State looks to diversify economy, rely on ‘volatile’ oil and gas revenue less

This week, Intel announced it would hire 300 more employees. Those new hires would bring the number of employees at its massive Rio Rancho plant to around 1,500, well below the peak of nearly 7,000 employees, decades ago. Economic Development Department Secretary Alicia J. Keyes called it “good news” as the state tries to diversify […]

State looks to diversify economy, rely on ‘volatile’ oil and gas revenue less

This week, Intel announced it would hire 300 more employees. Those new hires would bring the number of employees at its massive Rio Rancho plant to around 1,500, well below the peak of nearly 7,000 employees, decades ago.

Economic Development Department Secretary Alicia J. Keyes called it “good news” as the state tries to diversify its economy.

Diversifying the economy has been a rallying cry for years, as the state has increasingly been reliant on oil and gas money to balance the state budget.

If the most recent Legislative Finance Committee hearing last week is any indication, those efforts are still a work in progress.

“New Mexico is unlikely to ever have a revenue source that can make up everything we get from the oil and gas industry but that doesn’t mean we shouldn’t aim for a predictable, solid tax base that acts as a foundation for the less reliable energy industry tax revenue,” Sen. John Arthur Smith, D-Deming, wrote in the May LFC newsletter.

LFC Director David Abbey told legislators during last week’s meeting that the state has only grown more dependent on oil and gas in the last decade.

A report found that direct revenues from oil and gas rose from about 26 percent of the state’s general fund revenues to an estimated 35 percent for the current fiscal year—and that number could end up even higher by the end of this fiscal year. Abbey described it as a “volatile” revenue source.

If you include the state’s permanent funds, he said, “we’re pushing close to 50 percent of revenues coming from energy.”

This is largely due to the record amount of oil production in the state. The amount of daily oil production “increased by more than 160 percent between 2012 and 2018,” according to the LFC May 2019 newsletter.

Boon to the budget

The money flowing into the budget is welcome. The rule of thumb is that a million barrels of oil generates about $3 million for the general fund; New Mexico is projected to produce 290 million barrels of oil by July, blowing through the 250 million barrel projection in December 2018. In 2016 and 2017, the Legislature and then-Gov. Susana Martinez slashed state funding largely because of a drop in oil prices and production.

Then, when production and prices rebounded, the state saw a much better budget situation.

The most recent budget signed into law by Lujan Grisham included an 11 percent spending increase over the previous budget. But the budget also included large reserves, though not quite as large some deemed prudent.

“We can, and have, taken steps to create an adequate cushion for the inevitable downturns in the industry – with revenue reserves now at 20 percent of spending levels – but we need to do more to prevent those downturns from hitting the state so hard,” Smith said.

Another effort by the Legislature, and signed into law by Martinez, was a bill to expand a tax stabilization reserve fund by using excess oil and gas revenue to protect against future revenue downturns.

Any money from oil and natural gas taxes that exceeds the five year average of oil and gas tax collection will go into the new fund.

State efforts

Bruce Krasnow, a spokesman for the Economic Development Department, said that Keyes is “very aware of the role that [oil and gas] revenue plays in the state.”

But he said the question becomes what to do with the “spoils” from oil and gas activity.

“Now’s the time to kind of be strategic and look at these sectors that make sense for New Mexico.”

Krasnow mentioned film and TV, manufacturing, aerospace, outdoor recreation and other industries that could see a benefit from LEDA grants and job training funds.

He pointed to the Intel announcement as well as the announcement of 100 new jobs from Virgin Galactic as two of the examples of diversifying the state’s economy.

Still, the efforts won’t all be seen immediately.

“It’s a long game. You can’t just flip a switch and make it happen,” Krasnow said. “It’s a sustained effort.”

We're ad free

That means that we rely on support from readers like you. Help us keep reporting on the most important New Mexico Stories by donating today.

Related

Emily’s List endorses seven candidates for Legislature

Emily’s List endorses seven candidates for Legislature

Emily’s List, a nonprofit that supports women candidates and reproductive rights, endorsed seven incumbents facing general election opponents in New Mexico legislative elections. All…
Equality New Mexico endorses 15 legislative candidates

Equality New Mexico endorses 15 legislative candidates

A New Mexico-based LGBTQ rights organization endorsed 15 candidates for state House and Senate seats for the 2024 elections.  Marshall Martinez, executive director of…
Lujan Grisham pocket vetoes two bills

Lujan Grisham pocket vetoes two bills

Gov. Michelle Lujan Grisham pocket vetoed two bills the legislature passed this legislative session: one changing the Cybersecurity Act and the other concerning law…
BLM announces final methane waste rule

BLM announces final methane waste rule

The federal Bureau of Land Management announced its final methane waste rule on Wednesday. These new regulations clamp down on the practice of venting…
What consumers, farmers should know about the flu impacting dairy cows

What consumers, farmers should know about the flu impacting dairy cows

Migrating birds appear to have caused a virus in dairy cattle that is causing reduced milk production. So far, the disease, which initially started…
Republicans seek to limit national monument designations

Republicans seek to limit national monument designations

Republican-backed legislation in the U.S. Congress would make it harder for the government to designate new national monuments. The proposed Congressional Oversight of the…
Amid new graduation requirements, what do high schoolers want to learn?

Amid new graduation requirements, what do high schoolers want to learn?

By Margaret O’Hara, The Santa Fe New Mexican The main things that bring Brayan Chavez to school every day: Seeing, talking to and engaging with…
Special ed teachers hope lawmakers OK pay raises, admin changes

Special ed teachers hope lawmakers OK pay raises, admin changes

By Margaret O’Hara, The Santa Fe New Mexican Brittany Behenna Griffith has a laundry list of adjectives to describe the ideal special education teacher:…
Lawmakers must find consensus on competing education spending plans

Lawmakers must find consensus on competing education spending plans

By Margaret O’Hara, The Santa Fe New Mexican A challenging task awaits New Mexico lawmakers in the next 30 days: Reconciling three very different…
Health workers fear it’s profits before protection as CDC revisits airborne transmission

Health workers fear it’s profits before protection as CDC revisits airborne transmission

Amy Maxmen, KFF Health News Four years after hospitals in New York City overflowed with covid-19 patients, emergency physician Sonya Stokes remains shaken by…
Lujan Grisham, Biden admin announce $10 million in federal funds for tribes, pueblos

Lujan Grisham, Biden admin announce $10 million in federal funds for tribes, pueblos

Gov. Michelle Lujan Grisham announced Friday $10 million in funding from the federal American Rescue Plan Act was awarded to six tribal nations and…
Proposal to curb executive powers moves to House Judiciary

Proposal to curb executive powers moves to House Judiciary

The House Government, Elections and Indian Affairs Committee discussed a potential constitutional amendment that seeks to limit the governor’s executive powers. The committee approved…
Senators introduce legislation to aid abortion providers

Senators introduce legislation to aid abortion providers

Sen. Martin Heinrih and other Senate colleagues introduced abortion rights legislation into the U.S. Senate on Thursday. The Abortion Care Capacity Enhancement and Support…
U.S. Supreme Court hears case to restrict access to medication abortion

U.S. Supreme Court hears case to restrict access to medication abortion

The U.S. Supreme Court heard the case about the regulations around mifepristone, one of a two-step regime for abortion medication, on Tuesday. FDA v.…
At stake in mifepristone case: Abortion, FDA’s authority, and return to 1873 obscenity law

At stake in mifepristone case: Abortion, FDA’s authority, and return to 1873 obscenity law

Lawyers from the conservative Christian group that won the case to overturn Roe v. Wade are returning to the U.S. Supreme Court on Tuesday in pursuit…
Senators introduce legislation to aid abortion providers

Senators introduce legislation to aid abortion providers

Sen. Martin Heinrih and other Senate colleagues introduced abortion rights legislation into the U.S. Senate on Thursday. The Abortion Care Capacity Enhancement and Support…
New Mexico Medicaid to cover cost of over-the-counter oral contraception

New Mexico Medicaid to cover cost of over-the-counter oral contraception

New Mexico Medicaid announced on Wednesday that it will cover the cost of Opill, the first oral contraception approved for over-the-counter use. It is…
U.S. Supreme Court hears case to restrict access to medication abortion

U.S. Supreme Court hears case to restrict access to medication abortion

The U.S. Supreme Court heard the case about the regulations around mifepristone, one of a two-step regime for abortion medication, on Tuesday. FDA v.…
San Juan County, Navajo Nation settle redistricting case

San Juan County, Navajo Nation settle redistricting case

The Navajo Nation and San Juan County reached an agreement Monday about commission districts after the tribe alleged that its members were not adequately…
MIT ranks NM elections most well-run in the U.S.

MIT ranks NM elections most well-run in the U.S.

New Mexico’s 2022 election was ranked most well-run in the country by Massachusetts Institute of Technology’s Election Data and Science Lab’s Elections Performance Index.…
Emily’s List endorses seven candidates for Legislature

Emily’s List endorses seven candidates for Legislature

Emily’s List, a nonprofit that supports women candidates and reproductive rights, endorsed seven incumbents facing general election opponents in New Mexico legislative elections. All…
Ex-GOP candidate allegedly hired people to kill witnesses in shootings of homes of Democratix politicians

Ex-GOP candidate allegedly hired people to kill witnesses in shootings of homes of Democratix politicians

Republican failed state house candidate Solomon Peña is facing more federal charges, this time on a murder-for-hire scheme.  Peña allegedly tried to hire two…
BLM announces final methane waste rule

BLM announces final methane waste rule

The federal Bureau of Land Management announced its final methane waste rule on Wednesday. These new regulations clamp down on the practice of venting…
U.S. Supreme Court hears case to restrict access to medication abortion

U.S. Supreme Court hears case to restrict access to medication abortion

The U.S. Supreme Court heard the case about the regulations around mifepristone, one of a two-step regime for abortion medication, on Tuesday. FDA v.…

GET INVOLVED

© 2023 New Mexico Political Report