NM's revenue bonanza could loom large in governor race - Albuquerque Journal

NM’s revenue bonanza could loom large in governor race

Michelle Lujan Grisham and Mark Ronchetti. (Images courtesy of the candidates)

Copyright © 2022 Albuquerque Journal

SANTA FE – With New Mexico on track to hit a revenue motherlode over the next two years, GOP governor candidate Mark Ronchetti wants to give much of it away in the form of $800 rebates per person and tax cuts for state residents and businesses.

Gov. Michelle Lujan Grisham already signed off on rebates of up to $1,500 per household this year and a reduction to the state’s gross receipts tax rate, but also has other ideas on how the state’s unprecedented budget surplus should be handled.

A spokeswoman for the Democratic governor said Tuesday she is open to having discussions with the Legislature about the estimated $10.9 billion in revenue for the coming budget year, but cited public schools, economic development, public safety and tax cuts aimed at addressing equity issues as potential ways to put the unprecedented bonanza to use.

“We’re leaving every option on the table when it comes to providing relief for New Mexico families, and look forward to more in-depth discussions of the governor’s budget and legislative priorities in the coming weeks and months,” said Lujan Grisham spokeswoman Maddy Hayden.

She also said an infusion of infrastructure funding targeted at areas hit hard by forest fires and flooding this year – such as the area charred by the Calf Canyon/Hermits Peak Fire – could also be on the table.

With leading lawmakers describing the revenue windfall as a “once in a century” opportunity for New Mexico, the issue could emerge as a key one in what’s already a hotly contested and expensive race for governor.

Specifically, lawmakers and the governor – whoever that is come January – could face pressure to provide additional relief to New Mexicans dealing with rising prices for housing and basic supplies.

During a luncheon hosted by an Albuquerque commercial real estate group this week, Ronchetti took issue with the suggestion his rebate and tax cut plan could mean less money available for public schools or other key state spending areas.

“I completely disagree with the premise that extra money that we have coming into the state will mean less money for state programs,” Ronchetti said, citing hefty spending increases over the last two years amid a surge in revenue levels.

He said New Mexico residents and businesses who make $100,000 or less per year would have their taxes slashed in half under his administration, while state residents who make up to $200,000 annually would see their tax rates reduced by one-third.

“Money has to go back into the pockets of New Mexicans who are struggling to get to the end of each month,” Ronchetti said.

While tax cuts could be possible due to the unprecedented revenue levels, New Mexico has historically had one of the nation’s most volatile revenue streams, due largely to its reliance on taxes and royalties on the oil and natural gas industries.

With oil production booming in the Permian Basin and New Mexico having surpassed North Dakota as the nation’s second-highest oil producing state, 35% of the state’s direct revenue now comes from the extractive industries, according to Legislative Finance Committee data.

For that reason, retired New Mexico State University economics professor Jim Peach said state officials should proceed with caution when it comes to tax cuts.

“It scares me more than a little bit that there will be the temptation to cut taxes in the January session,” Peach told the Journal, referring to the upcoming 60-day legislative session. “When you cut taxes, it’s hard to bring them back up again.”

He also said past tax cuts enacted during the administrations of former governors Bill Richardson and Susana Martinez were largely unsuccessful in creating new jobs in New Mexico.

Instead of tax cuts, Peach said he would urge state lawmakers to consider one-time rebates.

He also said spending targeted at workforce training programs and improvements to state parks and highway rest areas could represent investments.

In all, lawmakers will have a projected $2.5 billion in “new” money during the budget year that starts in July 2023, according to new estimates released last week by legislative and executive economists.

That money, which represents the difference between current spending levels and projected new revenue, is being generated by the increase in oil production, along with an uptick in inflation-related consumer spending and strong wage growth.

In addition to the projected new money for next year, the state is also on track to have a budget surplus of nearly $3.8 billion for the current fiscal year – and about $2.6 billion flowing into a state early childhood trust fund created just two years ago.

Home » 2022 election » NM’s revenue bonanza could loom large in governor race


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