Letter to the Editor: Constitutional Amendment #5 Is A Finagle That Needs To Be Defeated

Former State Representative
Former CABINET Secretary for Finance and administration
Former Member of the State Investment Council

Constitutional Amendment #5 is a sleeper that might well pass because it is not easy to understand.

It allows investment of the Land Grant Permanent Fund without the protection of the Prudent Man Rule that has governed the State Investment Council (SIC) management  of the Fund  and served us well since statehood. This rule states that one would make investments of trust money as one would for their own portffolio with essentially minimum risk.

The proposal removes this rule and substitutes a new rule that would give the SIC (under the Uniform Prudent Investor Act (UPIA)  the leeway to legally make risky investments. This proposal is a replacement for the Prudent Man Rule. It could be a disaster.  Investments would not be considered individually as with the Prudent Man Rule but in consideration of the Permanent Fund as a whole. As such low grade stocks or bonds, etc. with high yield but with high risk could be bought as long as the rest of the portfolio consists of low risk, high quality assets.

Alas, when the market drops, the value of that risky stock would fall and the Permanent Fund along with the people of New Mexico would be losers. An effort to keep a balance between assets could lead to churning and a lot of money would be lost in fees.

Under UPIA third party investors are allowed, for a fee, which could be substantial, or a double commission (remember Pay to Play). Junior liens and derivatives, etc. would be allowed as investments. The State of New Mexico has already adopted the UPIA for all other funds than the Land Grant Permanent Fund and that allowed bad investment practice under a previous administration. It is the only fund that politicians cannot easily get into and that is our Land Grant Permanent Fund, protected by the State Constitution. It takes a constitutional amendment and a vote by the citizens.

This Constitutional Amendment #5 is a finagle that needs to be defeated.