NM investment accounts surpass $64 billion, as debate simmers over best use

SANTA FE — New Mexico’s state investment accounts have ballooned to a record-high $64 billion, rekindling a long-running debate about how they should best be put to use.

Amid recent calls to take more money out of the state’s permanent funds for targeted initiatives, the state’s top investment official made the argument Wednesday for leaving current distribution levels in place.

Specifically, State Investment Officer Jon Clark told members of a legislative committee the permanent funds will distribute nearly $2.6 billion in the current budget year — or about $500 million more than last year’s levels.

This year’s distributions make up about 28% of state public school spending and roughly 78% of early childhood spending statewide, according to State Investment Council data.

“Some people incorrectly assume it’s sitting there and not being used,” Clark told members of the interim Investments and Pensions Oversight Committee, referring to the $64 billion in overall assets.

The recent growth of New Mexico’s permanent funds, fueled largely by skyrocketing oil production levels and investments gains, means the state now has the nation’s second-largest sovereign wealth fund. Only Alaska, which provides annual dividend checks to all residents, has a larger such fund, Clark said.

New Mexico’s annual permanent fund distributions, which are projected to increase to nearly $10 billion by 2050 barring any policy changes, provide stability for state lawmakers and could allow for future tax cuts to be enacted, Clark added.

However, the state’s $64 billion-plus portfolio has also caught the attention of some state residents, who argue more should be done to address New Mexico’s chronically high poverty rate and reliance on federal programs like Medicaid.

Democratic gubernatorial candidate Deb Haaland cited the state’s permanent funds during a recent campaign event, while appearing to support increased distribution levels.

“It’s very unbalanced and we need to take money and invest in communities so that they can lift their communities up,” Haaland said during the event, which was posted to a social media account.

But Clark, while not referring to any specific proposals, warned lawmakers against taking large amounts of money out of the permanent funds.

He said taking half of the money — or $32 billion — out of the investment accounts would be “disastrous” for future education spending in New Mexico, citing the compound interest generated by the permanent funds if left untouched.

“We are going to be much more proactive in explaining this,” Clark said during Wednesday’s hearing.

Any changes to New Mexico’s permanent fund distribution levels require the approval of statewide voters. That happened most recently in 2022, when voters overwhelmingly ratified a constitutional amendment increasing distribution levels for early childhood programs.

Meanwhile, the State Investment Council now manages 14 different funds, including two funds created by lawmakers this year — a Medicaid trust fund and a behavioral health trust fund.

The behavioral health trust fund got an initial $100 million start-up infusion from the Legislature, while the Medicaid fund could see its first inflows this fall.

The exact amount flowing into the fund will depend on how much appropriated funding went unspent by state agencies during the budget year that ended in June, Clark said.