[LWVNM Action] 3.6 billion in new money

[Richard Mason]

   *- By Robert Nott rnott at sfnewmexican.com
   <https://www.santafenewmexican.com/users/profile/robert> - Dec 12,
   2022 Updated Dec 13, 2022*
   -
   <https://www.santafenewmexican.com/news/legislature/new-mexico-projects-more-than-3-6-billion-in-new-money-in-fiscal-year-2024/article_e338cb2a-74f8-11ed-83e4-fb49a9722909.html#comments>


   New Mexico’s economic outlook just keeps getting better and better.

With the oil and gas industry booming at unprecedented levels, the state’s
projected revenue for the 2024 fiscal year is close to $12 billion —
including a whopping $3.6 billion in “new money” that has legislators
drooling about the possibilities for long-term fixes to New Mexico’s
chronic problems.

All told, revenue growth estimates for fiscal year 2024 are 42.7 percent
greater than the roughly $8.5 billion budget for the current year,
according to a Legislative Finance Committee report released to lawmakers
on that committee Monday.

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.
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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.”

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