Monday, 11 June 2018 14:49

A New Idea For NM's Permanent Fund

By Dan McKay / Albuquerque Journal Staff Writer

New Mexico lawmakers have repeatedly debated whether to pull more money out of the state’s largest permanent fund to help pay for early childhood education programs.

But in a legislative meeting Thursday, the state investment officer suggested a different approach.

Why not, he asked, leave the 5 percent distribution alone, but instead earmark a portion of the annual revenue growth that happens anyway?

In other words, New Mexico’s two main permanent funds are already generating more money for the state each year because the size of the funds themselves is growing – a result of investment returns, revenue from oil and gas leases, and other factors that allow the funds to grow like an endowment over time.

That growth in revenue generated by the funds happens even without changing the distribution rates, which are 5 percent for one fund and 4.7 percent for the other.

Investment Officer Steve Moise suggested that instead of just sending the bulk of the new money into the state’s general fund – where it helps pay for public schools – the Legislature could earmark some of the new revenue for a particular purpose, such as early childhood education.

In the coming fiscal year, for example, the Land Grant and Severance Tax permanent funds are expected to distribute about $968 million. But that’s about $69 million more than the previous year – annual growth that occurs without increasing the percentage that’s distributed, according to Moise’s presentation.

Under the current system, the extra $69 million flows into the general fund – where it supports public education – or to other beneficiaries identified by law, such as universities.

It isn’t clear whether legislators are interested in Moise’s idea. But Rep. Tomás Salazar, a Las Vegas Democrat and chairman of the Investments and Pensions Oversight Committee, said the concept deserves more study. “It probably warrants a decent look,” he said in an interview.

The committee, which meets between regular legislative sessions, is just now starting its work for the summer and fall. How to maximize the benefit of New Mexico’s $24 billion in permanent funds has been debated at the Legislature for years. One proposal – passed by the state House before dying in the Senate – would amend the state Constitution and increase annual distributions from the Land Grant Permanent Fund by 1 percentage point, from 5 percent to 6 percent.

The legislation would generate about $150 million a year that would go to school districts and tribes to provide services to children before they reach kindergarten. Another $26 million would go to other beneficiaries of the permanent fund.

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