October 5, 2022

Land Grant Permanent Fund constitutional amendment is years in the making

In November, voters will vote whether an additional 1.25 percent of distribution will come from the Land Grant Permanent Fund to help support early childcare education in New Mexico, as well as address some of the concerns raised in the Yazzie-Martinez lawsuit.

The fund, also known as the Permanent School Fund, at around $25 billion, is one of the largest sovereign wealth funds in the world. It grows annually based on a rolling five-year average, which protects the fund from stock market crashes and reductions in oil and gas revenues. The state currently distributes 5 percent of the fund, annually, to the New Mexico Public Education Department and to 20 other public institutions.

For 10 years legislators and early childcare advocates worked on a joint resolution that would allow voters to decide if an additional 1.25 percent of the fund’s growth could be spent on early childcare and at-risk students.

State Rep. Antonio “Moe” Maestas, D-Albuquerque, said that over the course of the nine years he was a co-sponsor, the bill to amend the constitution to allocate additional funding from the fund, passed 25 committees in the House and underwent six three-hour debates in the House chamber. On the state Senate side, the bill received five hearings for an average of 20 minutes each and there were two hours of public debate on the bill in the Senate chamber, he said.

An effort to shift the debate came from state Sen. Michael Padilla, D-Albuquerque, who said he carried the amendment on the state Senate side for six years. But, he said he was “not a fan of insanity,” so he tried a different tactic, which was to create the New Mexico Early Childhood Education and Care Department to receive the 60 percent expected to come from the additional 1.25 percent, if the constitutional amendment passes.

The Legislature passed that bill to create the ECECD in 2019. Gov. Michelle Lujan Grisham, who supported the bill, named ECECD Secretary Elizabeth Groginsky to lead the department in July 2020. Before the creation of the ECECD, early childhood was overseen by four different agencies within the state, Padilla said.

“That bill ensures there’s a cabinet level secretary who wakes up every day to make early education better for students instead of four different leaders in the state trying to do that,” Padilla said.

Polls indicate that a majority of voters support allocating the additional distribution. But despite the current support for the proposal and the lengthy public debate, the bill died procedurally every year, until 2021, usually because it did not receive a hearing or a vote from the state Senate Finance Committee.

Many who talked to NM Political Report about that decade of struggle said that the turning point came with the 2020 primary and general elections, when voters ousted five conservative Democrats from the state Senate. That included former state Sen. John Arthur Smith, D-Deming, who was the longtime chair of the powerful Senate Finance Committee.

Opponents to the additional 1.25 percent distribution have referred to the proposal as “raiding” the Land Grant Permanent Fund. Some expressed concern that distributing more than 5 percent [the current distribution] from the fund would have a negative impact, overall, to the fund’s growth.

Though no longer a member of the Senate, Smith still stands by his opposition to the additional distribution and told NM Political Report that the additional 1.25 percent distribution won’t deplete the fund.

“But it won’t be growing as fast. You want that fund to grow with inflation. It’s going to have less capacity to do that,” Smith said.

Maestas said the fund has grown faster than the growth of inflation and spoke of what he called “generational equity.”

“In real dollars we’re stealing from the current generation and saving money for this mythical future generation,” Maestas said of the criticism to the proposal.

How the idea got started

Alicia Manzano, who is now chief of staff for House Majority Leader Javier Martinez, D-Albuquerque, was part of the original coalition that brainstormed the idea of an additional distribution from the Land Grant Permanent Fund to invest in early childcare education. She said that 12 years ago, she was working for New Mexico Voices for Children, a non-profit group, as outreach director.

She said that, at the time, New Mexico ranked, as it does now, at around 49th or 50th in the nation for child well being. She said a group of non-profits concerned with child well being had a planning session to discuss strategies.

“We began to float this out-of-the-box idea because of the volatile nature of the funding streams. We never quite knew what revenue oil and gas would produce each year. To have a sustainable funding source was critical for all of us,” she said.

Bill Jordan, government relations officer for New Mexico Voices for Children and an advocate with NMVFC since 1998, said the roots of that early planning meeting go back even farther: as far back as 2001 when a recession caused the state to cut New Mexico income eligibility for early childcare assistance to half of what it was, 200 percent of the federal poverty level.

The state didn’t restore the income eligibility level to 200 percent of the federal poverty level until 2008, he said.

“I can’t begin to tell you how frustrating it was for many years to try to get early childcare funded. For the safety of our kids and healthy development. So parents could get to work,” Jordan said.

Jordan said that, also around 2008, a lot of research began to appear that indicated that the earliest years of a child’s life are the most important in terms of development. This helped inspire the fight, he said. Jordan said that research shows that 85 percent of the brain develops in the first three years. The foundations for social and emotional learning and development happens in those first three years. Bonding with parents, language development and social behavior are all crucial in those early years.

“We know learning begins at birth. Why not expand the idea of education from kindergarten down to birth? And use the Land Grant Permanent Fund as the source of funding for early childcare funding? That was the original intent,” he said.

Jordan said the Land Grant Permanent Fund did not originally cover public kindergarten.

“We decided it was important and expanded the Land Grant. The first four years are different. Kids aren’t sitting in a classroom. We wanted to expand the definition of education and public investment in education to the early years,” he said.

Why does the state need a constitutional amendment?

The U.S. Congress created the Ferguson Act of 1898 and the Enabling Act of 1910, which granted 13.4 million acres to the New Mexico territory before allowing New Mexico to become a state in 1912. Congress deemed that the 13.4 million acres of mineral wealth derived from those lands would be placed into a trust in order to generate money for institutional beneficiaries, Maestas said.

The majority of the money, 86 percent, is distributed into the state’s general fund and earmarked for the New Mexico Public Education Department.

Maestas said Congress created this system before oil was discovered in New Mexico. That took place in 1927, he said. Then in 1957, the New Mexico legislature charged the State Investment Council with investing the money in the stock market. Maestas said New Mexico “was ahead of the curve” on this and other states, such as Arizona, didn’t begin to invest in the stock market with state trust funds until the 1990s.

The State Land Grant Office announced this week that it raised $2.413 billion for Fiscal Year 2022. The majority of that revenue – $2.32 billion – goes into the Land Grant Permanent Fund, said Joey Keefe, assistant commissioner of communications for the State Land Grant Office.

Maestas said the Land Grant Permanent Fund was $11 billion in 2011 when the Legislature first considered the constitutional amendment. Now the fund sits at $25 billion. He said the fund has been outpacing inflation over the years.

But the Legislative Finance Committee, in its analysis, said that in 2003 New Mexico voters voted, by a slim margin, to increase the distribution to 5.8 percent from FY06 to FY12 and 5.5 percent from FY13 to FY16.

As a result, by 2017 the distributions to the general fund were smaller than they would have been if the 2003 amendment never occurred, according to the analysis.

Maestas said the policy debate between fiscally conservative Democrats and many Republicans was an “ideological struggle” for 10 years but he said that Smith, who is largely credited with fighting off enlarging the distribution of the fund, was not opposed to early childcare education. The two sides had a different political philosophy, he said.

Smith told NM Political Report that his wife is a retired early childhood educator.

“When we tapped into the Permanent Fund under the Richardson administration, we took it up to 5.8 percent…that was a big mistake. When we took it to 5.8 percent, we were eroding the corpus and not keeping up with inflation,” Smith said.

But Martinez said the advocates who have fought for this constitutional amendment are “on the right side of history.”

“When the book is written on this, it will go down as one of the largest redistributions of wealth: 80 percent of women in New Mexico are women of color; eight out of 10 children are from communities of color. To me, this has been a righteous fight. I don’t say that about anything else. Tax reforms, cannabis. I’ve been involved in complex legislation. There’s a little gray area, you give and take, compromise here and there. This one is truly black and white, right and wrong,” he said.

Jessa Cowdrey, director of public policy and marketing for CHI St. Joseph’s Children, said the fight is an equity issue because of systemic racism. She said the 13.4 million acres the wealth comes from are stolen lands the U.S. government took from Indigenous people.

If the amendment passes, 40 percent of the additional 1.25 distribution is expected to address some of the concerns raised by the Yazzie-Martinez lawsuit, which the state lost in 2018 when the State District Court Judge Sarah Singleton ruled that every student has a right to be college and career ready and the state was failing to meet that need.

“In the Yazzie lawsuit, the judge ruled that Native Americans are not getting a sufficient education. Their very land was taken. This, at the root, is trying to address the systemic racism our country has baked into its structures,” Cowdrey said.

Martinez said that in some cases, the land was stolen twice.

He said some of the land grants, which came originally from the King of Spain when New Mexico was part of Spanish territory, were respected but in other cases the early land grants were not respected.

“When we look at the founding of this country, they stripped wealth from [the earlier people] by taking their land,” he said.

Updated.