NOTE:  As provided in LFC policy, this report is intended only for use by the standing finance committees of the legislature.  The Legislative Finance Committee does not assume responsibility for the accuracy of the information in this report when used for other purposes.

 

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F I S C A L   I M P A C T   R E P O R T

 

 

SPONSOR:

Heaton

DATE TYPED:

3/12/03

 

HB

918/aHGUAC/aHAFC

SHORT TITLE:

Expanded Investment Objectives of the State Investment Officer

 

SB

 

 

 

ANALYST:

Neel

 

REVENUE

 

Estimated Revenue

Subsequent

Years Impact

Recurring

or Non-Rec

Fund

Affected

FY03

FY04

 

 

 

 

NFI

 

 

 

 

 

 

 

 

(Parenthesis ( ) Indicate Revenue Decreases)

 

SOURCES OF INFORMATION

 

Responses Received From

 

State Investment Council (SIC)

 

SUMMARY

 

    Synopsis of HAFC Amendment

 

The House Appropriations and Finance Committee amendment reduces the percent of the Severance Tax Permanent Fund (STPF) that can be invested in New Mexico Private Equities from 8 percent to six. 

 

    Synopsis of HGUA Amendment

 

The House Government and Urban Affairs Committee amendment makes the following substantive changes:

 

  • Eliminates the 60 percent ceiling that SIC can invest in any one New Mexico private equity funds;
  • Requires SIC to comply with guidelines and policies established by the council in investing in New Mexico Private equity funds; and
  • Increases the ceiling that SIC can invest in individual companies from 49 percent to 51 percent with specified exceptions;

 

     Synopsis of Original Bill

 

House Bill 918 raises the limit on investments in New Mexico private equity funds from three percent to eight percent of the market value of the severance tax permanent fund.  It also allows co-investment in New Mexico businesses and defines the term “New Mexico business”. 

 

The bill eliminates restrictions on the dollar amount that may be committed to any one fund or business, and eliminates the restriction on the minimum committed capital size of a New Mexico private equity fund.  It raises the amount invested in any one New Mexico private equity fund from fifty percent to sixty percent of the total committed capital of that fund.  It sets limits on investment in any one New Mexico business of no more than ten percent of the amount available for investment pursuant to this section, and limits this investment to no more than forty-nine percent of the total investment capital in a business. 

 

The bill requires the State Investment Council (SIC) to review SBIC funding once a year and adjust funding to one-fourth percent of the market value of the Severance Tax Permanent Fund (STPF) if below this level.  It also requires semi-annual reporting on the New Mexico private equity investments in the STPF by the SIC to the Legislature.

 

FISCAL IMPLICATIONS

 

Current STPF pricing implies a limit of roughly $94 million. This amendment would raise the limit to $250 million.

 

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