NM revenue windfall could exceed robust projections

Economists propose sufficient cash reserves in case of another downturn

SANTA FE — New Mexico’s revenue bonanza could be even more robust than previously projected.

Revenue levels for the current budget year were tracking about $30 million higher than expected through August and record-high projections for the coming fiscal year could be revised upward even more when new estimates are released next month, a top legislative economist said Monday.

That could mean more available money for lawmakers to spend on public schools, health care programs and infrastructure improvements — or to set aside in case of a budget downturn.

While Gov. Michelle Lujan Grisham and an influential legislative panel won’t release their budget recommendations until just before a 30-day legislative session starts in January, a top state budget official said lawmakers should keep ample cash reserves — of at least $2 billion — given big recent revenue swings.

“We want to make sure we have a good buffer in case we have another downturn, which we hope we don’t,” Finance and Administration Secretary Debbie Romero told lawmakers during a meeting of the legislative Revenue Stabilization and Tax Police Committee at the state Capitol.

Much of the state’s recent revenue windfall is due to record-high oil production — and high oil prices — that has made New Mexico the nation’s second-highest oil producer, behind only Texas.

“Production is booming after bottoming out earlier during the pandemic,” said state Taxation and Revenue Secretary Stephanie Schardin Clarke.

But data presented Monday also showed improving economic activity in retail and other sectors, along with higher-than-expected personal income tax collections.

New Mexico’s economy has not recovered uniformly from the pandemic, however, as employment in high and medium-wage jobs — or those paying $27,000 per year or more —has increased since January 2020 while the number of individuals employed in low-wage jobs remains

below pre-pandemic levels, according to state Taxation and Revenue Department data.

Meanwhile, revenue estimates released by executive and legislative economists in August projected lawmakers could have nearly $1.4 billion in “new” money available for the budget year that starts in July 2022 — a figure that represents the difference between expected revenue and the state’s current $7.4 billion budget.

The revenue total does not include more than $1.5 billion that is projected to automatically flow into a state “rainy day” fund and an early childhood endowment fund over the next two years — under changes enacted in 2017 and 2020 to set aside some money in cash-flush years.

It also does not include roughly $1.1 billion in federal relief funds from the American Rescue Plan Act, after the state Supreme Court ruled last week Lujan Grisham can not spend the money without legislative approval.

Rep. Patricia Lundstrom, D-Gallup, the chairwoman of the House Appropriations and Finance Committee, said

Monday a spending plan for those federal dollars will likely be included in the budget bill lawmakers pass during the upcoming 30-day session.

“We’re very pleased to see everything trending upward,” Lundstrom told the Journal.

She also said a large chunk of the overall revenue windfall will likely be spent on one-time expenditures, instead of being built into the state’s recurring budget.

Approving a new state budget will be atop lawmakers to-do list for the 30-day session, which begins Jan. 18.