Copyright © 2021 Albuquerque Journal
SANTA FE – New Mexico’s sky-high revenue projections for the next year shot up again Friday as state economists shared their latest findings at the Capitol.
They are now projecting a record-breaking $9 billion in revenue for the state’s operating budget, including $1.6 billion in “new” money over this year’s spending levels.
Income derived from oil and gas production, consumer spending and wage growth is fueling the big numbers.
Rep. Patricia Lundstrom, a Gallup Democrat and chairwoman of the Legislative Finance Committee, said the strong revenue growth can help support new spending on economic diversification and infrastructure, schools, the environment, and tax relief for families – a potential peek at House Democrats’ budget priorities.
“This presents an unparalleled opportunity to continue making responsible and deep investments in our communities while keeping robust reserves over 30 percent,” she said in a written statement.
Republican lawmakers greeted the new projections with caution. They questioned whether federal stimulus spending has helped prop up the economy and suggested new environmental regulations might damage the oil and gas industry.
The figures set the stage for the budget debate to come in the regular 30-day legislative session beginning Jan. 18. The money would be available for schools, health care, public safety and other state operations.
Some of it could also be applied to one-time spending priorities, such as highway repairs and other construction projects.
But legislators also heard warnings Friday about uncertainty in the financial forecast. Stephanie Schardin Clarke, secretary of the state Taxation and Revenue Department, said state economists are watching closely to see whether the omicron variant of COVID-19 is determined to be more transmissible or cause more severe disease.
Anything that pushes the economy toward a global recession, she said, would affect oil prices and change New Mexico’s revenue forecast.
“This is something we’re tracking closely,” Schardin Clarke said.
Ismael Torres, chief economist for the Legislative Finance Committee, said Friday’s projection of $1.6 billion in “new money” is up from an August expectation of $1.4 billion – a difference driven largely by oil and gas revenue.
The future path of the pandemic, he said, will shape how much revenue the state actually receives. Oil prices, in fact, have already dropped since the new forecast was developed, though Torres said the changes might be an overreaction.
“These are pretty significant fluctuations,” he said.
State economists said there are also “upside” risks to the forecast – the possibility that revenue growth will be even stronger than expected.
The projection for $1.6 billion in new money doesn’t include the avalanche of federal funding flowing into New Mexico through the stimulus and infrastructure packages approved by Congress – some of which may be allocated in a special session that begins Monday.
Some of the revenue growth is also flowing automatically into a reserve account and a trust for early childhood programs.
Add it all up, and state policymakers say they have a historic opportunity to address the needs of a state that has long struggled with poverty.
‘Not good enough’
Lawmakers on Friday also examined a proposal by Gov. Michelle Lujan Grisham to ramp up education spending on literacy programs, career and technical learning, behavioral health and other efforts to help students.
The proposal includes a $280 million request to boost teacher pay by 7% and to increase the minimum amounts teachers make depending on where they fall in the three-tier licensing system.
Kurt Steinhaus, who leads the Public Education Department under Lujan Grisham, said the spending request is targeted at addressing a critical shortage of teachers and boosting student achievement.
“It’s time to start moving the needle,” he said as he went over student testing data. “We are not good enough, and we’ve got to work together.”
Sen. Gay Kernan, R-Hobbs, encouraged Steinhaus to consider non-financial strategies for boosting the number of teachers, such as changing excessive testing requirements that might be “keeping people out of the workforce who really could be good teachers.”
Bilingual student-teachers who speak English as a second language, for example, might have trouble passing a teaching exam even though they know the material, she said.
Sen. George Muñoz, a Gallup Democrat and vice chairman of the Legislative Finance Committee, said the dismal test scores of students demonstrate the urgency of improving New Mexico schools and how little success the state has had turning the education system around.
“The sprinklers are on and the fire’s going nuclear,” he said. “It’s really alarming to me.”