Most people in New Mexico don’t understand what the Permanent Fund is or even how it works. Let’s start with the fact that I am a trained accountant. I have been trained to understand the business world and investments. I have worked for some very rich people in my past. I now work at a local college training students in basic accounting concepts. I am going to try to explain in simple English a very complex system.
Years ago when New Mexico became a state the federal government land granted the state large tracks of land. The people who were running our state at the time decided to keep the land and lease it to companies. The money received as payment for those leases were gathered into a large fund. All the money is invested every year to gain interest. It is like the interest you would get from a savings account or a certificate of deposit. Over the life of our state our Permanent Fund has grown because we do not spend the principle or invested amount. We do spend the interest (Return on Investment, ROI) each year to run our government, build roads and state buildings; and to run our school systems. The Permanent Fund is just one source of income for our state. We also have fees, sales tax, and state income tax as well.
To put it simply every citizen in this state is a trust fund baby. Our trust fund that pays our bills is called the Permanent Fund. Without it we would be a much poorer state. Or we would pay much more in taxes. Still our Permanent Fund is an investment fund that goes up and down with the international markets. We earn less interest when the markets are performing poorly. We earn more money when the markets are doing well. Presently the Permanent Fund is valued at 22.3 Billion dollars and provides 890 million in interest to run our state.
This is how we currently invest our money from the Permanent Fund.
At present 0% of the Permanent Fund is invested in local businesses. It is like our state is going to corporations like Wal-Mart and refusing to shop at any of the local businesses on Central. This is not very good for the local businesses and does nothing to create jobs in our state. Even a small investment in local businesses and startup companies could make this state millions of dollars in personal income taxes and taxes on small businesses without raising tax rates. Putting more people to work would also benefit our state because they would then be able to spend their income in our state therefore increasing the amount of sales tax collected again without raising the tax rates.
Our state is in bad need of investment funds to grow our own small businesses and make sure we do not depend on one source of income from oil and gas companies. If we are unwilling to invest in the businesses in this state, then why would anyone else want to invest? The money received from this plan could grow the amount of money that we have to spend on schools, government and roads.