Editor’s note: An earlier version of this story incorrectly attributed a projected $1.1 billion state budget surplus to the current fiscal year. That projection is for the 2020 fiscal year.
New Mexico’s booming oil and gas industry generated a record $2.2 billion in government income in fiscal year 2018, according to the latest annual report from the NM Tax Research Institute.
State revenue jumped by $465 million, or 26 percent, compared with FY 2017, accounting for about 32 percent of total general fund income last fiscal year, which ended in June.
The report, which the Tax Research Institute produces under contract with New Mexico Oil and Gas Association, shows the industry’s immense impact on state finances, said NMOGA Executive Director Ryan Flynn.
“It’s been the foundation of the New Mexico economy for years, and it will continue to be so for the foreseeable future,” Flynn told the Journal’s editorial board on Tuesday.
About $1.06 billion, or nearly half of last year’s oil and gas revenue, went to finance the state’s public schools, including $822 million for primary and secondary education, and $241 million for higher education. That’s up $128 million compared with FY 2017.
Another $858 million helped finance other state programs, including $290 million for health and human services. The remainder was used to cover one-time expenses, and to shore up state reserves, according to the report.
Relatively strong oil prices, which generally ranged from $65 to $75 per barrel for most of 2018, combined with a surge in investment and production in southeastern New Mexico, helped drive revenue up.
Prices have receded significantly since the fall, with benchmark West Texas Intermediate hovering slightly above $50 per barrel since the beginning of this year. But New Mexico production continues to climb, leading to a projected $1.1 billion state budget surplus for FY 2020, which begins in July.
Despite price volatility, the industry expects production to keep climbing, given the huge draw of lucrative shale oil reserves in the Permean Basin, Flynn said.
“Over the next ten years, production has the potential to remain high, at record levels, even with a downtick in prices, because the Permian has become a focal point for investment,” Flynn said.