SANTA FE, N.M. (AP) - Funding for public education will get a nearly $60 million boost next fiscal year from New Mexico’s two major sovereign wealth funds thanks to strong investment results in 2016.
The disbursement from New Mexico’s Land Grant Permanent Fund and Severance Tax Permanent Fund will increase to roughly $896 million during the fiscal year starting July 1, up from $838 million this fiscal year, state Investment Council spokesman Charles Wollmann said.
The increased payout could help offset recent cuts to general fund spending on public education, as policymakers wrestle with a stubborn budget deficit.
In October, the state cut $68 million from annual spending on public schools, and influential lawmakers say more cuts are likely next year if new sources of revenue cannot be found quickly. New Mexico’s oil-dependent economy is reeling from a downturn in energy markets.
Disbursements from the permanent funds are determined at the end of each calendar year based on the funds’ market value, using a five-year average to avoid abrupt changes.
The value of the two funds climbed to nearly $20 billion at the end of the year, with a return on investment of just over 7 percent during 2016, according to preliminary, unaudited results.
“One area where the permanent funds shine is being consistent in delivering benefits for New Mexicans,” Wollmann said. “It’s about $1,000 per household that we save in taxes due to these permanent funds” each year.
The larger fund, the Land Grant Permanent Fund, is supported by royalties from fossil fuel development and mining on state trust lands. The $15 billion fund pays out 5 percent of its value each year, mostly to public schools, as well as universities, hospitals and the state penitentiary.
The fund’s roughly $688 million payout for the coming fiscal year exceeds any previous year.
Democratic state lawmakers have proposed a constitutional amendment that would increase annual distributions from the fund by an additional 1 percent for early childhood education programs.
Approval by a majority of the entire Legislature - not just those casting votes - would send the proposal to a statewide vote in 2018, with or without the governor’s endorsement.
Democrats will hold a majority in both chambers when the Legislature convenes Jan. 17.
Last year, Republican lawmakers blocked a proposed constitutional amendment to increase land grant fund distributions for education. GOP Gov. Susana Martinez has urged lawmakers not to use the fund to resolve the budget deficit.
The distribution rate of the land grant fund is at its lowest level in over a decade, with the sunset of a 2003 constitutional amendment that temporarily boosted funding for education.
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