A Microsoft Word version of this letter is available for download and PRINTING.

March 11, 2009

To the Administrator Addressed:

This letter serves as notice of temporary closure of the Texas Permanent School Fund (PSF) Bond Guarantee Program (BGP). The recent drop in the markets has lowered the value of the PSF to the point that outstanding guarantees exceed capacity under the federal regulations. There is no risk to the guarantee program itself nor to the tax-exempt status of any school district bonds that have already been sold. 

Because of these circumstances, no bonds will be guaranteed from this point forward until at least September (following a seasonal retirement of bonds in August), including those pending approval in recent months. This restriction includes refunding bonds.  Bonds that are issued to refund bonds that are currently guaranteed by the PSF will not be eligible to receive the guarantee. Districts that choose to refund their bonds that are currently guaranteed must notify the Texas Education Agency when those bonds are refunded.

Districts that have received preliminary approval for the guarantee will not receive final approval to sell their bonds with the PSF guarantee. We had hoped to manage the remaining sales within the reserve capacity, but there is no reserve left at current market prices.

While state law was modified to increase the capacity of the PSF to guarantee bonds in 2007, federal regulations must also be modified to accommodate this change. We have been working with the U.S. Treasury since 2007 in an effort to effect the necessary changes, but we have not yet been successful in resolving this matter.

In closing, the program itself is sound, and any bonds that have already been sold continue to be guaranteed. We will post updates to this information on the BGP website at http://ritter.tea.state.tx.us/school.finance/bond.html.

If you have any questions regarding the BGP, you may contact Cassie Huggins by phone at (512) 463-9232 or by email at Cassie.Huggins@tea.state.tx.us.

Sincerely,

 

Robert Scott
Commissioner of Education

RPS/ldf