Sen. George Muñoz, D-Gallup, said the potential funding provides a “big time” opportunity for lawmakers to make some positive differences on a number of fronts, including with New Mexico’s public schools, which are often ranked near or at the bottom in national reports.

“No one in this state’s history has ever had this opportunity, and if we don’t use this opportunity to fix problems within our agencies, fix problems within our schools, then we’re going to lose out,” he said.

He urged lawmakers to target additional revenue toward specific initiatives rather than to give into the wishes and desires of special-interest groups and lobbyists.

This “new money” is a boon for lawmakers and Gov. Michelle Lujan Grisham, giving them more financial capacity to enact initiatives during the upcoming 2023 legislative session, set to begin Jan. 17.

“New Mexico today has the opportunity to reach never-before-seen heights through our continued and responsible investments in key areas like housing, healthcare, education and public safety,” Lujan Grisham said Monday in a statement. “Our fiscal success will enable us to double down on the investments we know are working and explore innovative new strategies that move the needle and move New Mexico up in the rankings.”

A spokeswoman for the governor strongly hinted Lujan Grisham will push for a rebate to taxpayers.

“The record-high revenue projections present a unique opportunity to keep more money in New Mexicans’ pockets, and the governor will continue to push for an additional round of rebates as we near the legislative session,” press secretary Nora Meyers Sackett wrote in an email.

However, the good news comes at a potentially bad time for the economy as LFC analysts and financial experts on hand for the hearing warned the country is bracing for a possible recession.

“The economy currently teeters on a knife’s edge, with the likelihood of a recession just below that of a coin flip,” said the LFC report on the revenue projection, released Monday as the hearing began.

That report cited various sources, including Moody’s Investors Service, as predicting the chance of a recession as somewhere in the 40 to 45 percent range.

If a recession occurs, the report says, recovery could take several years “with full employment in the U.S. postponed until late 2027. For New Mexico, these scenarios could result in slower job recovery than the baseline … a recession would dampen wages and salaries and consumer spending” and pose risks to tax collection rates.

Still, the economic outlook, at least in the short run, looks rosy for Lujan Grisham and lawmakers preparing to tackle such issues as improving the state’s public education system, combating crime, reworking the state’s tax codes and finding ways to provide more affordable housing for New Mexicans struggling with rising costs on many fronts.

The projected revenue windfall comes as the nation’s economy continues to pull itself away from the lengthy coronavirus pandemic that led to job losses, business closures, supply chain disruptions and other challenges.

The demand for oil and gas on an international level is helping increase revenues, said Stephanie Schardin Clarke, Cabinet secretary of the state Taxation and Revenue Department. Though there is a current drop in oil and gas prices, lowered production levels are offsetting those price declines, she said.

New Mexico oil production increased to a high of 531.4 million barrels in fiscal year 2022 — a 30 percent increase from 2021 — with an average barrel price of $88.11, the LFC report says.

About two-thirds of the growth in the general fund forecast is from severance taxes and federal royalty payments tied to the oil and gas industry. The incoming severance tax money pays off for the state’s children, the report says, because more than $1.5 billion of those funds were distributed to the Early Childhood Trust Fund in fiscal year 2022.

That fund, signed into law in 2020, provides continual money for early childhood education and care initiatives.

The LFC report says between fiscal years 2023 and 2026 “an additional $3.864 billion of federal royalties” is estimated to pour into the Early Childhood Trust Fund.

Meanwhile, other factors, including a lower unemployment rate, an increase in natural gas production and a nearly 21 percent boost in taxable gross receipts helped drive the increase in revenues, the LFC report says.

Several Republican lawmakers on the committee took a cautious approach to the news and at least two urged lawmakers to find new revenue sources to offset the state’s reliance on the oil and gas industry — a common refrain heard year after year within the halls of the state Capitol.

Sen. Steve Neville, R-Farmington, said if drilling for oil in New Mexico were to stop “our revenues will plummet fairly quickly” unless the state comes up with ways to attract and support other industries.

Sen. Bill Sharer, R-Farmington, urged lawmakers to initiate “real, honest, serious, attractive tax reform” to help grow and maintain other businesses.

Deborah Romero, secretary of the state Department of Finance and Administration, said the potential additional money could lead to improvements in the state’s water, public health and broadband systems — “once in a lifetime things we should invest in.”