New Mexico State Investment Council

Summary

The purpose of New Mexico’s three permanent endowment trust funds is to contribute recurring revenues for the operating budget of the state and to provide resources to various fund beneficiaries. The fund’s investment goals are to preserve the permanent endowment funds for future generations and to provide future benefits by growing the funds at a rate at least equal to inflation.

Background

*The primary permanent endowment funds for New Mexico (Land Grant and Severance Tax Permanent Funds) have oil and gas revenue as their initial and ongoing funding sources.

Historical Assets Under Management on Land Grant Permanent Fund[ Content protected for Sovereign Wealth Fund Institute Standard subscribers only. Please subscribe to view content. ]

The trust is broken down into four funds:
Land Grant Permanent Fund
The Land Grant Permanent Fund (LGPF) is New Mexico’s largest endowment and permanent fund. It was established through, and continues to be maintained in part by leasing fees the State charges for 13.4 million acres of mineral resources and 8.8 million acres of surface land. The State Investment Council manages day to day operations of the Land Grant Permanent Fund, including investments and distributions.

Severance Tax Permanent Fund
The Severance Tax Permanent Fund (STPF) was established by the legislature as an endowment fund in 1973, to receive severance taxes collected on natural resources extracted from New Mexico lands. The State?s severance taxes have historically been used to retire debt from bond issues that have funded various capital projects.

Currently, severance tax revenues first pay the required debt service on severance tax bonds issued by the state, and the remaining (approximately 5% or less – historically it was 12.5%) severance tax receipts are then transferred to the Severance Tax Permanent Fund. The STPF is now a broadly diversified permanent fund, and except for its Economically Targeted Investment, the STPF investment statutes and asset allocations are essentially the same as those in the LGPF.

Tobacco Settlement Permanent Fund
The Tobacco Settlement Permanent Fund (TSPF) was created in 2000 as part of the Master Settlement Agreement between New Mexico, other states and big tobacco companies. During its early years, the TSPF received approximately half of the annual tobacco payments to the state, or about $20 million, while the other half went toward health and tobacco cessation programs. However, since 2008, legislative priorities have resulted in 100-percent of annual payments being appropriated, and no new funds going into the TSPF for investment. The TSPF is considered part of the state’s reserve fund, and is not constitutionally protected from legislative appropriation. The TSPF is expected to one day grow to a large enough size that it can make substantial annual distributions while also being self-sustaining through its earnings.

Water Trust Permanent Fund
The Water Trust Permanent Fund (WTPF) is a constitutionally protected permanent fund for the state of New Mexico, created in 2006 with an initial appropriation of $40 million and a subsequent legislative contribution of $15 million in 2007. The WTPF distributes $4 million annually to the state’s Water Trust Board, which authorizes spending these and other state funds on various water infrastructure projects around New Mexico. The WTPF will require additional capital to remain sustainable over time. Current estimates are that without an additional infusion of capital or a restructuring of its current distribution requirements, there is a 50% chance the fund will fall to $0 in the next 20 years.