March 10, 2015

Severance tax fund solvency bill clears Senate committee

Margaret Wright

Oil pump in southeast New Mexico.

A bill designed to address the solvency of the Severance Tax Permanent Fund passed the Senate Indian and Cultural Affairs Committee with no recommendation on Monday on a 4-2 vote.

Oil rig in southeast New Mexico. Photo by Margaret Wright

Margaret Wright

Oil rig in southeast New Mexico.
Photo by Margaret Wright

The legislation passed despite opposition from groups representing Native American tribes, which argued that the cuts to payments from the fund to the tribes would have an adverse effect.

Rep. Jason Harper, R-Rio Rancho, sponsored the legislation and said that without action that there was a good chance that the permanent fund would go bankrupt. He cited a Monte Carlo simulation that said the fund has an 84 percent change of going bankrupt in decades if there are no changes made.

“Without this fund, we would be talking about cutting $100 million from our general fund budget this year instead of spending $83 million,” Harper said, of the importance of the fund.

Harper’s bill—which is co-sponsored by Sen. Carlos Cisneros, D-Questa—would shave around 11 percent off of all the beneficiaries of funding from the severance tax fund.

Severance tax funds come from oil and gas drilling, which is the funding from “severing” the resources from public lands. Of the funds, 50 percent go to the “senior bonds” which include capital outlay projects, tribal infrastructure funds and funding for colonias. Another 45 percent goes towards schools.

“We’re decreasing the pie size for each of those groups slightly and phasing that in over four years,” Harper explained.

Cisneros said it was all about keeping the permanent fund for “the children of the future.”

“We’re looking at not so much as harming anybody… but rather to save and to salvage the permanent fund as we know it,” Cisneros said. “If we continue to erode, we’re not going to have the opportunity to spend money, we’re not going to have the opportunity to build infrastructure around the state.”

Sen. Benny Shendo, D-Jemez Pueblo, opposed the changes because of the cuts in payments to the Tribal Infrastructure Fund. He noted that he was part of the team that created the fund, also known as TIF. Shendo was the Cabinet Secretary of Indian Affairs when the fund was created.

“It’s been a great vehicle [for] investment,” Shendo said.

“I think all of us want to make sure that this fund survives but at the same time, I think the funding mechanisms for TIF and colonias is in such infancy,” Shendo said. He expressed a wish that these funds be held harmless in the reduction.

Harper noted that his legislation also tries to correct for the large swings in how much money is paid into the fund. Currently, the money taken from the fund is using the previous year’s funds.

The legislation would use the lesser of last year and this year “to help bring the extremes of the pendulum” back to the center according to Harper.

The bill now heads to the Senate Corporations and Transportation Committee, but Senate Minority Leader Stuart Ingle, R-Portales, looked forward to the bill’s assignment to the Senate Finance Committee.

Ingle noted there are other pieces of legislation related to the Severance Tax Permanent Fund that are pending in the Senate Finance Committee.

“We can come to a compromise that will work well,” Ingle said.

The legislation passed the House on a 38-29 vote last week.


  • Matthew Reichbach

    Matthew Reichbach is the editor of the NM Political Report. The founder and editor of the NM Telegram, Matthew also a co-founded New Mexico FBIHOP with his brother and one of the original hires at the groundbreaking website the New Mexico Independent. Matthew has covered events such as the Democratic National Convention and Netroots Nation and formerly published, “The Morning Word,” a daily political news summary for NM Telegram and the Santa Fe Reporter.