The recent crash in oil prices, paired with persistently low natural gas prices, has caused quite the budget headache for state government.
Revenues from the extraction of oil and natural gas are down, and at least 6,500 energy-related jobs have been lost in the past year. As a result, income tax and gross receipts tax revenues have also collapsed, driven by a downturn of economic activity in energy-rich counties.
For example, in three of the heaviest energy-producing counties – Lea, Eddy and San Juan – gross receipts tax revenues fell by $164 million in one year, while the rest of the state’s revenues increased.
This is what can happen when a state relies so heavily on a sometimes-volatile sector for its revenues. And, it is why we at the Greater Albuquerque Chamber of Commerce have worked so hard alongside state leaders to improve the diversity of our economy.
This has been bipartisan work, and both the governor and reform-minded legislators deserve credit for their efforts to reduce taxes, provide more incentives and tools to attract new jobs, and make New Mexico an export leader.
Think about the fiscal challenges the state has weathered.
It faced a massive budget deficit coming out of the Great Recession, steep cuts in federal government spending, a federal government shutdown, and now the steepest oil and gas crash in a generation. And despite it all, employment in New Mexico has grown 45 of the past 48 months, with the state adding nearly 10,000 jobs in the last year alone.
In fact, setting the energy sector aside, year-over-year job growth in New Mexico’s private sector over the last two months was the strongest it’s been since 2006.
We cannot afford to lose momentum. If federal government and energy sector employment is trending downward, while overall employment is rising, that means we are attracting more private sector jobs and employers from a wider array of industries.
Our recruitment pipeline for new companies and business expansions is strong, and New Mexico is now viewed favorably as a place to do business. Retreat should not be an option.
Over the next few weeks, there will be hard conversations about how to close the state’s $348 million revenue shortfall in the last fiscal year and address the projected revenue shortfall of $458 million in the current fiscal year.
We strongly urge the governor and Legislature to balance the state budget by reducing and reforming spending in a variety of ways, and across state government, to allow the state to live within its means while we weather the remainder of the oil and gas downturn.
Additionally, it would be imprudent to take any actions that undermine our key long-term goal of growing the private sector and making New Mexico’s economy more diverse.
To that end, we need to maintain funding for key job-creation programs that are helping the state attract new companies, thousands of jobs and hundreds of millions of dollars in new investment across New Mexico. This includes the Job Training Incentive Program and our state’s robust closing fund, both of which help the state compete for business recruitment projects.
We need to preserve certain recently enacted tax improvements that have reduced the costly layering of taxes on construction and manufacturing activities, made New Mexico a more thriving high-tech corridor and led to a boom in exports and economic activity along the southern border.
And, we need to continue implementing – on schedule – the landmark bipartisan tax reform package of 2013, which is reducing New Mexico’s business tax rate and making us more competitive.
Finally, while it makes sense to perhaps modify or eliminate certain tax expenditures that are no longer needed or working properly, it would be absolutely counterproductive to increase taxes. Placing additional burden on families and businesses would only dampen economic expansion, and serve as a short-term solution with long-term adverse consequences.
In solving today’s budget problem, we cannot slam the brakes on future progress, irreparably damaging the state’s reputation as a reliable economic development partner.
Working together, we must rise to the challenge and ensure that New Mexico is capable of competing for the jobs of tomorrow and creating the more diverse economy we need.
Tom Antram is chairman of the Board and Terri L. Cole is president and CEO of the Greater Albuquerque Chamber of Commerce.