FALSE PROMISE FOR EDUCATION – SB 182

NM Land Commission Dunn’s federal oil & gas seizure plan, sponsored by State Senator Mary Kay Papen,  can’t deliver what it promises. It’s a shell game in which our kids will never see a dime.

1. THE NEED IS NOW. Our kids won’t be kids anymore by the time Dunn’s plan generates any funding – and it’s doubtful it ever will. NM kids won’t see a dime of Dunn’s proposed royalty money for more than a decade – if ever. • EVEN IN THE BEST CASE SCENARIO… Let’s assume TWO BIG IFs… If a very complicated land transfer with the federal government involving split-estate mineral rights, which even is successful, is a process that would take at least 5 years;  It will take a long time before education would see any new funding. Oil and gas prices would have to rebound enough to justify drilling, and then it would take at least a decade for companies to conduct field research, obtain leases/permits and start producing oil. Only when this production is well underway will royalties begin to build the new permanent fund. And then, only after these royalties have been invested and begin generating earnings, will early childhood programs realize any new income.

2. DUNN’S APPROACH IS UNREALISTIC. It will never pass congressional muster. The MANY OBSTACLES facing Dunn’s Plan: Why it will be DOA in Congress • Cannot Pass Congress without at least $5 Billion in budget offsets • Senators and Representatives from the other 49 states, which do not have such plentiful mineral rights, will never agree to give one state a multi-billion dollar windfall at their states’ expense. • Political firestorm will ensue when New Mexico ranchers realize that Dunn wants to expedite drilling on their private lands.

3. Dunn’s plan is just a shell game that DOES NOT CHANGE THE STATUS QUO. Dunn’s revised plan to “share” oil and gas revenues is a shell game. When confronted by members of Congress with the requirement for a budget offset, Dunn changed his plan, proposing to share 50% of the oil and gas royalties from the proposed transferred assets with the federal government. But that is current law. Right now, states receive 50% of royalties from all oil and gas drilling on federal land.  In 2016, revenues from oil, gas, and coal production from the federal mineral estate in NM generated about $766 million in royalties. After adjustments, the federal government allocated 50 percent of those royalties ($368 million) to NM. Dunn’s proposal to share 50% of royalties from mineral rights transferred to the state would create a lot of unnecessary work, but simply maintain today’s status quo that NM receive half of all royalties from the federal mineral estate.

SOLUTIONS: There are ways to increase education funding. Increase the distribution from the Land Grant Permanent School Fund. NM has the nation’s second largest Land Grant Permanent School Fund. Legislators and voters could choose to increase the distribution of that fund, which would help us better fund K-12 schools and our higher education system, as well as invest a tiny portion in the early childhood education programs that will help our kids do better in school so more of them can attend college. Increasing the distribution by 2% would provide $300 million. Raise the existing royalty rate; Cut State Trust Land subsides to oil & gas Dunn and the state’s congressional delegation should support an effort to increase the federal royalty rate to 18.75%. The current royalty rate on federal lands is 12.5% compared to NM’s 18.75%. Such an increase would immediately generate another $184 million per year for NM’s schools and nearly $1 billion more over the next 5 years. Dunn and the legislature could cut State Land Trust subsidies to oil and gas companies, charge drillers for all the valuable methane they waste, and raise the ridiculous 25-cent-per-acre fee to drill on state lands — and direct all that new revenue to NM’s schools.

Center for Civic Policy, 1.20.17