SENATE JOINT MEMORIAL 17

50th legislature - STATE OF NEW MEXICO - second session, 2012

INTRODUCED BY

Sue Wilson Beffort

A JOINT MEMORIAL

REQUESTING A STUDY OF THE IMPACT OF INTERCEPTING SEVERANCE TAX REVENUE TO THE DEGREE THAT ONLY A NEGLIGIBLE PERCENT OF REVENUE IS DEPOSITED INTO THE SEVERANCE TAX PERMANENT FUND AND REQUESTING RECOMMENDATIONS FOR OPTIONS TO REDUCE SEVERANCE TAX REVENUE INTERCEPTS.

     WHEREAS, the severance tax permanent fund is a permanent endowment fund that was intended to create and sustain a substantial, perpetual source of wealth and income for future generations of New Mexicans to replace oil and gas revenues when wells run dry and to serve the current population through disbursements of a portion of the fund's annual investment income to the state's general fund; and

     WHEREAS, from 1976 to 1999, severance tax revenue was allocated equally between bond payments and deposits in the severance tax permanent fund, so that fifty percent of severance tax revenue was deposited annually into the severance tax permanent fund; and

     WHEREAS, beginning in 1999, the legislature reduced the revenues for the severance tax permanent fund to thirty-seven and one-half percent of severance tax revenue and increased the percentage of severance tax revenue allocated to service bond debt to sixty-two and one-half percent; and

     WHEREAS, in 2000, the percentage of severance tax revenue flowing to the permanent fund was further reduced to twelve and one-half percent, with eighty-seven and one-half percent of severance taxes authorized to service bonds; and

     WHEREAS, in 2004, fully ninety-five percent of severance tax revenue was authorized by law to service bond debt; and

     WHEREAS, provisions in capital outlay bills currently provide for the bonding of any remaining amounts of severance tax revenue, effectively reducing deposits to the severance tax permanent fund to almost zero; and

     WHEREAS, as a result, just three hundred ninety-one million nine hundred thousand dollars ($391,900,000) of three billion six hundred million dollars ($3,600,000,000) collected from 2002 through 2011 has found its way into the severance tax permanent fund; and

     WHEREAS, in 2010, only three million four hundred thousand dollars ($3,400,000), about one percent of the three hundred twenty-seven million six hundred thousand dollars ($327,600,000) collected that year, made it to the severance tax permanent fund; and in 2011, only six million five hundred thousand dollars ($6,500,000) of two hundred ninety-nine million five hundred thousand dollars ($299,500,000) received was deposited to the fund;

     NOW, THEREFORE, BE IT RESOLVED BY THE LEGISLATURE OF THE STATE OF NEW MEXICO that the state investment council and the state board of finance be requested to study the long-term impact on the severance tax permanent fund of intercepting the majority of all severance tax revenue for debt service, to study whether severance tax revenue used to service bond debt for public school facilities construction and renovation remains necessary at the current levels and to propose options for reducing the severance tax revenue intercepts; and

     BE IT FURTHER RESOLVED that the results of this effort be submitted to the governor and the appropriate interim legislative committees no later than November 1, 2012; and

     BE IT FURTHER RESOLVED that copies of this memorial be transmitted to the governor, the secretary of finance and administration, the chair of the state investment council and the state investment officer.

- 3 -