Font ResizeSANTA FE - Asked to earn the highest rate of return, the State Investment Council often is asked also to stimulate the economy through so-called economically targeted investments.
One of those targeted investments exposed the strain between the two missions Tuesday. And the film industry, no stranger to controversy, was at the center.
"If our responsibility is to maximize the permanent funds, every time you get into one of these, it puts us into a compromising situation," Lee Rawson said. The former Republican lawmaker was speaking of the seeming mixed message of the investment council being asked to earn the highest rate of return for the state's $14 billion in permanent funds while simultaneously making $243 million in zero-percent loans to 24 film and TV productions in recent years.
Since 2002, the agency has approved the zero-percent loans to try to help build up the film community.
Often overshadowed by the state's film production tax credit program, the SIC's low-profile loan program hasn't yet been dragged into the white-hot debate over the merit of giving incentives to the film industry at a difficult financial time when New Mexico is struggling to close a projected budget shortfall between $200 million and $450 million.
How long the program will remain under the radar is unclear, especially given the at-times tense discussion Tuesday by SIC members. The debate bore similarities to the high-profile discussion of whether to reduce the state's film production
Rawson sounded a similar note about the SIC's film-loan program.
"I'm not saying films aren't good," Rawson said. "But ... we should transfer this whole program to the New Mexico Finance Authority who's in the business of making loans and who's in the business of economic development. Let them do what they do well. And let us do what we do well."
Rawson even suggested the SIC should tell the governor and state lawmakers in a letter that "given the past performance that investments in film do not meet our fiduciary responsibility."
Some SIC members thought the action might give pause to film or TV productions contemplating whether to shoot projects in New Mexico.
SIC member Doug Brown said it might send "a big signal at a difficult economic time" to some of those companies that "this is a very unwelcome place."
Fellow council member Catherine Allen added that Utah already is using New Mexico's debate over whether to reduce incentives to the film industry as a potential recruiting tool.
"We have to be very careful of what signals we send," Allen said.
Members recognized the potential for the SIC's lower-profile film loan program getting dragged into the larger fight over the film incentives. One piece of legislation already introduced by Rep. Dennis Kintigh, R-Roswell, would reduce to $115 million the cap the SIC could have in outstanding loans to TV and film productions. Currently, the SIC is capped at $227 million.
"This issue of the loans is not currently in the public debate," said Richard May, Gov. Susana Martinez's budget secretary and an SIC member. "But you never know. It might. Some further clarity from the Legislature about these loans could be something that could come up over the next 50 some odd days."
Borrowing to close the state's budget shortfall
SIC, once a below-the-radar agency for much of the public, has risen in profile in the past two years as an agency at the center of federal investigations.
More than 20 bills, so far, have been filed this session, some dealing with the membership of the Council itself.
But members were concerned about a different piece of legislation Tuesday, one that would use the SIC as a tool to help address the budgetary shortfall.
Introduced by Sen. Majority Leader Michael Sanchez (SB1), would authorize New Mexico to issue up to $300 million in bonds. But instead of selling the bonds on the open market, the state would ask the State Investment Council to buy the bonds with money from New Mexico's permanent funds. Proceeds from the sale would then be used to help plug all or part of the hole in the state operating budget for the year that starts July 1.
Some members said Tuesday that they worried about the state-issued bonds yielding a smaller rate of return than the Council could earn investing in other financial products.
"We want to make sure that we're not accepting 4-percent bonds when we could be investing in 6-percent bonds," Brown said. "That is the big threshold issue.
Other members questioned the wisdom of borrowing to close the state's budget gap.
"I thought as a layman that wasn't allowed. I thought you couldn't cover a budget deficit with borrowing," SIC member Peter Frank said.
Sanchez said Tuesday borrowing from the the state's permanent funds would cushion the pain many New Mexicans would feel if programs were cut.
"In my opinion, it's a way to get past the rut we're in and move forward," Sanchez said.
Contact Trip Jennings at (505) 986-3050 or at tjennings@sfnewmexican.com.
