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Oversight panel briefed on Tobacco Settlement Permanent Fund growth, shifting program appropriations
Summary
Staff told lawmakers that a 2023–24 law change now directs all Master Settlement Agreement receipts into a permanent fund (with 4.7% flowing to a program fund). The permanent fund has grown, but program appropriations — including Medicaid support — have shifted and agency FY27 requests exceed current appropriations.
State staff gave lawmakers a detailed briefing on the Tobacco Settlement Permanent Fund and the separate tobacco settlement program fund, explaining how a recent change in state law altered where Master Settlement Agreement (MSA) revenue is held and how much is available for programs.
Ruby Ann Esquivel, who presented the one‑page financial summary, said the legislature in 2024 enacted a change that stopped splitting annual MSA receipts 50/50. "All of it goes into the tobacco settlement permanent fund," she said, and "4.7% is then goes of that amount into the tobacco settlement program fund that's available for appropriation." The permanent fund is now invested with the goal of growing the corpus and generating returns to support programs over time.
Esquivel walked the committee through the briefing document and the three sections it contains: the top lines show the permanent fund balance and investment gains or losses; the middle lines show the program fund balance available to appropriate; and the bottom lines list program appropriations. She said the FY24 beginning balance for the permanent fund was $330,826,400 (dollars shown in thousands on the table) and that projections show the ending permanent fund balance rising toward roughly $471.9 million by FY27, depending on market performance.
The briefing noted several budgetary shifts. Funding previously paid to the University of New Mexico Health Sciences Center for items such as instruction, research, poison control and pediatric oncology has been moved off the tobacco program fund and into UNM’s regular general‑fund appropriation starting in FY25; Esquivel said the overall levels of support did not decline, only the revenue source changed. By contrast, she highlighted a trend in which appropriations from the tobacco program fund for Medicaid support declined from FY25 actuals into the current operating year. The Health Care Authority has requested higher funding for FY27 than was appropriated for the current year.
Committee members asked staff how to read investment gains and whether the fund is intended to reach a point where returns, rather than settlement receipts, fund programs. Esquivel confirmed that the statutory framework anticipates the fund producing investment returns that can be used for program support once the corpus and the law’s triggers are satisfied, and she noted the State Investment Council’s asset allocation choices will influence year‑to‑year performance.
Esquivel also flagged a new program line: the PAC program grew from about $5.0 million in FY24 to $5.4 million in FY25 and FY26, and the Department of Health has requested $7.1 million for FY27. She said the legislature will ultimately decide whether to appropriate that higher amount.
Action: the committee approved the minutes from its previous meeting by voice vote during this session.
What happens next: staff will continue to update projections and the Department of Finance and Administration will adjust appropriations in the spring based on actual MSA receipts and investment performance.
