State predicts $1.4B budget windfall
Rallying oil prices contribute to forecast for fiscal year 2023
New Mexico’s revenue projections are like a roller coaster ride: Sometimes they’re up, and sometimes they’re down.
Well, they’re up again. But this time, they’re way, way up.
The state is projecting a nearly $1.4 billion windfall next budget year, which one lawmaker called a “generational opportunity” to make long-term investments in the state.
Recurring revenues for fiscal year 2023 are projected to reach a record high of $8.8 billion, with nearly $1.4 billion in “new money” available for spending growth, according to budget forecasts presented Friday to the Legislative Finance Committee.
“We’re going to think big,” Sen. George Muñoz, D-Gallup, said.
“We’re not going to pull around our little wagon anymore,” he said. “We’re going to load our armored trucks, and we’re going to develop and make New Mexico grow.”
Dawn Iglesias, chief economist for the Legislative Finance Committee, said expected growth in gross receipts and personal income taxes, as well as rebounding oil and gas markets, are fueling much of the jump in new money, which is the difference between the current budget and expected revenues in the next fiscal year.
“That difference — $1.4 billion — is what we’re saying is the new money that could be reallocated or could be allocated to recurring budgets,” she said.
Nora Meyers Sackett, press secretary for Gov. Michelle Lujan Grisham, wrote in an email the Governor’s Office has been conducting preliminary agencyby-agency budget meetings in recent weeks. Formal budget recommendations will be completed later this fall.
Though the process is ongoing, “I can tell you the governor’s budget priorities
have been clear throughout her term and they are unlikely to change: Public education, economic development (and recovery), environmental protection and crime and criminal justice reform,” Sackett wrote. “Within that framework is where we will continue to focus our efforts to respond to and invest in the areas New Mexicans care most about.”
Lujan Grisham is “incredibly optimistic” about the latest revenue projection, Sackett wrote.
“It underscores and validates the sound fiscal stewardship of her administration, which has, despite the unprecedented events of the last 18-plus months, put New Mexico in perhaps its best financial position in more than a decade,” she wrote.
Revenues for fiscal year 2022 are estimated to be $8.1 billion, or $632.8 million above February’s forecasts.
Revenues for fiscal year 2021 are projected to be just over $8 billion, an increase of $185 million, or 2.4 percent, from fiscal year 2020.
“Revenues are up $851.3 million from the February 2021 estimate, due primarily to higher-than-expected gross receipts tax and income tax collections that accompanied increased consumer spending and growth in high- and mid-wage employment in the first half of 2021,” according to a report to the Legislative Finance Committee. “Additionally, strong recovery in the oil and gas markets are pushing severance tax and federal royalty collections well above their fiveyear averages, resulting in large transfers to the newly created early childhood trust fund.”
Rep. Patty Lundstrom, a Gallup Democrat and chairwoman of the committee, called the projected $1.4 billion revenue increase “really great” news.
“We did a projection last January and what we saw is that we weren’t going to see as quick of a recovery with oil and gas, so we weren’t as optimistic,” she said. “I’d rather have this kind of news, you know, that we were wrong and that we got more funding.”
Oil prices rallied since the beginning of the year as COVID19 vaccines became available and business restrictions were lifted, which bolstered fuel demand, according to the legislative report.
“To date, New Mexico is the only top oil producing state to have recovered above pre-pandemic production levels,” the report states. “New Mexico’s natural gas production has accelerated as well.”
The projected increase in revenues next budget year means New Mexico will have additional resources to put into needed programs, Lundstrom said.
“What’s got me a little bit concerned, has been kind of a biter for me, is things like our pension programs,” she said. “Those pension programs need some help.”
Lundstrom said the additional revenue may allow the state to restore programs and services that had been scaled back during leaner times.
But the money would also allow the state to make new investments.
“Now that the economy has changed so much to a virtual way of life, we need to make sure we have the equipment in places to make sure it’s done properly,” she said. “We hear a lot about telemedicine. We all know about tele-education and things like that, but I just think it really in particular would help rural areas if we could have better connection to things like medicine.”
Lundstrom also said she would like to consider investing in research and development, including on hydrogen as a new alternative energy, as well as salary adjustments for state government employees.
“It’s not been good in many, many situations,” she said. “We want at least to have a living wage for folks, for goodness’ sakes.”
Lundstrom said the projected revenue growth “opens the door to a number of possibilities.”
“I’m hoping that my colleagues will agree that the economy is going to be a big piece of this,” she said. “We just need to make sure that we’re focusing on building the economy and helping people that need help.”