N.M. Const. art. XII, § 7
D. The legislature may establish criteria for investing the land grant permanent funds if the criteria are enacted by a three-fourths' vote of the members elected to each house, but investment of the land grant permanent funds is subject to the following restrictions:
H. Unless suspended pursuant to Subsection G or J of this section, the additional distribution from the permanent school fund provided for in Subsection G of this section shall be as follows and as provided by law:
The 2022 amendment, proposed by HECS/H.J.R. No. 1 (Laws 2021) and adopted at the general election held on November 8, 2022, by a vote of 472,826 for and 199,347 against, provided for additional annual distributions of the permanent school fund for enhanced instruction for students at risk of failure, extending the school year, teacher compensation and early childhood education, and required congressional approval for distributions from the permanent school fund for the provision of early childhood education; replaced "fund" with "land grant permanent fund" throughout the constitutional amendment; in Subsection F, deleted "Except as provided in Subsection G of this section, the" and added "The", after "annual distributions from the", deleted "fund" and added "land grant permanent funds to the beneficiaries specified in the Ferguson Act and the Enabling Act"; in Subsection G, after "the annual", deleted "distribution" and added "distributions", after "Subsection", deleted "H" and added "I", after "section, an", deleted "additional", after "annual distribution", added "of one and one-fourth percent of the average of the year-end market value of the permanent school fund for the immediately preceding five calendar years", after "shall be made", deleted "pursuant to the following schedule" and added "as provided in Subsection H of this section", after "provided that", deleted "no" and added "the additional", after "distribution shall", added "not", after "be made", deleted "pursuant to the provisions of this subsection", after "less than", deleted "ten billion dollars ($10,000,000,000)" and added "seventeen billion dollars ($17,000,000,000)", and deleted former Paragraphs G(1) and G(2); and added new Subsections H and I and redesignated former Subsection H as Subsection J.
The 2014 amendment, proposed by H.J.R. No. 16 (Laws 2014) and adopted at the general election held on November 4, 2014 by a vote of 225,641 for and 202,072 against, increased the duty of care for the management and investment of the fund; removed the restriction on the percentage of the fund that may be invested in international securities; increased the threshold amount for distributions in addition to the annual distribution; in Subsection C, after "state investment council, shall", deleted "exercise the judgment and care under the circumstances then prevailing that businessmen of ordinary prudence, discretion and intelligence exercise in the management of their own affairs not in regard to speculation but in regard to the permanent disposition of their funds, considering the probable income as well as the probable safety of their capital" and added "invest and manage the fund in accordance with the Uniform Prudent Investor Act"; in Subsection D, deleted former Paragraph (4) which provided that "not more than fifteen percent of the book value of the fund may be invested in international securities at any single time"; and in Subsection G, after "five calendar years is less than", deleted "five billion eight hundred million dollars ($5,800,000,000)" and added "ten billion dollars ($10,000,000,000)".
The 2003 amendment, proposed by S.J.R. Nos. 6 (Laws 2003) and adopted at the special election held September 23, 2003 by a vote of 92,198 for and 92,003 against, rewrote Subsection F, which had provided that annual distributions from the fund were to increase by 2% per year until the annual distributions reached a maximum value of 4.7% of the average of the year-end market values of the fund for the preceding five calendar years, and added Subsections G and H.
The 1996 amendment, proposed by S.J.R. No. 2 (Laws 1996) and adopted at the general election held November 5, 1996 by a vote of 307,442 for and 153,021 against, added Subsections A, D, E, and F and rewrote the remainder of the section. Section 6 of S.J.R. No. 2 (Laws 1996) provides that this amendment shall not become effective without the consent of the United States congress. The United States Congress approved the amendment in P.L. 105-37, 111 Stat. 1113, the New Mexico Statehood and Enabling Act Amendments of 1997, approved August 7, 1997.
The 1989 amendment, proposed by S.J.R. 12 (Laws 1989) and adopted at the general election held on November 6, 1990 by a vote of 189,456 for and 125,779 against, deleted the former last sentence of the first paragraph, which read "All losses from such interest-bearing notes or securities which have definite maturity dates shall be reimbursed by the state" and deleted the former second paragraph relating to sale of interest-bearing notes or securities by the state investment officer at less than their original acquisition cost under specified circumstances.
The 1965 amendment, proposed by H.J.R. No. 12 (Laws 1965) and adopted at a special election held on September 28, 1965 by a vote of 27,687 for and 22,502 against, designated the former second paragraph as the present third paragraph, increased therein the maximum investment in corporate stocks and bonds from 25% to 50% and inserted the present second paragraph.
The 1958 amendment, proposed by S.J.R. No. 12 (Laws 1957) and adopted at the general election held on November 4, 1958 by a vote of 56,877 for and 26,332 against, completely rewrote the section, which prior to amendment had read: "The principal of the permanent school fund shall be invested in the bonds of the state or territory of New Mexico, or of any county, city, town, board of education or school district therein. The legislature may by three-fourths vote of the members elected to each house provide that said funds may be invested in other interest-bearing securities. All bonds or other securities in which any portion of the school fund shall be invested must be first approved by the governor, attorney general and secretary of state. All losses from such funds, however occurring, shall be reimbursed by the state."
Compiler's notes. — An amendment to this section, proposed by S.J.R. No. 11 (Laws 1990), which would have deleted from the end the proviso beginning "and provided further" was submitted to the people at the general election held on November 6, 1990. It was defeated by a vote of 137,565 for and 169,859 against.
An amendment proposed by H.J.R. No. 8 (Laws 1994), which would have rewritten this section to require earnings of the fund to be deposited to the credit of the fund and provide for limited distribution from the fund, was submitted to the people at the general election held on November 8, 1994. It was defeated by a vote of 187,216 for and 192,492 against.
Cross references. — For statutes establishing state investment council, see 6-8-1 et seq. NMSA 1978.
For powers and duties of state investment officer, see 6-8-7 NMSA 1978.
Comparable provisions. — Idaho Const., art. IX, § 3.
Montana Const., art. X, § 3.
Utah Const., art. X, § 7.
Wyoming Const., art. VII, § 6.
Debentures to anticipate proceeds of gasoline excise tax proper investment. — Debentures to anticipate proceeds of gasoline excise tax, authorized by Laws 1927, ch. 20 (repealed), were eligible as an investment for permanent school fund, by virtue of 11-2-13, 1953 Comp. (repealed), even though the provisions of Laws 1927, ch. 20, to render them so eligible failed of passage by vote of three-fourths of members elected to each house, as required by this section. State v. Graham, 1927-NMSC-066, 32 N.M. 485, 259 P. 623.
Bank deposit not proper. — This provision expressly limits the class of securities in which permanent school fund might be invested, until the legislature should otherwise provide. Joint R. No. 14 (Laws 1913), insofar as it required deposit of those funds in banks, was beyond legislative power and void, for such deposits were investments. State v. Marron, 1913-NMSC-092, 18 N.M. 426, 137 P. 845.
Businesses "incorporated within the United States" construed. — The term "incorporated" as used in Article XII, § 7 does not have the same meaning as the statutory clause, "organized and operating"; a company "organized and operating within the United States" is not also "incorporated within the United States", if it was incorporated outside of the United States. State ex rel. Udall v. Colonial Penn Ins. Co., 1991-NMSC-048, 112 N.M. 123, 812 P.2d 777.
Purchase of stock in foreign corporation. — The purchase by the state investment officer of stock in a corporation formed and made a legal entity in the Netherlands Antilles violated this section. State ex rel. Udall v. Colonial Penn Ins. Co., 1991-NMSC-048, 112 N.M. 123, 812 P.2d 777.
The New Mexico military institute is not a beneficiary of the annual distribution from the permanent school fund provided in Article XII, Section 7(G). — Under the Enabling Act (act) of the New Mexico constitution, the proceeds of land grants covered by the act may be used only for the purposes specified in the act, and under the act, the permanent school fund consists of proceeds of lands granted under the act for the support of “common” or public schools, and because the New Mexico military institute (NMMI) is not a common or public school, as that term is used in the act, NMMI is not a beneficiary of the permanent school fund and is not entitled to a share of the additional 1.25% annual distribution for public schools provided for in Article XII, Section 7(G) of the New Mexico constitution. 2025 Op. Att’y Gen. No. 25-02.
Duty of investment advisor. — A professional services contract, whereby an investment advisor would advise the state investment council and officer regarding investment of the equity portion of the state permanent fund and severance tax fund, obligated the investment advisor to provide advice consistent with this section and to recommend only stock of companies technically incorporated within the United States. To interpret the contract otherwise would not be reasonable and potentially would place the contract in jeopardy of being declared unenforceable as violative of public policy. State ex rel. Udall v. Colonial Penn Ins. Co., 1991-NMSC-048, 112 N.M. 123, 812 P.2d 777.
Use of land grant funds to finance private or sectarian education programs. — The Enabling Act of June 20, 1910, 36 Stat. 557, ch. 310 and the New Mexico Constitution prohibit the state from using money, directly or indirectly, from the land grant permanent fund for private, sectarian or denominational schools. The distribution of land grant funds to a private, sectarian or denomination school would require amendments to the Enabling Act by congress and an amendment to the New Mexico Constitution proposed by the legislature and adopted by the state’s voters. 2012 Op. Att’y Gen. No. 12-03.
Increase of land grant funds to finance education programs. — Distributions from the land grant permanent fund may be increased and used for the support of early childhood learning programs, provided the funds go to public schools and the increased distribution is accomplished by the amendment of Article XII, Section 7 of the New Mexico Constitution. 2012 Op. Att’y Gen. No. 12-03.
Purpose of loss reimbursement provision. — Loss provision of constitution and detailed statutory provisions under which council operates (6-8-1 to 6-8-16 NMSA 1978) were conceived out of jealous regard by constitutional framers and members of legislature for the safekeeping of permanent funds held in trust for school children. 1962 Op. Att'y Gen. No. 62-46.
Reimbursement requirement not self-executing. — This section is not self-executing insofar as loss requirement is concerned. 1962 Op. Att'y Gen. No. 62-46.
"Loss" in this section refers to entire sale or transaction rather than to individual securities or to securities of a corporation or to securities of a certain type. 1971 Op. Att'y Gen. No. 71-113.
Exchange is distinct from separate sale and purchase. — "Exchange" is a term of art of precise import, meaning the giving of one thing for another and excluding transactions into which money enters either as consideration or as a basis of measure. 1962 Op. Att'y Gen. No. 62-46.
Separate transactions will not be construed together. — Placing together two money transactions so as to create a fiction that no loss occurred from the sale and purchase would be opening the door to eventual nullification of the constitutional requirement of loss reimbursement. A subsequent transaction cannot affect the fact of loss in any single transaction. 1962 Op. Att'y Gen. No. 62-46.
Investment officer to exercise sovereign power. — Constitution contemplates that state investment officer, in determining investments to be made, will be exercising portion of sovereign power of state. 1958 Op. Att'y Gen. No. 58-10.
Constitution and statutes vary in concepts of investment council. — The entire concept of the activities of the investment council, as reflected in act establishing council (6-8-1 to 6-8-16 NMSA 1978) appears at variance with concept reflected in this section. The constitution apparently visualizes the independent exercise of delegated sovereign power by the investment council acting as public officers. The legislation apparently reduces the function of the council to that of an advisory group. 1958 Op. Att'y Gen. No. 58-10.
Investment officer may use service of investment counselor or other sources of advice to aid in making an investment policy recommendation to investment council. 1959 Op. Att'y Gen. No. 59-21.
Council regulations likely to restrict scope of investments. — This section provides that investment council may prescribe policy regulations with respect to investment of permanent funds. Such regulations, in prescribing classifications of permissible investment, will necessarily restrict scope of investment authority to extent that by silence they exclude investments which might otherwise be permissible under the constitution. 1958 Op. Att'y Gen. No. 58-10.
Fund not "permanent" as contemplated in investment of permanent school fund. — The severance tax permanent fund is not a permanent fund as contemplated by this section. The severance tax fund and the various land grant permanent funds are fundamentally different. 1977 Op. Att'y Gen. No. 77-10.
Investment in mutual funds or investment trusts. — Investment by the state treasurer in a mutual fund acting as an investment conduit (i.e., an open-end mutual fund or a unit investment trust meeting the requirements of Subsection O of 6-10-10 NMSA 1978) is constitutional. 2000 Op. Att'y Gen. No. 00-03.
"Capital loss" means the difference between the original acquisition cost of bonds to be sold and the proceeds of sale. 1968 Op. Att'y Gen. No. 68-03.
Loss determined by sale transaction alone. — Whether capital loss will be realized and amount of the loss must be determined by considering sale of the bonds alone, without reference to higher-yielding bonds which will subsequently be purchased. 1968 Op. Att'y Gen. No. 68-03.
"Increased interest income" means annual income rather than total income. 1968 Op. Att'y Gen. No. 68-62.
Loss must be restored from income accruing from new investment in insured loans, and that income accruing from investment of recoveries of principal cannot be used to restore capital loss. 1968 Op. Att'y Gen. No. 68-62.
Loss must be amortized from portion of the increased interest income only. 1968 Op. Att'y Gen. No. 68-62.
New investment must yield increase in income after capital loss is restored to corpus of permanent fund. 1968 Op. Att'y Gen. No. 68-62.
Effect of 1965 amendment on offsetting gains and losses. — Since 1965 amendment to this section, the investment council has not had power to sell common stocks realizing a capital gain and to use such gain to offset loss taken on sale of fixed income security. 1968 Op. Att'y Gen. No. 68-116.
Am. Jur. 2d, A.L.R. and C.J.S. references. — 68 Am. Jur. 2d Schools § 89.
Particular purposes within contemplation of statute authorizing issuance of bonds or use of funds by school district for special purposes, 124 A.L.R. 883.
Stock of private corporation, constitutional or statutory provision prohibiting school districts from acquiring or subscribing to, 152 A.L.R. 495.
78 C.J.S. Schools and School Districts § 12.