The University of Texas System
The Texas A&M University System
UT El Paso
UT Permian Basin
UT San Antonio
UT Southwestern Medical Center at Dallas
UT Medical Branch at Galveston
UT Health Science Center at Houston
UT Health Science Center at San Antonio
UT M. D. Anderson Cancer Center
UT Health Center at Tyler
Prairie View A&M University
Tarleton State University
Texas A&M University
Texas A&M at Galveston
The Texas A&M University Health Science Center
Texas Agricultural Experiment Station
Texas Agricultural Extension Service - Texas Cooperative Extension
Texas Engineering Experiment Station
Texas Engineering Extension Service
Texas Forest Service
Texas Transportation Institute
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The Permanent University Fund (PUF) is a public endowment contributing to the support of 18 institutions and 6 agencies in The University of Texas System (UT System) and The Texas A&M University System (TAMU System). 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 one million acres. Another state grant of one million acres was made in 1883.
PUF Lands, which today consist of more than 2.1 million acres in 24 counties primarily in West Texas, are managed by the UT System under the direction of its Board of Regents. In administrating PUF Lands, the UT System's mission is to generate income and apply intensive conservation measures to maintain and/or improve the productivity of the lands for the benefit of the PUF. In keeping with this purpose, the lands are managed to produce two streams of income: one from oil, gas, and mineral interests, and the other from surface interests such as grazing.
Surface acreage of the sparsely populated PUF Lands has been leased primarily for grazing and easements for power lines and pipelines. As mandated by the Constitution, all surface lease income is deposited in the Available University Fund (AUF). Mineral income generated by PUF Lands consists primarily of bonuses and rentals from the periodic sale of mineral leases and royalties on gross revenues from oil, gas, and sulpher production. The Constitution requires that all income from the sale of PUF Lands and leasing of mineral interests be retained within the PUF and invested in PUF Investments.
PUF Investments ($6,738.3 million)
PUF funds are invested in a broadly diversified portfolio including equity, fixed income, and absolute return investments. Distributions from PUF Investments to the AUF are allocated two-thirds for the benefit of eligible institutions of the UT System and one-third for the benefit of eligible institutions of the TAMU System. PUF distributions paid to the AUF are expended by each university system to fund two major programs as follows:
Debt Service on PUF Bonds Issued to Fund Capital Expenditures
The Constitution authorizes the UT Board and the A&M Board to issue bonds (PUF bonds) payable from their respective interests in PUF distributions. PUF bonds are issued to finance construction and renovation projects, major library acquisitions, and educational and research equipment at the 18 eligible campuses and six agencies of the UT and TAMU Systems. The UT Board and the A&M Board are constitutionally authorized to issue bonds secured by each system's interest in PUF distributions in an amount not to exceed 20% and 10%, respectively, of the book value of PUF assets at the time of issuance. The $1,069.2 million of outstanding PUF bonds were rated AAA, Aaa and AAA by Fitch IBCA, Moody's Investors Service, Inc., and Standard & Poor's Inc., respectively, as of fiscal year end.
Academic Excellence Programs
PUF distributions, after payment of debt service on PUF bonds, are used to fund academic excellence programs at UT Austin, Texas A&M University, and Prairie View A&M University. Expenditures for excellence programs encompass library enhancements, specialized science and engineering equipment, student counseling services, graduate student fellowships, and National Merit and other scholarships. In combination, these activities enhance the universities' competitive posture as they seek to attract the best scholars in fulfilling their roles as world-class academic and research universities.
PUF Distributions to the AUF
Since 1923, a cumulative $6,008.8 million, or approximately 64.8% of the $9,267.8
million of cumulative investment return generated on PUF Investments, has been
distributed to the AUF in support of the UT System and the TAMU System.
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The distributions to the AUF are determined by the UT Board from the "total return"
on PUF Investments, including income return as well as capital gains (realized
and unrealized). The net income attributable to the surface of the PUF Lands is also distributed
to the AUF. Prior to November 29, 1999, and the amendment of the Constitution,
the amount of distribution to the AUF consisted of all dividends, interest, and
other income of the PUF, including the income attributable to the surface of the
PUF Lands. With the amendment to the Constitution, PUF distributions are not limited
to cash income from PUF Investments, but may now be made from capital gains as
The Constitution directs the UT Board to establish a distribution policy that
provides stable, inflation-adjusted distributions to the AUF and preserves the
real value of the PUF Investments over the long term. To achieve this, the annual
distribution is currently established at 4.75% of the prior 12 quarters' average
net asset value of the PUF Investments, as determined each February 28 for the
following fiscal year.
The distributions to the Available University Fund are subject to the following overriding conditions:
|(1) ||Distributions must be at least equal to the amount needed to pay debt service on PUF Bonds;
|(2) ||Distributions may not increase from the preceding year (except as necessary to pay debt service on PUF bonds) unless the purchasing power of PUF Investments for any rolling 10-year period has been preserved;
|(3) ||Distributions may not exceed 7 percent of the average net fair market value of PUF Investments in any fiscal year, except as necessary to pay debt service on PUF Bonds.
Distributions from the PUF to the AUF increased by 6.7% from $317.1 million in fiscal year 2001 to $338.4 million in fiscal year 2002.