State predicts more education funding from investments

Public education is expected to get a financial boost in the coming year from New Mexico’s two major sovereign wealth funds, based on investment returns and income from the oil sector.

The State Investment Council has estimated that New Mexico’s Land Grant Permanent Fund and Severance Tax Permanent Fund are likely to pay out $963 million for the coming fiscal year, a $64 million increase from the fiscal year that started in July.

The majority of annual distributions from the two state trusts go directly toward public schools. A little over $200 million flows to the state’s general fund, which also underwrites public education.

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 a combined $21.8 billion at the end of September.

“Very simply, the funds have grown by $2 billion over the past year,” said Charles Wollmann, spokesman for the State Investment Council, on Thursday. “The markets have been performing beyond expectations.”

Royalties on oil and natural gas production added $444 million to the Land Grant Permanent fund in the fiscal year that ended June 30, up from $420 million the previous year, according to the State Land Office.

New Mexico struggled this year to sustain funding for public education amid faltering tax revenues linked to a downturn in the oil and natural gas sector in 2015 and 2016. Spending was slashed at public colleges and several state agencies earlier this year to offset faltering tax revenues.

Initial indicators show an upward trend this year in state revenues, helping replenish exhausted reserve accounts that act as a buffer to economic downturns.

Recent efforts to increase the distribution rate of the land grant fund toward public educational have repeatedly failed in the Legislature. A new proposal being circulated among lawmakers would increase the distribution rate from the smaller Severance Tax Permanent Fund to fund early childhood education programs.

Very simply, the funds have grown by $2 billion over the past year. The markets have been performing beyond expectations.” Charles Wollmann, spokesman for the State Investment Council