At the recent Legislative Finance Committee meeting in Santa Fe Finance and Administration Secretary Olivia Padilla-Jackson proposed a new permanent fund be set up in New Mexico.
According to the Santa Fe New Mexican, “Padilla-Jackson said the state could hypothetically allocate around $300 million a year to build the fund to $1 billion within three fiscal years, and it could initially generate $50 million annually for early childhood education.” According to the article Sen. Finance Committee Chair John Arthur-Smith (who has opposed using other permanent fund $$ for pre-K) is supportive. Is another permanent fund a good idea?
We at the Rio Grande Foundation have a different perspective from many on both the left and the right when it comes to permanent funds which are more broadly known as sovereign wealth funds. We also see these funds as deferred government spending. We especially don’t like the idea of allowing government to invest money in private businesses (which is in many respects the very definition of “socialism”).
What COULD be done with all this largess? Ideally, the State would consider a permanent change like dramatic reductions or elimination of the personal income taxes (the PIT generates about $1.6 billion annually). Barring that, it would be nice if the State set up some kind of Alaska-style refund system where average citizens could directly share in the windfall being generated by the oil and gas industry.
While we are enthusiastic in our support for oil and gas and are pleased with the revenues it generates, New Mexico doesn’t need even bigger government than it has now (as seen below, click on chart to find original data).
I’d much prefer tax cuts than any of the other alternatives.