Inside the Capitol

Thursday, February 07, 2013

NM Likes its Permanent Funds


SANTA FE – New Mexico is very fortunate to have two large permanent funds socked away for a rainy day. In the eastern states most land is privately held. By the time the Western states were settled, the government was keeping large chunks for federal, state, county and municipal purposes.
Much is desert land but much is good for grazing or has oil and minerals under it.The revenue from those lands goes into what is sommonly called the State Land Grant Permanent Fund. Each entity gets its share. Public schools get the revenue from sections 2 and 32 of each 36-acre township. Part of that money is then transferred to the aappropriation amounts for the various governmental units.
These funds were helpful in getting schools started as the School for the Visually Handicapped and the Deaf Shool.
Back in the early 1970s, New Mexico was experiencing a very healthy economic boom. Severance taxes from oil and gas companies were flowing in at record rates. The mines near towns such as Santa Rita, Carlsbad and Questa also were doing well.
So the Legislature and Gov. Bruce King created a second permanent fund, which they named the Severance Tax Permanent Fund. Previously severance taxes were used to finance the budget. That fund began growing to a size approaching the original Land Grant Permanent Fund.
As the economy started leveling off in the early 1980s, legislators decided they would begin diverting some of the yearly severance tax receipts into a fund to improve roads, bridges, buildings and other capital needs. The fund still grew from part of the yearly income plus interest on the fund.
The money from this severance tax revenue stream, combined with money from state budget surpluses (which we haven't had much of recently) is then used for what many of us lovingly call pork. Gov. Susana Martinez hasn't been very willing to spend much pork money since the beginning of her term because of the state's poor financial condition.
It appears some state surplus money may be available this year, if revenue projections are correct, strong pressure is expected to be exerted on her to fund projects around the state, partly because it means jobs, especially in the construction industry which has been hit hard since early 1988.
New Mexico apparently likes permanent funds. We created a third permanent fund with the tobacco settlement money we received several years ago. It is used for ongoing cancer research.
New Mexico State University also recently created what it calls a water permanent fund for future use in areas with critical water shortage.
The only problem with permanent funds is how permanent are they? To some, they are similar to an endowment, from which only the interest is drawn. To others, they are a savings account for use only when there is a critical need.
The only way to settle the dichotomy is to specifically spell out the terms in the state constitution.
The state Land Grant Permanent Fund was established through revenue obtained from leasing 13.5 million acres of minerals and 8.8 million acres of surface land.
Why does the state own more mineral rights than surface land? There is an old custom in the West that when people sell land, they retain the mineral rights in case there is a huge pool of oil underneath that can put them on easy street forever.
My father's family were farmers. His father and grandfather owned land in New Mexico, Texas and Oklahoma. Gradually the family sold the land. They always retained the mineral rights. The Texas property was near enough to producing land that oil companies have always been interested enough to occasionally lease it.
They've never hit anything but possibly because of the current interest in energy independence, my cousins and I leased it again today.
Maybe someday I no longer will be an ink-stained wretch.


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