(The Center Square) – Should New Mexico offer its citizens a permanent fund dividend based on oil and gas revenue?
Megan DeLaRosa, interim chairwoman of the Southwest Public Policy Institute, is advocating for the proposal.
She wants New Mexico to create a program similar to the Alaska Permanent Fund Dividend, which provides money to state residents. In Alaska, the dividend has ranged from several hundred dollars to $2,000 annually.
Given that New Mexico ranks 45th out of 50 states in median household income at about $54,000 per year, DeLaRosa thinks a dividend could lift families out of poverty and provide them with some much-needed help.
“A permanent fund dividend can directly put money into the pockets of residents, effectively raising their annual income,” DeLaRosa told The Center Square in an email message. “This can especially benefit households with incomes below the median, thereby reducing the overall income disparity. Such a dividend could provide immediate financial relief to residents, giving residents a more equitable share of the state’s resources and lifting many out of poverty.”
Not only does DeLaRosa think the money will help families pay bills, but she also thinks it will help the state’s economy.
“When residents receive and spend their dividends, there’s an influx of cash into local businesses,” DeLaRosa told The Center Square. “This increased consumer spending can lead to growth in sectors, such as retail, services, and hospitality. Additionally, with more money in circulation, there could be increased investments in housing and education, as families might consider using their dividends for long-term benefits like home improvements or furthering education. Other sectors, like local manufacturing or arts and culture, might also grow as residents have additional disposable income.”
One potential issue a permanent fund based on oil and gas revenue may face is volatility. Prices and demand for oil and gas fluctuate based on many factors, meaning the state will not collect a consistent amount of revenue from it from year to year.
If the permanent fund dividend became law, DeLaRosa said the state should prepare for the lows to ensure people can get a decent rebate in down years.
“The Institute proposes setting aside a portion of the state’s permanent fund surplus to build a financial safety net. This ensures the dividend’s longevity, even if oil revenues decrease,” DeLaRosa said. “By creating a buffer with the surplus, the state can protect against future downturns and still continue to pay dividends, ensuring stability despite the inherent volatility of oil and gas prices.”
Critics of the plan may argue that giving money from the state directly to the people leaves less money available for the government to increase spending in various sectors.
DeLaRosa understands the concern but does not think offering New Mexico residents dividend payments would worsen the services provided by the state.
“Critics’ concerns about potential reductions in investments for infrastructure, education, or healthcare are valid,” DeLaRosa said. “However, if modeled after the Alaskan system, only a portion of the surplus is allocated to residents as dividends. The state would still retain a significant portion of the surplus for investments in key areas. Therefore, with proper fiscal management, both goals — benefiting individual citizens and funding state projects — can be achieved simultaneously. It doesn’t have to be an either/or scenario.”
The Southwest Public Policy Institute offers more information on its dividend proposal here.
