Investment dollars for education, general fund to top $2B in FY25

Apr. 15—AAround $53 billion in state assets sit with the New Mexico State Investment Council.

That's over five times more than the record-breaking $10.21 billion budget the governor in March signed for the state for fiscal year 2025.

The SIC is an investment firm that manages tens of billions of dollars of permanent, rainy day and governmental funds for New Mexico. It oversees the third-largest sovereign wealth fund — a permanent endowment fund managed by the state — in the nation.

The investment firm currently oversees nine funds: the Land Grant Permanent Fund, Severance Tax Permanent Fund, Tobacco Settlement Permanent Fund, Water Trust Fund, Tax Stabilization Reserve Fund, Rural Libraries Endowment Fund, Early Childhood Education and Care fund, Conservation Legacy Permanent Fund and Opioid Settlement Restricted Fund.

The Land Grant Permanent Fund is the largest fund with a balance of over $30 billion, according to a February investment holdings report from the SIC. It's one of the largest funds of its kind in the country, according to the investment agency.

Oil and gas revenue, such as royalties and bonuses, makes up most of the contributions to the fund.

There are 21 beneficiaries that get money from the Land Grant Permanent Fund, and the assignments date back to around the early 1900s when New Mexico became a state. The largest beneficiary is public schools, which has about 87% ownership of the Land Grant Permanent Fund, according to the SIC. Other beneficiaries include state universities and schools, hospitals and the New Mexico Military Institute.

SIC spokesperson Charles Wollmann said the fund will distribute more than $2 billion in fiscal year 2025. That's double the distributions from five years ago, he said, when permanent fund distributions per year surpassed $1 billion.

The $2 billion in distributions will have an equivalent of around $980 per New Mexican and more than $2,500 per New Mexican household, Wollmann said.

The Severance Tax Permanent Fund is the second-largest pot of money, at $9.6 billion. Money from this fund also comes from natural resources, but the taxes come when resources like oil and gas are taken, or severed, from the state, according to the SIC.

Wollmann said both the Land Grant Permanent Fund and the Severance Tax Permanent Fund are protected from appropriations. Voters must first approve officials taking more money out, meaning increasing the distribution rate.

Another fund of note is the Early Childhood Education and Care Fund. Lawmakers approved its creation in 2020 with an initial allocation of $320 million. Since then, the fund has grown to nearly $7 billion because of additional monetary inflows and investments.

"That could be a game changer, in addition to the money out of the Land Grant Fund specially dedicated for early childhood things," Wollmann said. "We can build a world-class early childhood system here, and really, this is a resource that makes it possible."

The SIC will start managing three new funds in fiscal year 2025, starting July 1: the Capital Development and Reserve Fund, Higher Education Trust Fund and Workforce Development and Apprenticeship Trust Fund.

In addition to the permanent funds, government agencies can also invest money with the council. Twenty-five entities have about $2 billion invested, according to the February investment holdings report from the council.

Wollmann expects the net assets at the SIC to stay around $50 billion for a while, unless there's a big market pullback.

With New Mexico's booming budget recently, he said the SIC is able to compound returns to a huge degree.

"We have enough money coming in right now that it offsets our distributions," he said.

He said these dollars could make up a substantial portion of state budget funding, and could be a way to partially supplement money when oil and gas goes away.

"Over the next 10 years — knock on wood — these funds could double themselves," he said.