SANTA FE — New Mexico’s financial outlook might be brightening, but some lawmakers remain wary after a year in which sagging oil and natural gas prices caused state revenue estimates to be pared back several times.
With legislative and executive economists readying to unveil new projections later this month, some top-ranking legislators are being cautious despite encouraging recent trends.
“We’re not in recession mode, but we’re not doing great, either,” said Sen. Carlos Cisneros, D-Questa, vice chairman of the Senate Finance Committee. “So long as we don’t have to make (budget) cuts, we’ll be in good shape.”
Although numbers are not final, the state is on pace to have taken in more than $100 million more than forecast — nearly $6.3 billion — during the 2015 budget year that ended in June, according to the state Department of Finance and Administration.
Positive revenue trends for New Mexico include better-than-expected collections of personal and corporate income taxes, along with a gross receipts tax gain that could suggest a healthier overall state economy.
But the state’s construction sector is still largely stagnant, and oil and gas prices have recently dropped again.
New Mexico relies heavily on the energy sector, since 16 percent of its revenue comes directly from taxes and royalties on oil and natural gas production — the number is even higher when you factor in annual distributions from the state’s two large permanent funds.
But although oil prices have decreased in the past year, the state’s oil volume — or amount produced — actually increased by about 20 percent in the just-completed fiscal year, according to the state finance agency. That has helped offset the revenue dip caused by lower prices, as has a hefty budget reserve that’s expected to top $600 million for the 2015 budget year.
“This shows the state’s economy is growing in a balanced way,” Finance and Administration Secretary Tom Clifford said in a statement, referring to the broad-based tax revenue growth. “The state will be able to manage the downturn in oil and gas revenue because our state’s fiscal house is in order.”
The historic boom-and-bust cycle of oil and natural gas largely explains why New Mexico ranks eighth-highest in the nation when it comes to the volatility of its major tax sources, according to a recent Pew Charitable Trusts report.
The state’s 7.6 percent volatility rate — a figure that reflects the swings above and below the average collected revenue for a year — is topped by the rates of states including Alaska, North Dakota and Wyoming, which also rely heavily on the energy industry to fill their coffers.
Cisneros pointed out that the volatility makes it difficult for lawmakers to plan for budgetary purposes, saying, “The biggest hurdle is the uncertainty about how much we can spend and how much we can commit.”
The revised revenue estimates will be unveiled Aug. 19 at a Legislative Finance Committee hearing in Taos. The numbers are a key part of the state’s annual budgeting cycle, which will begin again this fall with state agencies submitting their funding requests.
“It’s just a matter of seeing what we’ve got,” said Rep. Jimmie Hall, R-Albuquerque, the LFC’s vice chairman. “We’ve got to balance the budget.”
This article was written by Dan Boyd from Albuquerque Journal and was legally licensed through the NewsCred publisher network.