TAOS — New Mexico lawmakers could have an estimated $293 million in “new” money to spend in the next budget year, though several top-ranking legislators cautioned Wednesday that low oil prices could — for the second year in a row — undermine those projections.
After the revenue estimates were unveiled at a Legislative Finance Committee hearing in Taos, panel Chairman John Arthur Smith, D-Deming, said he’s “suspicious” about the projection for the coming year.
“We hope it comes through, but I don’t want everyone coming to feed at the trough yet,” Smith said.
Rep. Jimmie Hall, R-Albuquerque, the LFC’s vice chairman, was even more blunt, telling state economists and two Cabinet secretaries, “I think you’ve got a $75 million error.”
The revenue estimates are compiled by a team of executive and legislative branch economists. They are key in lawmakers’ annual task of approving a balanced budget.
Although some legislators greeted the Wednesday figures with skepticism, Finance and Administration Secretary Tom Clifford said the projections are actually conservative, claiming that state income tax collections could end up being higher than expected.
He said the $293 million in “new” money, if it materializes, could allow for pay increases for some state workers and more money for public school initiatives sought by Gov. Susana Martinez’s administration.
New money is the difference between projected revenue for next year — more than $6.5 billion — and current state spending levels — about $6.2 billion.
Though state spending has increased for four consecutive years, plummeting oil prices caused revenue projections to be pared back twice in advance of this year’s 60-day legislative session.
The state’s $6.2 billion budget for the fiscal year that started in July ended up increasing state spending by just 1.3 percent — or about $84 million — over last year’s levels.
Rep. Larry Larrañaga, R-Albuquerque, chairman of the House Appropriations and Finance Committee, said he’s wary.
“We were here almost exactly at this same spot last year,” Larrañaga said. “Frugality is the operative word right now in trying to look at the budget.”
Though New Mexico has fared better than other states that rely heavily on the energy industry to finance their day-to-day operations and programs, the ongoing drop in oil prices has largely offset improved state tax collections in other areas.
The revenue estimates unveiled Wednesday peg New Mexico oil prices at roughly $51 per barrel for the current budget year and about $56 per barrel for next year. U.S. crude oil prices hit a six-year low this week, with a domestic oil glut causing prices to reportedly fall to less than $41 per barrel on the New York Stock Exchange.
Every $1 the state is off on its oil price projections equates to at least $7.5 million in state revenue adjustments.
“That’s obviously a big risk for the New Mexico economy,” Clifford said during Wednesday’s hearing, held at the University of New Mexico-Taos campus.
Although the size of next year’s budget remains uncertain, legislators got good news about the just-completed fiscal year, as the revised estimates found that improved tax collections have put the state on pace to take in $137 million more than previously projected. Such a surplus would bolster the state’s cash reserves.
Meanwhile, Rep. Luciano “Lucky” Varela, D-Santa Fe, said any increase in state revenue in the coming budget year should be used to increase state spending on anti-poverty programs and to provide broad-based pay hikes for state employees.
“The rest of government needs a salary increase too,” Varela said in response to Clifford’s assertion that the Martinez administration supports targeted increases for State Police officers, computer specialists and other high-turnover positions.
The revenue estimates will be updated before lawmakers convene in January in Santa Fe for a 30-day legislative session.