An oil and gas bonanza in Southwestern states may be helping to drive the continuing national economic boom. The nation’s 4.2 percent growth in GDP, estimated last month by the Bureau of Economic Analysis, is the highest quarterly growth since 2014. State estimates aren’t due until mid-November, but many experts see oil and natural gas drilling, driven by higher prices, as a leading reason. “The states that contribute most might be the ones with strong increases in energy production,” including Texas, New Mexico and Colorado, said Mark Perry, an economist at the University of Michigan and an economic analyst for the conservative-leaning American Enterprise Institute. GDP measures gross domestic product, or the value of all goods and services produced in a given period of time.
The latest New Mexico revenue projections appear to be convincing economists and state officials there is enough money to finance state government through June without resorting to government furloughs. “Based on the projections we see, yes, I think there are adequate funds,” Deputy state Treasurer Sam Collins told NM Political Report. New Mexico State University economics professor Jim Peach recently gave the Santa Fe New Mexican a similar answer. But Gov. Susana Martinez, who has been threatening furloughs for a month, had a different take. Martinez spokesman Michael Lonergan warned that the state still may not have enough cash on hand to avoid furloughs and is calling on the state Legislature to fix this in a special session.
While state lawmakers continue to slash budgets, unemployment remains high, and more uncertainty than ever surrounds federal government policies, economists said Tuesday that New Mexico’s economy has stabilized and will see an uptick in growth in the coming year. In testimony before the Senate Finance Committee, economists from the state’s two largest universities said higher energy prices are helping boost growth, and that means higher employment and income levels throughout New Mexico by 2018. Jeff Mitchell, director of the University of New Mexico’s Bureau of Business and Economic Research, said that when he spoke to lawmakers a year ago, the price for a barrel of West Texas Intermediate crude had slumped to $26.60. That benchmark as of Tuesday had climbed to almost $53. “I remember sitting here a year ago and we watched it go to $26.60,” Mitchell said.
During September’s special legislative session, lawmakers agreed on fixes that added about $23 million in revenue. That was a start, but not nearly enough to solve the state’s budget crisis. On Wednesday, state legislators received little good news about the state’s revenue stream during a committee meeting. Even with that help, New Mexico’s bean counters dropped their revenue projections for the current fiscal year from previous estimates by more than $130 million. The state’s current fiscal year began in July and ends next June.
Just months before Donald Trump’s surprise victory to the nation’s top office, Gov. Susana Martinez penned an op-ed about a bright spot in New Mexico’s otherwise weak economy. That bright spot is also a geographical location—the border. “We are quickly positioning our state as a gateway of international trade throughout the Americas,” Martinez wrote in June, “and we are embracing our newly found leadership role, which wouldn’t be possible without the cross-border relationships we’ve built.”
Related: Why Trump would almost certainly be violating the Constitution if he continues to own his businesses (by ProPublica)
Last year, for example, Las Cruces and Santa Fe, respectively, ranked as the two metropolitan areas in the nation with the highest economic growth in exports. In 2012 and 2014, New Mexico also led the nation in export growth. Nearly half of these exports—45 percent—are shipped south of the border.
The state’s budget situation and the fix to solve a budget deficit mean that it will cost more to borrow money. That’s the news from Moody’s Investor Service. The bond-rating agency dropped New Mexico from the top rating of AAA to the next level of AA1, still a very high bond rating. According to Jeff Mitchell, the director of the Bureau of Business and Economic Research at the University of New Mexico, the downgrade itself will not be very impactful or have any significant effect on the state. “It’s not, however, a good sign,” Mitchell said.
Economic headlines for New Mexico have rarely been good in recent months. In November and December, the state led the nation in highest unemployment rate. In January, New Mexico improved, but only to 49th. Stories abound of people moving out of the state to states with better economic climate. Which brings to mind the “r” word that everyone dreads when it comes to the economy: Recession.
Two experts gave a presentation of a grim scenario about oil and gas prices on Wednesday afternoon. The two spoke to the Senate Finance Committee, which plays a key role in crafting the annual state budget. Jeff Mitchell, director of the University of New Mexico Bureau of Business and Economic Research and Dr. Jim Peach, Professor of Economics at New Mexico State University outlined the problems—with few solutions—that New Mexico faces in the wake of tumbling oil prices. Mitchell’s outlook, which was slightly better than Peach’s, was that while the state is still reeling from low oil prices, the employment impact of low oil prices should wear off by 2016. Mitchell added that lower gas prices also means more savings for consumers at the pump, which generally leads to more money spent on goods and services throughout the state.