When Texas won independence, the republic made claim to approximately 251,579,800 acres of land. Of this area only 26,280,000 acres had been previously disposed of in grants or sales by Spain or Mexico. Thus the Republic of Texas originally claimed a public domain estimated at 225,299,800 acres. There were, or came to be, three general categories of public lands: (1) the unappropriated public domain, which included all the virgin lands owned by the state prior to their disposition or appropriation, (2) the reserved submerged areas, and (3) the appropriated public lands.
In the early days of the republic the unappropriated public domain was considered the chief source of future public revenue. The largest single land transaction made by Texas from the unappropriated public domain was the transfer to the United States in connection with the Compromise of 1850 of an estimated 67,000,000 acres in settlement of the boundary dispute. Texas immediately received $5 million in United States five percent bonds, and after five years of negotiations over the extent of the state’s debt, Congress appropriated $7,750,000 to be prorated among individuals who held Texas’s debt. Texas and the state’s debt holders thus received a total of $12,750,000 from the United States to settle boundary issues in the 1850s.
This vast acreage conceded by Texas in 1850 became parts of New Mexico, Kansas, Colorado, and Wyoming. The transaction not only settled a burdensome state debt inherited from the republic, but also left Texas, unique among the states, with full control over her public domain. Before and after this transaction attempts were made to sell lands to obtain revenue, but the results were disappointing. Between 1835 and 1942 only slightly more than 55,000,000 acres, including then appropriated lands, was sold. The total direct and indirect revenue received from the public domain according to the best available records during that period was $201,909,977.05. Simultaneously, a policy of lavish land grants for social purposes was avidly pursued. Approximately 86,570,733 acres, more than half the present area of Texas, was given away outright. Of these land donations, the Republic of Texas gave away 41,570,733 acres and the state donated 44,457,370 acres. By the end of the nineteenth century no unappropriated public domain remained in the state of Texas, but the lands held in the reserved area and the unsold residue of the appropriated public domain left the government still the largest landed proprietor in the state.
The reserved submerged area is composed of the beds of navigable rivers and lakes and the submerged coastal areas, which are permanently reserved to the state, with the minerals appropriated to the Permanent School Fund. The annual receipts derived from the submerged areas alone often exceed the average yearly revenue obtained from the unappropriated public lands during the years they were on sale. The United States Supreme Court in 1950 decreed federal ownership of the land in the Gulf of Mexico lying between the three-mile and three-league limits off the Texas coast. This area, comprising an estimated 1,878,394 acres, was "returned" to Texas by a congressional act on May 23, 1953, and the Supreme Court finally confirmed state ownership of the area in a new court case on December 12, 1960. The estimated off-shore portion of the reserved area, including beach areas, islands, land beneath bays and inlets, and submerged lands to the three-league limit, is 4,045,000 acres. The total appropriation from the public domain to the public school fund, as of 1964, amounted to 42,561,400 acres.
The appropriated public domain is composed of all lands set apart for the public schools, the University of Texas System, and the eleemosynary institutions. Texas appropriated to these institutions 51,921,519 acres, an area equal to about 30 percent of the total area of the state. Even though these lands were dedicated to the endowment of public education, interests on them were frequently sacrificed to the social policy of encouraging home ownership. Except for the 2,109,000 acres of unsold university lands and some scattered tracts of school lands, the appropriated public domain has disappeared. Proceeds from the sale of this land have gone into the respective permanent funds of the institutions to which the lands were appropriated. Mineral leases and royalties have also augmented the permanent funds. The leasing of unsold appropriated lands has been a regular state policy since 1883; grazing rental accrues annually to the available funds of the various institutions. Ironically, in the 1940s the all-but-vanished public lands were yielding more in rents, mineral rights, and royalties than in the heyday of public-land sales.
In 1992 the approximate book value of the Permanent University Fund stood at around $3.65 billion while the Permanent School Fund exceeded $7.9 billion.