Mind-blowing is how legislative analysts describe New Mexico’s budget numbers, saying during a briefing Thursday that projected revenues have been outpacing previous spending at levels never seen before.
Still, they warned members of the revenue and tax policy committee that some of the one-time funding will dry out, and lawmakers will have to decide whether to continue paying for health care, education and other social programs that have been expanded during the boom.
Staff with the Legislative Finance Committee also reiterated that oil and gas development has been driving New Mexico’s historic numbers, and more still needs to be done to diversify the state’s economy to weather the industry’s volatility as well as prepare for a future when energy markets might shift more toward renewable sources.
“These are historic revenues that we have not ever seen before,” said Charles Sallee, interim director of the Legislative Finance Committee. “It gives us an opportunity to make sure that wherever you decide to spend the money on, that it counts, that it results in something. Government’s job is not just to spend money to spend money.”
He talked about increased reserves that allowed the Democratic-led legislature to boost one-time spending on a wide range of projects during the most recent legislative session. Despite some vetoes, Democratic Gov. Michelle Lujan Grisham signed off on a state budget that boosted spending by 14%.
Sallee said his staff would be embarking on another round of forecasts this summer that will look decades down the road at both the possibilities and constraints of increasing spending over the coming years.
Economists with the Legislative Finance Committee also warned that a recession could be on the horizon. They have been monitoring rising inflation and brinkmanship in Washington over the national debt ceiling given New Mexico’s heavy reliance on federal funding and bank failures around the country.
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Some lawmakers asked about recommendations for potential tax changes that could help help boost economic development and create new revenue streams for the state.
Sen. Ron Griggs, a Republican from Alamogordo, noted that tax revenues from solar and wind development amount to a fraction of what oil and gas brings in. He told fellow lawmakers that continuing production in a way that is environmentally conscious would ensure revenues for decades.
“If we don’t have oil and gas revenues, what happens to New Mexico? I mean you and I can’t afford to suck that up on personal income tax or something so we have to look at that,” he said.
Sallee acknowledged that New Mexico has been blessed with record revenues that have allowed the state to “punch well above our weight” when it comes to spending. Replacing those revenues to maintain spending would mean imposing high taxes on what amounts to a very poor population, he said.
Democratic Sen. Bill Tallman of Albuquerque asked whether lawmakers should be concerned. Sallee said yes, noting that lawmakers will have to consider “that these revenues are not going to be at the same level for the next generation.”