A Democratic legislative leader wants to tap into a nearly $9 billion state endowment fund to help solve New Mexico's budget problems.
Senate Majority Leader Michael Sanchez said Wednesday he'll propose taking $2 billion from the Land Grant Permanent Fund to pay for critical government operations in the next few years, such as public schools.
"It's like a loan from ourselves to get past the crisis so we don't have to cut education, cut any type of health care, provide for those who need help the most, continue with our public safety," the Belen Democrat said in an interview.
He said pulling money out of the permanent fund _ which makes yearly payouts for schools, state hospitals and other public institutions _ will minimize the need to increase taxes to deal with a projected budget shortfall next year and a potentially slow financial recovery for several years. Sanchez proposes to require the state to repay the money removed from the permanent fund, but he hasn't worked out details of his proposal to set a deadline for that.
The state needs at least $400 million next year to plug a hole in the budget and maintain current services, according to the Legislative Finance Committee. Gov. Bill Richardson has warned that tax increases will be necessary to resolve the budget problems. The Legislature met in October to deal with a $650 million budget shortfall this year.
Land Commissioner Pat Lyons opposes taking money from the permanent fund. He said it will slow the fund's growth and translate into smaller distributions to schools and other beneficiaries in the future.
"Tapping into the fund will result in less money for education, and New Mexico's families will once again be forced to carry the burden by paying higher taxes to make up the difference," Lyons said in a statement.
The land grant fund receives income, mainly royalties from oil and natural gas production, from millions of acres of land given to the state by the federal government in anticipation of statehood. Investment earnings on fund balances also provide income.
The fund was valued at about $8.7 billion at the end of September, and it has started to rebound from financial market losses, which caused the fund to drop from about $10.8 billion in September 2007.
Under the state Constitution, the fund makes a yearly payout dedicated for schools and 20 other beneficiaries, including four-year colleges and state hospitals _ about $470 million in 2008, with four-fifths of that for public schools.
The proposal by Sanchez requires a constitutional amendment. If the Legislature approves the measure, it would be placed on the November general election ballot for voters to decide.
In 2003, voters approved a proposal by Richardson to increase yearly distributions from the fund _ currently at 5.8 percent of the fund's five-year average market value. Lyons, whose office administers state trust lands that generate revenues for the permanent fund, also opposed the 2003 change.