SANTA FE – The amount of money flowing into a New Mexico endowment fund that helps pay for state public school costs slowed to a record-low trickle in the most recent budget year – just $97.18, to be exact.
Also during the 2015 budget year, the Severance Tax Permanent Fund paid out $182.7 million to the state general fund, as part of an annual distribution that’s stipulated by the state Constitution.
The difference between the amount going in and the amount paid out means the State Investment Office had to post solid investment gains just to keep the fund value from decreasing.
“I put that much a month into my kids’ college fund,” Sen. George Muñoz, D-Gallup, said Wednesday, referring to the $97 figure, the smallest amount since the fund’s creation in 1973. “At some point, that number is going to have to go up.”
In fact, legislation enacted this year will gradually increase the dollar flow into the $4.7 billion fund, though some say it’s unclear whether the new law will go far enough.
“Time will tell whether it’s enough of a shift,” State Investment Council spokesman Charles Wollmann told the Journal . “But we think the Legislature took a very prudent step in adopting this bill.”
The Severance Tax Permanent Fund is the smaller of two large state endowment funds – the Land Grant Permanent Fund is the other – that get money from taxes and royalties on oil and natural gas production. The two funds are managed by the State Investment Office and are intended to be a future resource for New Mexico, while also helping bolster state spending levels in the short term.
While the land grant fund has grown steadily in recent years, the severance tax fund has seen more modest growth, in large part due to the small inflows, Wollmann said.
Over the years, a larger and larger portion of state severance tax revenue has been diverted before being deposited into the permanent fund. Up until this year, only about 5 percent of such tax revenue ultimately went into the fund.
The rest of the money is used to pay off state bond projects, including earmarks for infrastructure on tribal lands and in communities along the Mexican border known as colonias.
Muñoz, who is the chairman of the interim Investments and Pensions Oversight Committee, noted some of the money earmarked for those uses has gone unspent for years, saying, “I don’t mind the diversions, as long as they use (the funds).”
This year’s legislation, signed into law by Gov. Susana Martinez in April, will gradually reduce the amount of money set aside for some of those other projects. But roughly 86 percent of the total severance tax revenue collected by the state will still be diverted before flowing into the permanent fund.
Although the Legislature is constitutionally barred from changing the percentage of the yearly distributions – or payouts – without state voters’ approval, lawmakers can control how much tax revenue is deposited into the funds without a statewide vote.