SANTA FE – New Mexico’s budget windfall could be even larger than expected, as an oil production boom in southeastern New Mexico shows no signs of slowing down.
Total state revenue collections were nearly $290 million above projected levels through March, according to a Legislative Finance Committee revenue tracking report released Monday.
In addition, a rainy day fund created in 2017 was on track to receive at least $80 million – with several months still remaining in the state’s budget year.
The state was already expecting a $1.2 billion budget surplus for the fiscal year that ends Sunday, but the latest LFC revenue tracking report suggests the final surplus figure will likely end up being even larger than that.
Most of the revenue windfall is due to an ongoing oil boom in the Permian Basin, which has been driven by improvement in drilling techniques and production methods.
Even a decline in oil prices that prompted legislative and executive economists in December 2018 to scale back estimates for oil and natural gas production did not ultimately prompt a slowdown, according to the LFC report.
“New Mexico rig counts did not respond to the sharp price drop in ways consistent with past declines,” the tracking report says. “Active rig counts actually increased in the months following the price drop and currently remain in the triple digits.”
The state’s cash-flush revenue situation has allowed lawmakers to authorize an unprecedented $446 million increase in state public education spending in response to a landmark court ruling last summer that New Mexico was not meeting its constitutional obligation to provide adequate schooling to all students, especially Hispanics, Native Americans and English-language learners.
In addition, Gov. Michelle Lujan Grisham signed off on a spending plan that authorizes $389 million in spending for highway repairs and construction around New Mexico.
An even larger budget surplus than previously projected could give even more options to lawmakers.
During a legislative hearing at the Roundhouse, Rep. Phelps Anderson, R-Roswell, suggested Monday that some of the budget surplus could be used to shore up the state’s two large public retirement systems, which both have sizable unfunded liabilities and have caused national credit rating agencies to express concern.
However, Sen. John Arthur Smith, D-Deming, said more lasting fixes might have to be crafted to address the two pension funds – the Public Employees Retirement Association and the Educational Retirement Board.
“Those funds are in dire need of funds on an annualized basis,” said Smith, who suggested changes may have to be considered to the pension funds’ benefit structures.
While a new official revenue estimate will be unveiled in August, New Mexico also appears to be seeing positive employment trends. The state added 13,000 jobs in a one-year period ending in April, with nearly half of those jobs in the mining and construction sectors, according to the report.