NM’s budget crisis: It’s time to tap the permanent fund

By Rep. Antonio 'moe' Maestas / Albuquerque Democrat, Chair Of House Commerce Committee And Rep. Javier Martinez / Albuquerque Democrat, Co-chair Of House Taxation & Revenue Committee

Sunday, May 17th, 2020 at 12:05am ABQ Journal

Is $1,808,505,746 the amount of funding that would go to early childhood educational services over a 10-year period if 1% of our state’s Land Grant Permanent Fund were invested for that purpose? Close. Around $1.8 billion is how much money the LGPF’s investment portfolio has lost in 2020. By contrast, investing in our children is recession proof. One of the smartest and most impactful things we can do in June’s special legislative session is to pass a proposed constitutional amendment to use 1% of the LGPF for early childhood services.

A 1% increase for early childhood education was characterized by the UNM Economics Department in a recent white paper analysis as a positive “alternative investment.” This alternative investment would be a game changer for future generations and also helps jump-start our economy in the short term. It would create close to 4,000 new jobs in the early education field. It also increases tens of thousands of home economies by allowing parents to join the workforce, finish their degrees or start their own small businesses.

There are two schools of thought when it comes to these types of state permanent funds. That they are development funds or generational equity funds. We consider the LGPF to be a development fund. The lands and the funds derived from them was granted by the federal government at the inception of statehood so that New Mexico could develop a governmental structure and grow an economy so as not to be dependent for its existence. Those who view it strictly as a generational equity fund simply want to distribute an annual percentage of the fund consistent with current dollar value plus inflation to ensure each generation benefits equally.

Both views, ironically, call for an increased distribution from the LGPF. The distribution is so low, 4.12% annually, relative to the average growth of the fund, 11% annually, that an increase of 1% would actually track better annual distribution with annual growth. When we do the math we realize the current generation is actually being cheated because a disproportionate amount of the fund is being reserved for future generations at the expense of the current generation. Tragically, there will always be a fictional “future generation” of poor children whom the fund is being saved for that will always remain in the future.

Opponents insist on not distributing more than 5% annually. Many don’t realize we don’t distribute 5% of the fund each year. We actually distribute 5% of the preceding five-year average of the year-end amount of the fund, which averages out to a 4.12% annual distribution.

 

Now another view is percolating to the surface, that it is a rainy-day fund to be used during the darkest of times. Earlier this year the state investment officer referred to the LGPF as “our state’s nest egg.” Gov. Michelle Lujan Grisham said she would favor accessing the LGPF for one or two fiscal years during “this extraordinary emergency.” No matter how you slice it the LGPF has always been viewed as a buffer against future taxes.

The worst economic crisis imaginable is looming in our midst with a severe budget crisis to follow. We cannot go back on our state’s commitment to expanding early childhood education. Conditions for our most vulnerable children will only get worse during this crisis. By accessing this additional funding we not only avoid cutting existing programs, but we can actually expand ECE programing. It will also free up valuable resources that we can use for a stimulus package for small businesses.

To accomplish this we must act now. Let’s plant a tree that will bear fruit immediately. We implore the governor to add the 1% for early childhood initiative to the special session and hope the Senate joins the House in passing this plan onto the November ballot. It’s time to let the voters decide.