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Editorial: Don’t tap permanent fund without a plan for millions

Every year, there is a move to tap the Land Grant Permanent Fund for early childhood programs. January 2016 will bring the latest – a resurrected proposal by Democrats and a coalition of 40 groups to take an additional $160 million a year out of the $15 billion fund.

Rep. Javier Martinez, D-Albuquerque, says “we have been advocating for this legislation for five years” to combat the fact “our children continue to enter kindergarten underprepared, and child well-being in New Mexico is one of the worst in the nation.”

It is a heartfelt plea that could resonate with voters should the bill make it through the session to the November ballot. Yet even a heartfelt plea needs a well defined plan with accountability measures. To date this plan starts and ends with taking millions of dollars out of a fund the state relies on to keep its public schools and universities running.

The fund already pays out hundreds of millions of dollars each year for education programs – but New Mexico has yet to have more than half of its students proficient in math or reading, or graduate more than seven out of 10 of its students on time. In the private sector that’s diplomatically called a poor return on investment.

So throwing another $160 million a year on top of the record $2.75 billion the state spent on K-12 public schools and early childhood programs this last budget year should give folks who have to work for a living, pay their bills and balance a checkbook real concern that it go toward data-driven, results-monitored programs that will actually improve the situations New Mexico’s poorest residents are born into.

And even with a solid spending plan, there are fiscal conservatives who say it’s just too much money to take out of the fund and threatens its corpus. State Sen. John Arthur Smith, a Deming Democrat and chairman of the powerful Legislative Finance Committee, says it’s not about the merits of any proposal but about taking so much out that it “would put us in a dangerous position.” Smith also notes New Mexico has made significant increases in the amount spent on early childhood programs but that simply “throwing money at it is not exactly the right thing to do with any program.”

The Land Grant Permanent Fund gets its revenue from royalties from oil and natural gas production and other income from land conveyed to the state by the federal government. And while Martinez opines that “the fund has survived a stock market crash, drop in oil prices and has grown by $4 billion,” gasoline prices are now well under $2 a gallon and even a fiscal optimist has to admit that without careful guidance, nothing lasts forever.

The state’s other so-called “permanent” funds offer a cautionary tale: the state diverts 95 percent of the Severance Tax Permanent Fund before it even hits the account – and that should concern Rep. Martinez and his 40 groups because this fund pays for public school operation budgets. Then there’s the Tobacco Settlement Fund, a perennial target for general fund concerns that have nothing to do with smoking’s impact (like the lottery scholarship), and the Water Trust Fund, which has not had revenue since 2008 but spends $4 million a year on infrastructure and “faces certain depletion.”

As a lawmaker, Martinez should school his 40 groups on the fact that the Land Grant Permanent Fund is NOT a “rainy day” fund. It’s a sovereign wealth fund established to provide New Mexico with a meaningful income stream when oil and gas revenues dwindle – either as those finite resources are tapped out or as green energy takes their place.

And he should take a page from Smith and other states and institutions that going 1.5 percent above the current 5.5 percent distribution rate isn’t prudent. The State Investment Council has pointed out that the state of Wyoming’s permanent fund distribution, as well as those of Yale and Texas A&M endowments, are at 5 percent; Columbia is at 4.5 percent.

State lawmakers must approach the funds’ balance sheets as they do their own and protect the corpuses and revenue streams — and voters should demand it. Because if those funds go broke, it will be taxpayers who have to pick up the tabs for all the programs they now fund.

This editorial first appeared in the Albuquerque Journal. It was written by members of the editorial board and is unsigned as it represents the opinion of the newspaper rather than the writers.

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