SANTA FE – New Mexico’s revenue growth is outpacing expectations as state government continues to emerge from a budget crisis that prompted spending cuts and drained reserves, according to a recent legislative report.
A rebound in the oil and gas sector has helped improve the financial picture, and gross receipts tax revenue is increasing faster than projected, according to the report issued by analysts for the Legislative Finance Committee.
Altogether, recurring revenue shot up $292 million, or 17 percent, during the four-month period ending in October – the first third of this fiscal year – compared with the same period last year.
That, of course, is just a snapshot, with no guarantee it will remain that strong going forward.
“I’m glad to see the uptick,” Rep. Patricia Lundstrom, a Gallup Democrat and chairwoman of the Legislative Finance Committee, said in an interview. “I think it’s a good sign for New Mexico, but that doesn’t mean that we run out and spend every dime we’ve got.”
The tracking report, while acknowledging higher-than-projected revenue from gross receipts taxes, said that more research is needed to fully explain the growth. But a “fair amount of strength” is likely due to the rebounding oil and gas industry, the report said.
State Sen. John Arthur Smith, D-Deming, vice chairman of the Legislative Finance Committee, said he hopes to build support for replenishing reserves and addressing staff shortages in New Mexico prisons.
He cautioned against a “feeding frenzy” by advocacy groups pitching their causes.
“I’m already getting calls,” Smith said Thursday. But “from my take on it, we have a lot of backfilling to do, and we would like to build reserves substantially.”
Lundstrom has said she expects the LFC to recommend 1.5 percent pay raises for state employees and teachers. But there will be hard choices, she said, because the requests from state agencies, the push to rebuild reserves and other needs will outweigh what’s actually available.
Economists working for the executive and legislative branches of government have estimated New Mexico will have about $199 million in “new money” – or revenue beyond this year’s spending levels – in the budget year that begins July 1. Lawmakers will start crafting the budget in a legislative session that begins Jan. 16. The budget is expected to total about $6.2 billion for basic operations.
Smith said though it’s beginning to look like the state will have more than $199 million in new money, “we’ve been through a feast-or-famine type of revenue scenario” before.
“I’d like to have a few more months under our belt to make certain that what’s happening is recurring,” he said.
Larry Behrens, a spokesman for Republican Gov. Susana Martinez, said the tracking report shows she was right to reject a package of proposed tax increases earlier this year.
“It wasn’t that long ago some were saying a $350 million tax increase was the only answer,” he said. “Instead, Gov. Martinez fought against raising taxes on families and made sure state government lived within its means. Fast forward less than one year, and clearly these revenue projections show who was right.”