1. Early Childhood Education Revenue Options New Mexico Early Childhood Development Partnership December, 2013 1

2. New Mexico is moving in the right direction, But…..  This year, New Mexico will spend $78 million in state funds on home visiting, child care assistance and Pre K.  This is a huge improvement over where we were just a few years ago.  About 20,000 children ages 0-5 now receive these essential services.  Some state subsidized ECE is high quality, but most is not.  Over 70% of child care assistance slots are level 2 or unregulated 2

3. New Mexico Must Do More  To make measurable improvements in child well-being and long-term outcomes NM must increase its investment :  Cover more children  Improve the quality of state-paid services We estimate that these improvements will cost about $119 million 3

4. $119 Million is A Lot of Money…. 4

5. But So Is:  $71 million for juvenile justice  $270 million for corrections  $105 million for TANF  $500 million for special education  $158 million for mental health and substance abuse treatment* * SAMSHA http://store.samhsa.gov/shin/content//SMA08-4326/SMA08-4326.pdf) 5

6. Where Do We Get $119 Million? We explored many options:  Tax increases  New Taxes  Public-private partnerships  Tobacco Settlement  Local financing strategies  Land Grant Permanent Fund 6

7. Local Revenue Options: Community Children’s Trust  Independent local entity whose sole mission is to fund children’s programs  Voter-approved special district and local revenue source specifically created to fund the Trust.  Locally governed and funded – maximally responsive to local needs, priorities and values  Provides coordination and leadership on children’s initiatives and administers funding to children’s programs through a competitive grant making process  Conducts research, identifies needs, tracks improvements in child well-being and makes grants for ECE  Could generate enough revenue in some communities to make a meaningful difference in access and quality at the local level  Special district and new taxing authority would both require state statute and local voter approval.  Not a viable alternative for communities with limited tax base 7

8. Social Impact Bonds 8  Contracts between a non-profit, a private investor, and a government entity in which the investor loans the non-profit money to implement a high-impact social program on behalf of the government entity.  If the program improves outcomes the government entity pays the non-profit a portion of its cost savings  The non-profit then repays the private investor.  If the program does not improve outcomes, the government does not pay the non-profit and the non-profit does not have to pay back the loan.  Reduce inmate recidivism and divert young offenders from the juvenile justice system (NYC)  Prevent asthma hospitalizations (Fresno, Ca.)  High quality public pre k (Salt Lake City)  Unproven, with limited revenue potential (approx. $10m)

9. Increase or Earmark General Fund Taxes  Equalize Emergency School Tax Rates for Oil and Gas -- $57m  Increase liquor excise tax -- $45m  Implement a “junk food” tax -- $50m  Earmark part of the new Insurance Premiums Tax revenue for ECE -- $40m 9

10. Master Settlement Agreement A highly uncertain and declining revenue source  For 2014, $9.5 million of New Mexico’s anticipated $39 million in MSA revenue was appropriated for ECE.  An arbitration ruling in September is expected to reduce MSA payments by between $12 and $25 million this year, and subsequent rulings could reduce revenue a lot more.  General fund should replace the MSA revenue that was appropriated for early childhood in the 2014 session. 10

11. Land Grant Permanent Fund  Amend the Constitution to increase the annual distribution and earmark most of the new revenue for ECE.  Generates substantial revenue without raising taxes or reducing funding for other programs  Increasing the distribution from 5% to 6.5% and earmarking 66% of the new revenue for ECE would generate approximately $100 million in new ECE funding annually.  Reduces Permanent Fund earnings, which over the long run will result in smaller distributions to all beneficiaries  Current proposals lack a spending plan 11

12. We Concluded… There are numerous ways the state can increase revenue for ECE, some are better than others, none is perfect. The ultimate solution may be a combination of two or more On the other hand, increasing revenue from new or existing taxes and/or royalties may not be necessary, if we prioritize ECE in the General Fund budget. 12

13. The Revenue Picture is Getting Brighter…. General fund revenue outlook is positive for the next several years.  Economic Recovery  Additional Insurance Premiums Tax due to ACA  Projected strength in oil and gas Projected General Fund Revenue and Expenditure FY15FY16FY17FY18FY19FY20 Recurring Revenue$6,189$6,361$6,514$6,710$6,911$7,119 Total Recurring Appropriations $6,078$6,248$6,422$6,601$6,781$6,966 Surplus/(Deficit)$111$113$92$109$130$153 13

14. By Devoting 29% of New GF Revenue Each Year for Six Years We Could Reach Our Goal 14

15. Thank You 15