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New Mexico wary of oil downturn as agencies trim budgets

SANTA FE – Legislators kept a wary eye Tuesday on trends in oil prices and production as the number of active drilling rigs and new wells has plummeted from pre-pandemic levels, threatening a crucial source of state income amid the coronavirus pandemic.

A report from the budget and accountability office of the Legislature found that drilling for new petroleum wells in New Mexico’s share of the Permian Basin declined to 134 wells in September, down from 589 in September 2019.

Reduced oil field activity has rippled through the New Mexico economy. The U.S. Bureau of Labor Statistics estimates the oil and mining sector has lost 7,400 jobs since February.

New Mexico typically relies on income from the oil and natural gas sectors through a variety of taxes, royalties and lease purchases for more than one-quarter of its annual general fund budget.

Oil market analyst Bernadette Johnson of Enverus briefed a budget-writing committee of the Legislature on the outlook for oil prices amid lagging demand.

“A lot of folks are working from home; they’re not using as much gasoline as they were before,” Johnson told members of the Legislative Finance Committee in a webcast.

She expects natural gas prices to increase in 2021 but said demand and prices for oil will take longer to recover.

“The biggest impact to commodity markets right now? It’s demand, it’s COVID,” she said.

Gov. Michelle Lujan Grisham says she wants to call a special legislative session to provide new economic relief to the unemployed and hard-hit businesses.

Democratic State Sen. John Arthur Smith of Deming, who ends a 32-year legislative career in December, urged his successors and the governor to find new revenue sources for the state that are more reliable than oil.

“Hope springs eternal that someday we will have a more reliable revenue stream,” he said.

Lujan Grisham has directed state agencies to reduce spending requests by up to 5% for the budget year that begins in July 2021 to conserve resources.

The agency in charge of serving New Mexico’s elderly proposed a 5% spending reduction at a legislative hearing Tuesday.

The largest savings at the Department of Aging and Long-Term Services would come from a reduction in costs for adult protective services, which investigates neglect and abuse of the elderly. Some funds would be made up by leveraging federal Medicaid dollars.

The department purchased computer tablets for elderly residents at all 71 nursing homes and 250 assisted living facilities in the state. Those residents were cut off from in-person visits by relatives and state welfare advocates as a precaution against COVID-19 infection under emergency health restrictions.

In a presentation to state lawmakers on Tuesday, the agency reported that more seniors are requiring help to ensure they don’t go hungry.

“We have exceeded our meals by 27% in this first quarter … that trend will continue to go up,” Aging and Long-Term Services Secretary Katrina Hotrum-Lopez said.

At the same time, the Department of Public Safety is seeking legislative approval to boost pay for State Police officers, emergency dispatchers and transportation inspectors. The agency said its overall budget request of $152.8 million next year would represent a 3.4% decrease from current annual spending.

The state held an estimated $2.1 billion in financial reserves at the start of July to fill any potential shortfalls for current annual spending obligations of $7.2 billion. State economists say general fund income may range from $6.8 billion to $7.6 billion during the coming fiscal year.



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