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Debate on land grant fund divides lawmakers

SANTA FE – After years of Roundhouse debate, there’s still no clear consensus on how New Mexico’s Land Grant Permanent Fund – and the $15 billion it contains – should be properly used.

Backers of a plan to take more money from the permanent fund and earmark those dollars for home visiting and other early childhood programs say a cash infusion in those programs is needed now, with the state struggling with poverty and a string of high-profile child-abuse cases.

Opponents of the proposal say diverting more dollars from the fund, which gets income primarily from oil and natural gas taxes and investment gains, would stunt the fund’s growth and lead to less money being available for future generations to fund public schools and other basic programs.

Several proposed constitutional changes calling for larger permanent fund distributions have been filed in advance of the legislative session that starts Jan. 17, and proponents are feeling more confident with Democrats having retaken control of the state House and expanded their majority in the Senate.

“I think this is the best chance we’ve had for a long time,” said Rep. Javier Martinez, D-Albuquerque, a primary sponsor on one of the proposals. “I think our ask is very responsible.”

But House Minority Whip Rod Montoya, R-Farmington, said a 2003 change to the permanent fund’s distribution rate pushed by then-Gov. Bill Richarsdon – the rate dropped back down to 5 percent for the current year after being temporarily bumped up to fund a new teacher salary structure – has come back to bite the cash-strapped state in recent lean budget years.

“If we had left it alone several years ago, we wouldn’t be in the trouble we’re in now,” Montoya told the Journal, implying the state would have more revenue available now and in the future if the rate had not been raised.

He also predicted that increased distribution rates for home visiting and other early childhood programs, even if approved, would not lead to immediate improvement in poverty or other child wellbeing measures.

“Literally any benefit to this would be 20 years out,” Montoya said.

Any change to the permanent fund’s distribution rate would have to be approved by a majority of elected members in both the House and Senate and by voters statewide, likely in the 2018 general election, to take effect.

However, the legislation would not have to be approved by Republican Gov. Susana Martinez, since governors don’t have veto power on constitutional amendments.

Some Democrats balk

While Democrats largely support the proposal to increase the annual distribution rate and Republicans largely oppose it, the issue does not break down along strict party lines.

Some moderate Senate Democrats played a pivotal role in stifling similar legislation in previous legislative sessions, and once again are expressing misgivings in the run-up to this year’s 60-day session.

“That’s going to be a hard sell,” said Senate Finance Committee Chairman John Arthur Smith, D-Deming, whose committee could play a key role in the fate of this year’s proposals.

Sen. Carlos Cisneros, D-Questa, the panel’s vice chairman, sounded a similar tone, saying lawmakers’ primary focus should be a projected $69 million budget deficit for the current fiscal year and more difficult budget decisions on tap for next year.

“We’re going to take a very close look at those propositions,” Cisneros said of the permanent fund proposals. “But I think we need to deal with the crisis at hand.”

He also said the Land Grant Permanent Fund – the larger of two state saving funds – was primarily created to provide a funding stream for New Mexicans when the state’s natural and extractive resources run dry.

But it already provides a significant chunk of the state’s budget.

The Land Grant Permanent Fund currently makes annual distributions to public schools, hospitals and other specified beneficiaries. The total payout from the fund for the budget year that starts in July is projected to be a record-high $688 million – or more than 11 percent of the state budget – even at the lower distribution rate.

Without the fund and another state permanent fund that also makes annual distributions, the average New Mexico household would have to chip in an additional $1,100 annually in taxes or current state services would have to be curtailed, according to the State Investment Council, which oversees the investment of the funds.

Meanwhile, general-fund state spending on pre-kindergarten, early literacy, home visiting and other early childhood programs has already increased in recent years, even as the state has struggled with plummeting revenue levels. The state is spending $238 million on such programs in the current fiscal year, up from less than $140 million in the 2012 fiscal year.

Different approaches

The two permanent fund proposals that have been filed so far – more are expected to be introduced in the coming weeks – call for slightly different approaches.

One being pushed by Reps. Martinez and Antonio “Moe” Maestas, D-Albuquerque, calls for an additional 1 percentage-point distribution – or 6 percent total – from the Land Grant Permanent Fund, with the additional funding initially being split between general education spending and early childhood programs.

After a three-year phase-in, the entire amount would eventually be funneled to early childhood programs, though it would flow through the state’s 89 school districts.

The other proposal would increase the yearly distribution rate by 1.5 percentage points. That would amount to roughly $200 million more per year for early childhood programs, based on current distribution levels.

It’s sponsored by Senate Majority Whip Michael Padilla, D-Albuquerque, who also proposed similar legislation in previous years and who said Friday he’d be willing to lower the rate to 1 percent in this year’s legislation in order to make it more palatable.

Padilla said the permanent fund has continued to grow in recent years despite a sharp downturn in oil and natural gas prices, and said a modest increase in the distribution rate would not jeopardize its future health.

He also said targeting more money at early childhood programs could eventually lead to a more qualified state workforce, saying, “It is one of the most proactive economic development tools that we could have.”

In addition, Padilla said he is planning to introduce separate legislation in advance of the 60-day session that would create a new Cabinet-level agency focusing on early education. It would call for existing early childhood duties in the Public Education Department, Children Youth and Families Department and other agencies to be transferred into the new agency.

Funding for the agency would be provided by a tax increase on energy-related sectors and an increase in the yearly distribution rate from the Land Grant Permanent Fund.

Padilla said the proposal is intended to give lawmakers a new, alternative approach to addressing early childhood issues, and said he believes it would help focus the state’s efforts and resources.

“I don’t want to lose another generation of New Mexico children squabbling about how to properly fund early education,” he said.