were rejected by Richards & Tierney, which is not going to help our rep in financial circles.

The only constitutionally mandated function the board has is to manage the Permanent School Fund -- the money that Texas gets from its public lands, mostly in oil royalties. The 145-year-old fund functions like an endowment for the public schools and is now worth $20 billion.

For most of the state's history, the Permanent School Fund was invested by state civil servants under the board's supervision. But in 1995, the board decided to place some of the fund with outside money managers to see if they could get a better return on investments, which turned out to be a shrewd move. About one-third of the fund is now in the hands of 12 different outside money-management firms, and both the state-managed component and the outside-managed component are doing nicely.

But some of the board members have convinced themselves that at least one of the 12 firms is guilty of shenanigans, and they have raised a perfect storm of accusations, demanding investigations by the Securities and Exchange Commission, the Association for Investment Management and Research, and now the state attorney general's office. They have variously alleged corruption, influence-peddling and cronyism.

So far, there appears to be much smoke and no fire, while the right-wingers are themselves accused of conducting a political vendetta. Oddly enough, the firm that drew the ultra-conservatives' fire was not a low performer -- in fact, it was the fund's best performer.

In September, the Bradley-Offutt faction decided to hire a Chicago firm, Everen Securities Inc., as consultants to evaluate the performance of the 12 outside firms. The only trouble with this genius scheme is that an executive of Everen is himself the subject of an SEC investigation. Offutt said he was not concerned about that federal inquiry of the Everen exec.

Also last month, the board decided to replace its investment consulting firm IAS, whose contract expires at the end of the year, with Richards & Tierney. The consultants advise the board on how much of the money to keep in what kind of investments, balancing risk vs. returns depending on market conditions. But the contract has not been signed, and Richards & Tierney rejected the assignment, saying it is concerned about conflicts and instability on the Board of Ed.

State Sen. Bill Ratliff, chairman of the Senate Education Committee, told the Austin American-Statesman, "Any time your situation is so bad you can't attract the best advisers and consultants, that bodes very seriously for the prospects of good management of that fund."

He also said, "If I were those folks, I would be very nervous about getting embroiled in a situation such as we've had with that board for the last few years and particularly with the Permanent School Fund in the last few months."

Chase Untermeyer of Houston has been chairman of the Board of Ed only since January. He is a longtime associate of the Bush family and was appointed to fill out the term of Republican Jack Christie, who has expressed frustration about the acrimony on the board.

Untermeyer, who says he got accustomed to a lot of flak while serving as President George Bush's appointments director, seems fairly calm about all this, although he says, "If the financial community feels the Permanent School Fund is in flux, that does concern me because it might affect other potential consultants."

The Legislature has not infrequently gotten annoyed with the board over the years, threatening to take away its control over textbooks and curriculum. But the board's authority over the PSF is in the constitution and could be changed only by amendment.

Experience with the Board of Ed shows there's no point in counting on cooler heads to prevail, although the fate of $20 billion in state money should give us some pause. It's all your fault, you know. You people have either not been voting or you've been voting for whackos. Time to pay attention.

At least they haven't outlawed the teaching of evolution. Yet.