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What you didn’t want to know about the Land Grant Permanent Fund

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By Merilee Dannemann

We’ve all heard the arguments about early childhood education as the solution to pull New Mexico out of poverty. The state’s Land Grant Permanent Fund is targeted as a way to pay for it.

Not so fast. The devil is in the details. 

What follows is the kind of policy wonkish recitation that sends people tiptoeing out of the room. This explanation comes from former State Land Commissioner Ray Powell, who knows because he’s watched lawmakers and others sneak out the back door.

The Permanent Fund is not one big pot of money that we can dip into any way we choose. The money is all spoken for. Changing the distribution requires a state constitutional amendment and approval by Congress.

Our state trust lands were established with a checkerboard pattern, six squares by six, a total of 36 squares each representing a square mile. The pattern was applied all over the state. In each checkerboard, four squares – none touching each other -- were given to the state. 

These tracts are scattered everywhere. On the Land Office map (on the website, look for LandStatus11x17) they appear as lots of tiny pale blue squares and larger clumps where tracts are consolidated.

Each tract is earmarked for a specific beneficiary. And so is the revenue from that tract.

This system was created in federal legislation at statehood. Exceptions were made for private, tribal, federal lands and land grants. To make up for those lands, the federal government designated “in lieu of” lands, some of which, luckily, were rich in oil and gas.

Some land generates income from oil and gas; some is good for grazing; some may be in the middle of a city. The Land Commissioner has authority to sell tracts, and over the years the holdings have been reduced from about 13 million to 9 million acres.

One complication: Surface land can be sold but the mineral rights cannot be sold so simply. Any such sales create a potential legal mess.

The largest beneficiary is the public schools, with more than 7 million acres designated, but there are several other beneficiary entities, each with specific tracts and thus a designated piece of the revenue pie.

Revenue from a renewable resource like a grazing lease goes directly from the land office to the designated beneficiary, such as a specific university or hospital, or the fund for the schools. Potentially, a very lucky beneficiary could get the revenue from a shopping mall.

Revenue from nonrenewable sources like oil and gas goes into the Permanent Fund – but again, it is not one big happy bank account. It’s all earmarked. The income from each tract is designated for a specific beneficiary. The beneficiary with a producing oil well is luckier than the beneficiary with a dry well or no well at all.

When the Legislature gets the annual numbers, a further complication happens – for example, with education. The Legislature decides the total dollars for the education budget. The Permanent Fund contribution is combined in the state general fund with revenue from other sources to reach that total. A good year for the Permanent Fund does not necessarily mean more money for education.

Given this configuration, it is not clear how the money for the early childhood program could be allocated.

The proposals we have seen would mandate that the total distribution from the fund be increased and a certain percentage of that increase go to the early childhood program. But it is not clear how that distribution would work.

The Land Office, in legislative analysis documents, has offered a different possible approach: to buy new land that could be earmarked for early childhood. I don’t know whether that’s the right idea, but I know that next time the issue comes up, I will not sneak out of the room.