Haggarty, Walsh, & Pohl: Public Finance via Land and Resource Trusts
In Diversifying Revenue on New Mexico State Trust Lands, Mark Haggarty, Kathryn Bills Walsh, and Kelly Pohl (all Headwaters Economics), evaluate the management and investment status of New Mexico’s Land Grant Public Fund (LGP Fund), an endowment formed to retain revenues generated on state trust lands distributed to New Mexico when the state entered the Union in 1912. While most states and local governments servicing the fossil fuel industry receive and immediately spend federal revenue-sharing disbursements generated through resource extraction and production, New Mexico reserves nearly all of its resource revenues on state trust lands in the LGP Fund. New Mexico’s public schools and other public institutions are the beneficiaries of the resulting investment income, receiving millions in distributions from the endowed LGP Fund. In this report, the authors provide recommendations for the State Land Office to better diversify revenue from the LGP Fund to be more resilient against the eventual decline in fossil fuel revenues.
In particular, the authors identify four land management activities they believe have the greatest potential to diversify and grow revenue for the LGP Fund, based on interviews with State Land Office staff, staff in other state land offices, as well as with trust management, economic development, natural resources, and fiscal policy experts. First, the authors suggest the expansion of renewable energy generation, transmission, and storage on state trust lands. Second, the authors advocate for diversification of commercial activities on state lands with high real estate and development potential. Third, the authors advise expanding New Mexico’s outdoor recreation industry beyond revenues from permit purchases. Fourth, the authors advocate for conservation investments on state lands, possibly through increasing leases and partnerships for conservation and/or participation in carbon markets.
New Mexico is currently in a much better position than many other rural state and local governments reliant upon the boom and bust of fossil fuel revenue-sharing to fund their schools, infrastructure, and other services. The authors’ case study of economic diversification specific to New Mexico’s LGP Fund is valuable as an early study in how an endowment structure like this can provide durable, predictable revenue for beneficiaries.
This digest was written by Addison Schneider, a 2023 graduate from the University of Nebraska College of Law with a concentration in Litigation Skills. This digest was prepared as part of Professor Jessica Shoemaker's Rural Lands Seminar.
