Leveling the Playing Field in Texas

The Texas Senate passed a bill last Friday to create a multibillion-dollar endowment to fund Texas’ emerging public research universities.

The endowment, called the Texas University Fund, is the realization of over a decade of negotiations. But it took a flurry of college football drama—along with a record budget surplus—to carry it over the goal line and score a win for the state’s less well-funded research institutions.

The endeavor got a big boost in 2021, when the University of Texas at Austin announced that it planned to withdraw from the Big 12 NCAA conference and join the Southeastern Conference by 2025. Fans of UT’s in-state conference rivals—Baylor University, Texas Tech University and Texas Christian University—were outraged, and state lawmakers tried to pass a law to block the move.

Most Popular Stories

Most Popular

Their efforts came to no avail, and in February the Longhorns finalized a severance agreement with their former conference.

One month later, lawmakers introduced the bill to create TUF, a constitutionally enshrined endowment to which no UT campus would have access. That bill has now passed both bodies of the state Legislature, and while it still requires the passage of a constitutional amendment—which Texans will vote on in an as-yet unscheduled statewide referendum—to become law, its supporters are bullish about its prospects.

“It’s amazing what happens when one football team heads to another conference,” Lieutenant Governor Dan Patrick said after the bill passed the State Senate last Tuesday. “$2.5 billion dollars later, here we are.”

The Texas University Fund will primarily benefit four of Texas’ public research universities: Texas Tech, the University of Houston, the University of North Texas and Texas State University. It will start either with $3.5 billion or $4.5 billion, depending on whether the Senate or House version ultimately makes it into the final state budget. (This paragraph has been updated with the correct names of the beneficiaries.)

“The intent is to make these universities more competitive, strong and vital, especially in areas that will be important for regional and state economic development,” said Harrison Keller, the Texas commissioner of higher education.

Keller said that while efforts to create an independent fund for these institutions were years in the making, he could not deny the effect lawmakers’ frustration with the Longhorns’ conference swap had on pushing the bill over the finish line.

But if football was an accelerator, there were more long-standing factors behind the success of the TUF bill—namely, growing resentment over the massive gap in state support between its wealthiest universities, UT and A&M, and all the rest.

“This conversation about equity in funding and boosting emerging research universities has been going on for over a decade among policy makers,” Keller said. “TUF is the most substantial investment in a lasting structure that other campuses can use to be more competitive.”

Spreading the (Oil) Wealth

TUF is the Legislature’s answer to the state’s Permanent University Fund, a nearly 150-year-old endowment made up of the income generated by a vast, 2.1-million-acre land trust across northwest Texas. One-third of the available profits from the PUF goes to the Texas A&M system each year, but the UT system is the primary benefactor; a whole third of the fund is available exclusively to UT Austin, and its other campuses have access to large streams of revenue through the fund’s capital earnings.

When the PUF was created in 1876, most of the land in the original trust was considered largely useless, arid tracts of desert barely fit to lease out for grazing, let alone for more profitable agricultural activity.

A few decades later, that desert—like many across the American Southwest—yielded black gold, and oil wealth flowed into PUF’s coffers. In 1923 alone, the year the Santa Rita oil well was discovered outside Austin, the endowment grew by 445 percent.

Today the PUF is worth over $30 billion, making UT the richest public university system in the country by far. Much of the land sits on the oil-rich Permian Basin, which the state leases to fossil fuel companies to the tune of about $6 million daily as of last year, according to Bloomberg. If trends continue, the endowment is on track to exceed Harvard’s and become the largest of any U.S. higher ed institution, public or private. (This paragraph has been updated to reflect the current value of the PUF.)

Jason Smith, vice president of government relations for the University of Houston system, said oil wealth has allowed UT Austin and Texas A&M to rise into the ranks of the top research universities in the country and become powerful drivers of the state economy. He believes that Houston and other Texas research universities could do the same—if only they had access to even a fraction of UT’s and A&M’s resources.

“I went to [the University of] Houston; I grew up here,” he said. “Understanding the kind of resources [UT and A&M] have over the other systems, this is something graduates, community members and supporters here have been talking about for a long, long time—having some sort of reliable, sustainable resource of our own.”

Of the TUF distributions made each budget cycle, 75 percent would come from a Permanent Endowment for Education; Tech and Houston each would receive one-third of that, with the final one-third split between North Texas and Texas State.

The remaining quarter of the available money would be tied to performance in research, pegged to the amount of federal and private grant money and the number of research doctorates awarded each academic year. Additional institutions outside those four systems could become eligible for that share of the TUF in the future if they meet the research criteria.

If the referendum passes and TUF is enshrined in a new constitutional amendment, the endowment will also have a yearly guaranteed infusion of funding similar to PUF’s—$100 million of the investment income and interest earned on Texas’ rainy day fund, itself largely derived from oil and gas severance taxes.

Kelly Damphousse, president of Texas State University in San Marcos, said the endowment would put TXST's efforts to boost its research output into hyperdrive, funding 150 postdocs and many new faculty positions, and allowing the university to attract and financially support far more doctoral students.

“There’s no reason a state as big and well resourced as Texas shouldn’t have more top research universities,” he said. “We’re striving to be an R-1 institution; right now, we’re R-2 … but whereas before we were moving toward that goal incrementally, this new funding will allow us to move much faster.”

‘Perfect Timing’

It may seem farcical to ascribe meaningful policy impact to football drama like UT’s Big 12 departure. But in Texas, Keller said, it’s hard to separate higher ed policy from gridiron politics.

“It was certainly not a coincidence,” Keller said about the timing of the TUF bill. “Remember, in Texas we organize our universities largely on the basis of historical football rivalries.”

John E. Moore III/Getty Images

It’s not just that football fans are having a hard time dealing with change. Smith said UT’s withdrawal helped generate sympathy among lawmakers who saw the decision as self-serving—especially since one of the TUF institutions, Texas Tech, was “left in the lurch” as the Big 12 conference flounders in the wake of other departures.

“I’d be lying to you if I said that wasn’t a significant factor in moving this conversation forward faster,” he said. “[Lobbying for TUF] has been a strategic process many years in the making, but a lot of things coalesced this session to make this the right time.”

Another factor, Smith said, was the state’s historic budget surplus— itself a product of rising oil and gas prices, but also of an increasingly vibrant state economy and the remnants of federal COVID relief money.

“It’s just perfect timing: the state budget is overflowing, the machine of the state economy is humming,” Damphousse said. “They could have given that surplus money to any number of other parties that were asking for it, but we’re grateful they recognized the impact it could have at our universities.”

“It’s a game changer, not just for Texas State but for the state of Texas,” he added.

A Reckoning to Come?

State lawmakers have tried other methods of boosting R-2 and emerging research universities’ funding. In 2009 they created the National Research Universities Fund, a kind of precursor to TUF, but it was nowhere near as well endowed; last year it doled out only about $50 million to participating institutions, according to The Dallas Morning News. The NRUF’s remaining $900 million will be folded into the TUF.

“We’ve been on this trajectory, and we’ve little by little seen the benefits of this extra state funding,” Smith said. “Now we need an extra boost to get to the next level, and that’s what TUF is going to give us.”

Initially, the TUF would make about $240 million available to the four eligible university systems per two-year budget cycle, Keller said—a significant improvement on the NRUF and other previous funds for emerging research institutions. But the endowment would still be minuscule compared to the revenue that PUF generates—about 10 times smaller.

“I think there’s a growing sentiment among legislators that, gosh, [the PUF] is so big, there’s no good reason why we shouldn’t share it with more universities,” Smith said.

TUF funds would also be less flexible and discretionary than PUF money, Keller said; the money must be used for research or infrastructure and hiring to support research, whereas PUF funds can be invested in capital projects, housing or administrative hiring.

Damphousse said he doesn’t feel envious of PUF, nor concerned that TUF institutions are in competition with UT and A&M. In fact, he said the success of PUF has made other universities’ case for increased state support easier.

“We don’t feel like this is something we’ve been owed. We see it as complementary to PUF in many ways,” he said. “They’ve been so successful that I think legislators see it and say, ‘Hey, if it worked there, why not over here?’”

There’s no bitterness over TUF in Austin, either, according to a UT system spokesperson.

“Texas needs more world-class research institutions, and our state is in a position this year to increase critical support for a number of them,” he wrote in an email to Inside Higher Ed. “We believe the Texas University Fund … [is] the appropriate [mechanism] to do that.”

Smith clarified that Houston is not currently trying to cut into the PUF revenue shared by UT and A&M. But he said some lawmakers and leaders at other universities are calling for just such a reckoning, saying TUF is only the first step.

“I’ve heard discussion in public meetings and debates from other members who have said, ‘I would rather open up and share the PUF with other universities,’” he said. “They’re saying there will be a day when that happens. But today is not that day.”