A new battle over education money
Bill would reverse looming drop in payouts from state permanent fund
SANTA FE — A 2003 constitutional amendment that tapped a New Mexico savings fund to provide additional money for education is scheduled to expire this year, setting up a new debate that pits current classroom funding against future needs.
Some legislators plan to support proposed legislation during the coming 30-day session that would allow New Mexico voters to decide whether to keep the additional money flowing from the state’s largest permanent fund, essentially undoing a sunset clause in the 2003 measure.
Senate Majority Whip Michael Padilla, D-Albuquerque, who is sponsoring the legislation, said allowing the distribution level to drop could cause teacher shortages around
the state and lead to increased classroom sizes.
“It’s just going to turn into a real disaster,” Padilla said in a recent interview.
The $14 billion Land Grant Permanent Fund is paying out nearly $655.8 million for public schools and other beneficiaries in the current budget year — the amount makes up more than 10 percent of the total state budget — but the distribution rate will be trimmed back from 5.5 percent to 5 percent for the fiscal year that starts in July.
The State Investment Council, taking into account projected growth of the fund, estimates the payout for the next fiscal year would fall to about $638 million — a drop of about $17 million. The payout figure is then projected to steadily increase in future years.
Despite the short-term funding reduction, opponents of the proposal to keep a higher distribution rate claim it would steal dollars from future generations by sapping the fund’s potential future value.
State Land Commissioner Aubrey Dunn, whose office generates money for the fund via oil and natural gas leases and royalties, said there are better ways to increase public school funding.
“I share the desire to bring additional dollars to New Mexico’s education system with those who advocate tapping into the fund,” Dunn said. “However, I fear that an increased distribution from the permanent fund would simply be stealing from New Mexico’s future generations. To gain funding, our generation should be increasing revenues from other sources or cutting state expenses.”
Previous attempts to extend the distribution rates established by the 2003 measure have been unsuccessful. Rep. Jim Trujillo, D-Santa Fe, who sponsored one such attempt in 2012, said in a recent interview that it will be “difficult to pass” the latest version.
Trujillo said he still supports the idea of increasing education funding, but also acknowledged there are valid reasons to allow the distribution rate to sunset.
“If you leave it alone, there will be more money going into education in the future,” he said.
The 2003 constitutional amendment was pushed by then-Gov. Bill Richardson and called for the additional money to help pay for a three-tier minimum pay scale for teachers, which is still in place.
After being narrowly approved by state voters, it increased the distribution rate from 4.7 percent of the fund’s average market value to 5.8 percent. The rate then dropped to 5.5 percent in 2011 and is scheduled to drop one more time, to 5 percent.
Under Padilla’s proposed constitutional amendment, Senate Joint Resolution 3, the rate would go back up to 5.8 percent and stay at that level. However, to take effect, it would have to gain approval by both legislative chambers during this year’s session and then by voters in November.
The issue is related to, but separate from, a proposal to earmark more money from the Land Grant Permanent Fund for home visiting programs and other types of early childhood intervention initiatives.
Padilla said the decision to propose the two measures separately this year was a strategic one because the early childhood piece has been blocked for several consecutive years and likely faces long odds in the 30-day session.
The Land Grant Permanent Fund is the larger of the state’s two primary savings funds. The other one, the Severance Tax Permanent Fund, also distributes a smaller amount of money to the state general fund every year. Combined, the distributions from the two funds total roughly $849.3 million for the current year.
More than three-quarters of the money distributed annually from the Land Grant Permanent Fund goes to public schools. State universities, a hospital and other beneficiaries split the remainder.