Texas has once more made national headlines for politicizing investment decisions after the Chair of the Texas State Board of Education (SBOE) made an investment move jeopardizing hundreds of millions of dollars in returns for Texas’ public schools.
Last week, SBOE Chairman Aaron Kinsey announced that he sent a letter on behalf of the Texas Permanent School Fund (PSF) notifying BlackRock, the largest asset manager in the world, of its intent to divest $8.5 billion in assets that BlackRock currently manages for the Texas public school system.
In a statement, SBOE Chair Aaron Kinsey said that the agreement between the PSF and BlackRock was not in compliance with Senate Bill 13, Texas’ 2021 bill that prohibited state investments in companies that allegedly boycott energy companies. The investments from which Kinsey claimed to be divesting in the name of complying with the law are not actually required to be divested since they are not direct holdings, however.
Nevertheless, Kinsey commented, “BlackRock’s dominant and persistent leadership in the ESG movement immeasurably damages our state’s oil and gas economy and the very companies that generate revenues for our PSF.” This claim that does not add up given the investment manager’s continued investment of more than $100 billion in Texas’ publicly traded oil and gas companies, as well as the high profile event earlier this year in Austin led by BlackRock that convened investors for Texas’ energy grid.
Despite claiming to be acting in his fiduciary duty, it does not appear Kinsey even consulted all of the SBOE members before making such a drastic decision. Republican board member Pat Hardy, claimed she was “unaware of any decision to divest from BlackRock.”
Other SBOE board members who seemed to be aware of the decision to divest from BlackRock were telling a drastically different story than Aaron Kinsey did in his press release and interview on Fox Business. Rather than accusing BlackRock of being hostile to the oil and gas industry as justification for the divestment, Republican board member Tom Maynard said the decision was made to “reduce risk.”
Maynard’s explanation also raises eyebrows given BlackRock’s response that its management of funds outperformed PSF’s own investment benchmark and generated approximately a quarter of a billion dollars for Texas schools.
These drastically different stories trying to justify the divestment undermines the legitimacy of any actual process the SBOE followed to make such a decision. When Chairman Kinsey—who was elected to support Texas public schools—appears to play politics with the investments that fund public schools in the state, it is fair to question whether he may be leveraging the Permanent School Fund to garner attention in pursuit of a higher office.
This decision will impact public school funding for decades, considering the gains that the school funds have been making until now. Performance matters. Politicization of education is bad all the way around and often has consequences. Now, it is Texas students’ who are likely to suffer thanks to politically motivated members of the State Board of Education.
