New Mexico’s revenue is higher so far in the current fiscal year than it was a year ago, according to the Legislative Finance Committee.
Estimated recurring revenues for Fiscal Year 2025 are $13.017 billion which is above the December estimate by $174.5 million, according to the General Fund Consensus Revenue Estimate issued by LFC economists Wednesday. The state’s fiscal year begins on July 1.
Although growth in revenue has slowed, the amount available for appropriation remains high due to fiscal restraint in recurring appropriations and higher base revenues, according to the revenue estimate.
Revenues for the next year, coming from things such as oil and gas revenue, gross receipts taxes and state income taxes, are expected to grow by 2.8 percent over the current year’s amounts to an estimated $13.382 billion.
Recurring revenue rose by $365 million; however, nonrecurring spending grew in recent years and is now teetering at being a third of annual spending, the report states.
The recurring revenues for FY 24 were up by 12.5 percent, or $1.45 billion, from FY 23.
“The state’s historic revenues have grown at a record pace propped up by booming oil and gas, durable consumer spending, inflation, strong demand for employment, and robust wage growth. Those factors contributed to nearly 20 percent revenue growth in FY22 and FY23,” the report states.
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Even though revenue grew at a slower pace in FY 24, it is still double the average growth rate of the past 20 years.
“As legislative changes to the tax code take effect and economic activity softens, revenue growth is expected to contract by 0.2 percent in FY25 and grow 2.8 percent in FY26 before returning to more typical growth of over 3 percent in FY27 and beyond,” the report states.
General Fund Financial Summary
The General Fund Financial Summary is a guide for policymakers that transmits audit reports into an overview of the state’s general fund transactions and is included in the consensus review. It is also used by investors wanting to see New Mexico’s financial health.
There are five accounts in the state’s reserves: the operating reserve, the appropriation contingency fund, the state support fund, the tobacco settlement permanent fund, and the tax stabilization reserve.
“As reserves are intended to be liquid and ready to cover shortfalls in revenues, these accounts earn inferior investment returns compared to other investments made by the state and are often identified and used for non-recurring spending,” the report states. “Only two funds, the operating reserve and the tax stabilization reserve, are true reserve funds in that their purpose is to backfill general fund revenues during downturns.”
During the 2024 regular legislative session, the legislature removed the tobacco settlement permanent fund and included the New Mexico Government Results and Opportunity (NM GRO) Expendable Trust Fund which began in FY 25 through the legislature’s passage of HB 196.
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“The ‘government results and opportunity expendable trust’ is created as a non-reverting fund in the state treasury. The trust shall consist of distributions, appropriations, gifts, grants and donations,” the bill states.
Undistributed appropriations
The general fund experiences consequences, although unintended, from appropriations that remain undistributed and therefore unused.
These include appropriations for public safety, which was discussed in the Interim Legislative Courts, Corrections and Justice Committee Aug. 13.
“What this legislature has done is allocate millions, hundreds of millions of dollars to the police, the courts, behavioral health professionals, public defenders office, to make sure that folks are getting the proper defenses that they deserve, and it’s not being spent,” CCJC Chairwoman Rep. Christine Chandler, D-Los Alamos, said during the Aug. 13 CCJC meeting.
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The consequences from funds appropriated by the legislature but not spent, or delays in fund distributions could result in “large changes in reserves,” the report states.
“In FY24, over $428.5 million of appropriations were drawn down because of delayed agency requests in FY23,” the report states.
The LFC suggests that agencies that distribute appropriations might choose “to require appropriation disbursement to avoid unintended spillovers into more restrictive accounts in the future,” the report states.
Note: This story has been updated to reflect the expected revenue amount is $365 million.