SANTA FE – Robust oil prices and production, primarily in southeastern New Mexico, will propel state revenue levels to come in roughly $250 million higher than expected for the just-completed fiscal year, based on preliminary figures.
With possible federal budget cuts and other economic concerns looming, top-ranking state officials and lawmakers say the extra money likely will be needed.
“This is proof that New Mexico has a very, very volatile revenue base,” Finance and Administration Secretary Tom Clifford said Tuesday. “This doesn’t remove our need for caution.”
The stronger-than-expected revenues mean the state likely will end up taking in nearly $5.8 billion for the fiscal year that ended June 30, an increase of roughly 7 percent – or about $380 million – over the previous year.
However, figures to be released today by the Department of Finance and Administration show that about $200 million of the $250 million in higher-than-expected revenue stems from oil and natural gas taxes and royalties, which tend to fluctuate from year to year.
Oil and natural gas taxes and royalties currently make up about 16 percent of the state’s revenue, even more under some calculations.
Rep. Luciano “Lucky” Varela, D-Santa Fe, vice chairman of the Legislative Finance Committee, said some of the unexpected money could be used during the 2013 legislative session to fill shortfalls in state agency budgets.
“It’s a good thing that we do have some extra dollars so we can consider some of those deficiencies and supplementals,” Varela said.
He also warned that the state could face federal budget cuts and may have to spend more money in order to expand its Medicaid program.
In addition, rank-and-file state employees have not received a pay increase in three years, and Varela said he is concerned not enough public employees have been hired under Gov. Susana Martinez’s administration.
For now, the additional revenue will be used to bolster the state’s reserves, which are on track to end the fiscal year at about $750 million, or more than 13 percent of recurring state spending, according to DFA.
That money, which was previously expected to total about $500 million, can be used as a buffer in case of unanticipated expenses or future revenue fluctuations.
However, even with more dollars than expected flowing into the state’s coffers during the just-completed fiscal year, New Mexico’s incoming revenue still has not returned to pre-recession levels.
The state took in about $6 billion during the 2008 fiscal year before a severe economic downturn caused revenue levels to drop by more than $1 billion over a two-year period.
Martinez, who pledged to make state government more effective during her 2010 gubernatorial campaign, said the growth of the state’s cash reserves – which sat at about 5 percent of recurring spending two years ago – is proof of prudent fiscal oversight.
“We remember where this money comes from and New Mexicans should feel confident that we’re using their tax dollars in the most efficient way possible,” Martinez said in a statement.
Legislative and executive branch economists are expected to release new state revenue estimates next month. Those estimates will include the just-completed fiscal year, the current year and future years.
While economic recovery has been slow in most of the state, as reflected in unemployment figures and a weak housing market, the boom in oil production in southeastern New Mexico has led to a population increase in that part of the state.
— This article appeared on page A1 of the Albuquerque Journal