During a Monday hearing at the state Capitol, members of a key legislative panel were told the state collected more than $355 million less in revenue during the first six months of the current budget year – a more than 11 percent drop – than it did during the same period a year earlier.
In addition, state employment dropped by about 1,800 jobs during a recent yearlong period and the average hourly earnings of New Mexico workers also declined in the past year – from $16.93 in December 2014 to $16.73 in December 2015.
Although oil prices have actually rebounded recently after a decline that forced the state’s revenue projections for the budget year that starts in July to be pared back by $326 million, a slowdown in drilling could have a ripple effect through the state’s economy.
“It seems like we’re in a situation right now that could potentially get worse,” said Sen. Howie Morales, D-Silver City.
The number of active rigs in New Mexico has decreased precipitously in recent months – from 93 in January 2015 to 32 in January of this year – due to a combination of falling oil prices and a bitter winter storm that affected the oil-rich southeastern part of the state, according to top state officials.
As a result, some lawmakers from energy-producing areas cautioned Monday that rebounding oil prices, even if they hold, won’t necessarily be an overnight cure for the state’s budgetary woes.
“Even if oil goes to $100 (a barrel) tomorrow, it’s going to take six to 12 months to increase production,” said Sen. Steven Neville, R-Aztec, during Monday’s LFC hearing. “All of the people have left town or taken new jobs.”
During this year’s 30-day session, the plummeting energy prices prompted lawmakers to enact a $6.2 billion spending plan for the coming fiscal year that will trim overall state spending for the first time in five years. The state’s universities and colleges will be among those hit hardest by the budget crunch.
Although legislators used one-time fixes like moving money from different state government accounts and drawing down the state’s cash reserves to minimize budget cuts, that option might not be available in coming years if tax collections remain lower than expected.
LFC Director David Abbey said lawmakers will have to return to Santa Fe for a special session if tax collections fall more than $79 million short of projected levels at any time during the budget year that starts in July.
“There’s not much of a margin,” Abbey warned LFC members during Monday’s hearing.
Meanwhile, Land Commissioner Aubrey Dunn said during a recent discussion with the Journal’s editorial page staff that he doesn’t think the state will take in enough money to cover approved spending levels for the coming year.
“There are some real issues,” said Dunn, a first-term Republican who has previously voiced concern about the state’s budget situation and has called for both spending cuts and tax increases.