SANTA FE — Legislative Finance Committee economists and the State Investment Council told the Tax Policy Subcommittee that directing windfall oil and gas receipts into permanent funds and new trust vehicles is central to the state’s strategy for revenue stability. "These revenues...combined make up about 22% of the general fund," said Ismael "Izzy" Torres, chief economist at the Legislative Finance Committee, referring to oil and gas taxes and royalties.

What officials told lawmakers: Don (last name on file), an LFC staff presenter, and Dawn Iglesias of the State Investment Council described 14 state permanent endowments, trusts and reserve funds the SIC invests. "We now manage 14 different permanent endowment, trust, and reserve funds," Iglesias said, and she noted the largest are the Land Grant Permanent Fund, the Severance Tax Permanent Fund and the Early Childhood Trust Fund.

How the funds work: Committee members were shown how the state now caps amounts flowing directly into the general fund from energy receipts and directs excess—to the severance tax permanent fund, early childhood fund or, under recent changes, newly created Behavioral Health and Medicaid trust funds. Officials said the result is that investment earnings have grown to become one of the fastest‑growing, more stable revenue sources for the general fund.

Why it matters: The SIC and LFC ran scenarios showing that allowing a larger share of oil and gas receipts to be invested can produce larger, more stable distributions later. LFC staff described a counterfactual: under prior law large near‑term windfalls would have boosted short‑term general‑fund receipts but exposed the budget to sharper declines later; under current law investing those windfalls produces slower, steadier general‑fund growth and higher cumulative distributions over time.

Distribution and constitutional limits: Presenters stressed that three funds are constitutionally protected—Land Grant Permanent Fund, Severance Tax Permanent Fund and the Water Trust Fund—meaning changes to their distribution rules would require voter approval. The Severance Tax Permanent Fund distribution (the fund’s constitutionally set percentage) and the Permanent School Fund (6.25% rolling five‑year average for school beneficiaries) cannot be changed without constitutional amendment.

Questions and follow‑up: Legislators asked for breakdowns of federal royalty receipts and how much is flowing to state beneficiaries, for a clearer mapping of which funds are earmarked to which purposes, and for modeling assumptions (oil prices) used in LFC stress tests. LFC and SIC staff said they would supply the requested tables and the model outputs to committee staff.

Ending: Committee members agreed to request the underlying data and stress‑test scenarios for use in future interim meetings and to examine whether targeted investment or one‑time appropriations should be used alongside the permanent funds to support local infrastructure priorities.