New Mexico endowment, pension funds gain during quarter but remain down by $2 billion

NM investment funds improve with market gains

SANTA FE, N.M. — New Mexico’s public investment funds gained almost $3 billion during the last quarter as financial markets rallied, but they still haven’t recovered from losses suffered over the past two years.

The state’s largest permanent and pension funds of the Public Employees Retirement Association and the Educational Retirement Board had combined asset values of $30.2 billion at the end of September. That’s down $2 billion, or 6 percent, from a year ago, according to a report to lawmakers on Monday by an economist for the Legislative Finance Committee.

However, the funds gained nearly $3 billion, or 11 percent, for the quarter that ended in September.

Performance of the permanent funds is critical for New Mexico because they provide more than 10 percent of revenue for the state’s main budget account, which finances public education and government operations such as prisons and health care for the poor. The permanent funds provide yearly distributions of money based on a five-year average of their balances.

Investment earnings are important for the pensions funds in covering future benefits for retired government workers and educational employees.

Despite quarterly gains, the one-year and five-year investment performance of the funds, except for the educational pension program, ranks low compared with other endowment and public funds across the country, lawmakers were told.

New Mexico’s funds were worth almost $39 billion in September 2007, but that plunged because of a global meltdown in financial markets.

According to the LFC report:

— The Land Grant Permanent Fund was valued at nearly $8.7 billion at the end of September. That’s up 9.4 percent for the quarter but down 9 percent from the end of September 2008.

— The Severance Tax Permanent Fund was worth nearly $3.4 billion, a quarterly gain of 7.9 percent but down 13.8 percent from a year ago.

— PERA had assets valued at almost $10.2 billion, a quarterly increase of 12.4 percent but down 5.1 percent from a year ago.

— ERB had fund assets of $7.9 billion, up 12.2 percent for the quarter and a decline of 0.8 percent from a year ago.

Senate Majority Leader Michael Sanchez has proposed taking $2 billion from the Land Grant Permanent Fund to help pay for critical governmental programs during the next few years because the state expects continuing budget problems from weak revenue collections.

If $2 billion is removed, the fund is estimated to provide $342 million to the state’s main budget account in 2017 rather than $429 million if no changes are made, LFC economist Dan White told members of the Investments Oversight Committee.