Published: 2:51 pm, Thu. Aug. 17th, 2017Updated: 2:50 pm
New Mexico is on track to collect more money in the coming fiscal year than it currently spends as surging oil production pulls state government out of a budget crisis, state economists told lawmakers on Wednesday.
Economists from three state agencies and the Legislature predicted that tax revenue and other government income will slightly surpass spending obligations during the fiscal year that begins in July 2018.
They anticipate excess revenues of $25 million — equal to a small fraction of the state’s $6.1 billion general fund spending plan for the current fiscal year.
Lawmakers expressed guarded relief as they prepare to craft a budget for the coming fiscal year during a 30 day legislative session that starts in January.
“I do feel better with the trend than where we’ve been in the past,” said Sen. John Arthur Smith, D-Deming, as a panel of lawmakers met at a ski resort outside Taos.
He cautioned that New Mexico remains vulnerable to swings in oil and natural gas prices. Smith also warned that an ongoing lawsuit could force legislators to boost funding of public schools that already account for 44 percent of state general fund spending.
New Mexico’s finances were hit hard over the past two years by a downturn in state revenue from the oil and natural gas sectors that threatened funding for classrooms, courts and museums. The state also is grappling with one of the nation’s highest unemployment rates, second only to Alaska.
The state’s credit rating was downgraded last year amid faltering tax revenues and depleted reserves. To shore up shaky state finances, the Democratic-led Legislature and Republican Gov. Susana Martinez agreed in May to tap into borrowed money from suspended infrastructure projects.
State economists said Wednesday that New Mexico has quickly restored depleted reserves to $321 million — equal to more than 5 percent of annual spending. Those reserves are expected to shrink to $206 million by June 2018, before revenues align more closely with spending.
Oil production in the state hit records during the fiscal year ending in June, boosting related revenues from taxes, leases and royalties. State economists warned that the gains could quickly be reversed with harsh financial consequences.
“If the oil industry takes another downturn, even a relatively minor one, other industries might not be able to absorb the impact,” staff at the nonpartisan Legislative Finance Committee warned in a written brief.
Legislation enacted this year creates a rainy day fund that gradually sets aside oil and natural gas proceeds in booming years for use during future fiscal emergencies.
Economists for the Legislature raised concerns about recent abnormalities in tax collection data that could signal the state will receive less money than anticipated.