The oldest and largest of the endowments that bankroll Texas’ public research universities was built into the state constitution to benefit two university systems — and on Wednesday the Senate Committee on Higher Education spent much of its day probing whether that century-old arrangement still distributes the money the right way.
The single interim charge before Chair Paul Bettencourt, R-Houston, asked members to review the distribution methodology for both the Permanent University Fund and the newer Texas University Fund and recommend any needed reforms. The Permanent University Fund, the constitutional heavyweight, drew the larger share of the discussion.
A Legislative Budget Board analyst set the terms. Frank Valdovinos, testifying for the LBB, walked members through the plumbing that converts the fund’s oil-and-gas endowment into spendable dollars. “The Available University Fund, or AUF, consists of revenue from PUF surface income and an annual distribution from total returns on PUF investments,” he told the panel.
And the split is not a matter of policy discretion: “Under the constitution, the AUF appropriations are allocated two-thirds to the UT System and one-third to the Texas A&M System.” That constitutional formula — untouched by the Legislature — is the heart of what the charge set out to examine.
The two systems appeared together to defend the structure and show what it has bought. Testifying for the University of Texas System, one witness thanked members for the chance “to discuss the significant investments the Texas Legislature and the UT System Board of Regents have made in UT institutions,” before walking the committee through a slide deck on how UTIMCO-managed returns flow to campuses.
Robert Albritton, chairman of the Texas A&M University System Board of Regents, presented the A&M side of the ledger. The panel opened with a moment of levity — Bettencourt ribbing the two flagships over who would testify first, one witness quipping about “home court advantage” in the Austin hearing room.
Members pressed for detail on how the money is actually spent once it reaches the systems. In one exchange, Bettencourt asked whether the A&M system could break out, across its component institutions, how much PUF-backed money went to debt service versus programs meant to build “excellence” over the last five years. The witness conceded he did not have that breakdown on hand — “I do not have that breakout in front of me. We have the numbers” — and promised to supply it. The question went to the committee’s central concern: how much of the constitutional endowment’s benefit reaches system institutions beyond the flagships in Austin and College Station.
The governing rules give the systems wide latitude in that distribution. The PUF’s earnings feed the Available University Fund, which is spent first on debt service for construction bonds authorized against the endowment, with the remainder supporting operations and “excellence” at the two flagships — a structure set out in Chapter 66 of the Education Code and in the UT System’s own rules governing use of the AUF. UTIMCO policy caps the annual PUF payout at 7 percent of the fund’s trailing 20-quarter average value, a guardrail meant to preserve the corpus even as the systems draw on it.
The presence of a House member underscored that this is a two-chamber conversation. Bettencourt noted that his “ever present, ever faithful House colleague, Chairman Wilson” — chair of the House Higher Education Committee — planned to “hang with us no matter what,” even though as a House member he could not vote in the Senate hearing. The joint attention signals that any recommendation on the endowments will need buy-in across both chambers before it reaches the floor.
Because the panel met in the interim, it took no vote. Its review will feed recommendations to the 90th Legislature, which convenes in January 2027. The questions members left on the table — whether the two-thirds/one-third split still fits a state with far more research ambitions than it had when the fund was written, and how to measure where the money lands — are the ones a future session would have to answer if it chooses to reopen a formula the constitution has kept fixed for generations.
Also heard
The same charge covered the Texas University Fund, the newer endowment voters created in 2023 to support emerging research universities. Presidents from the University of North Texas and the University of Houston testified on how that fund’s growing distributions are reshaping their campuses.
The hearing at a glance
Issue
Distribution methodology of the Permanent University Fund — the constitutional two-thirds (UT System) / one-third (A&M System) split of the Available University Fund, and whether the benefit reaches beyond the flagships. The larger of the day’s two funds by discussion time.
What happened
Invited testimony from a Legislative Budget Board analyst and from UT and A&M system officials on how PUF earnings are distributed and spent. Interim hearing — no vote on legislation.
When
9:00 AM CT, Wednesday, July 29, 2026 · hearing ran about 3 hours 25 minutes (both funds)
Where
Room E1.028 (Hearing Room), Capitol Extension, Austin
Chair
Sen. Paul Bettencourt, R–Houston (SD-7)
Archived video
senate.texas.gov · vid 22696