Analysts told lawmakers projections show New Mexico will have $1.1 billion in “new money” to spend compared to last year. But they also urged caution on how to spend that money, given the state’s reliance on volatile oil and gas revenues and the need to replace the money legislators used money from various state programs in recent years.
Members of the Legislative Finance Committee, which hears regular budget updates throughout the year, were briefed on the numbers from their chief economist and members of outgoing Gov. Susana Martinez’s cabinet.
The sky-high budget numbers were slightly lower than the August forecast, but still much higher than the state has seen since 2005, before the Great Recession of the late 2000s.
The budget boom doesn’t necessarily mean that legislators will fund new recurring programs.
Committee chairwoman, and House Appropriations and Finance Committee chairwoman, Patty Lundstrom, outlined in the most-recent LFC newsletter where the money would likely go.
“The surplus money is like a Christmas bonus. It’s best used for one-time expenses, like a new dishwasher or to catch up on a bill,” the Gallup Democrat wrote. “On a state level, it will likely be used to cover unexpectedly high expenses in some agencies, to replace revenue in funds that were drained during the fiscal downturn, and to buy equipment outside the regular operating expenses of agencies. There is also talk of using some of it to pay for construction projects usually covered with the long-term debt provided through severance tax bonds.”
Legislators will decide how to spend the money during the 2019 legislative session, and Gov.-elect Michelle Lujan Grisham will be sworn in on Jan. 1. Governors typically provides a budget proposal, which can influence what the Legislature decides to tackle.
According to the December LFC report on the consensus revenue estimate, 80 percent of the growth in revenues between Fiscal Year 2018 and the projections for Fiscal Year 2019 “is related directly to the oil and gas industry through severance taxes, rents and royalties, and gross receipts taxes.”
The report also outlined why this could pose problems for the state in the future, and cautioned legislators when creating the budget.
“A sharp decline in oil prices and production activity could create a fiscal challenge far more severe than a moderate recession,” the report states.
And oil prices have fallen since the last revenue projection. The price of West Texas Intermediate dropped from $70.75 to $50.96 per barrel since October. The last federal numbers from the Energy Information Administration for oil production in the state is from September, which showed record highs.
The large amount of money gained by lease sales is also not likely to to continue, the report states because lease sales are “heavily dependent on market conditions at the time.”