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Texas Board Halts Guarantees of Bonds

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The Texas state board of education said last week the continuing economic downturn is causing it to halt the school bond-guarantee program until at least September.

The program helped lower interest costs on school construction projects, but the board said the program is at capacity now. There is no risk to the guarantee program itself, officials said, nor to the tax-exempt status of any school district bonds that have already been sold.

In December, the state announced it was temporarily suspending the program, which it has provided for 25 years. At that time, the Texas Education Agency said that school bonds could again be guaranteed as soon as January, depending on the market.

But as the economy has fallen, the Permanent School Fund’s value has also plummeted, from $26.6 billion in 2007 down to about $17.5 billion now. The diminished value of the funds coupled with the number of districts requesting the bond guarantee have temporarily impaired the state’s ability to back the issuance of school bonds.

Vol. 28, Issue 24, Page 4

Published in Print: March 11, 2009, as Texas Board Halts Guarantees of Bonds
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