New Mexico revenue collections dip amid economic slowdown 

SANTA FE — New Mexico’s magical revenue ride is showing new signs of coming to a halt, which could force the state to dip deeper into its backup accounts.

A new legislative report shows state revenue collections were tracking $166.6 million below projections as of late last year, due largely to lower-than-expected personal and corporate income tax levels.

If the current revenue trend continues through the rest of the current budget year that ends in June, the state would take in nearly $380 million — or roughly 2.8% — less than in the previous fiscal year, according to a Legislative Finance Committee report.

That could force the state to dip deeper into its cash reserves to balance the budget. The state already drew down about $160 million from reserves to plug a budget gap at the end of the fiscal year last year, according to legislative analysts.

In addition, Gov. Michelle Lujan Grisham authorized nearly $257 million in spending via executive orders last year — mostly on natural disaster response and National Guard deployments — and has already authorized roughly $124 million in such emergency spending during the current budget year, according to legislative data.

“Continued revenue softness would require additional draws on the operating reserve, which is already under pressure,” the LFC revenue tracking report states.

New Mexico has seen an unprecedented revenue bonanza in recent years, with revenue levels increasing from $7.8 billion in 2019 to a projected $13.7 million as of this year, according to legislative data. Much of that revenue growth has been fueled by record-breaking oil production levels in southeast New Mexico’s Permian Basin.

The revenue surge has allowed state lawmakers to set aside large amounts of money in new trust funds, including an early childhood trust fund that is set to pay for Lujan Grisham’s universal child care initiative over the next five years.

However, the revenue growth has shown signs of cooling — and perhaps dissipating entirely — amid recent economic trends.

Specifically, a legislative economist said Monday that a slowing national and state economy is playing a role in the lower-than-expected corporate and personal income tax collections. A large part of the slowing economy is due to President Donald Trump’s tariffs that have led to many businesses having to absorb losses.

In addition, changes to the federal tax code signed into law by Trump last summer have also been a factor in New Mexico’s recent revenue slowdown.

During this year’s 30-day legislative session, lawmakers approved a tax package that, among other things, would decouple the state from some of the federal corporate income tax changes.

But that bill, Senate Bill 151, which had not yet been signed by the governor as of Monday, would only partially plug the revenue decline going forward, said LFC chief economist Ismael Torres.

Meanwhile, New Mexico could benefit financially from a global spike in oil prices due to the intensifying war in Iran. The price of West Texas Intermediate crude oil reached nearly $120 per barrel on Monday — its highest level since 2022.

New Mexico’s most recent revenue estimates project the price of oil to average $58 per barrel in the current budget year, meaning a prolonged increase in oil prices could lead to more revenue for the state than projected.

But elevated prices would likely have to remain in place for several months in order for oil companies to begin increasing drilling, legislative officials said Monday. 

Dan Boyd covers state government and politics for the Journal in Santa Fe. Follow him on X at @DanBoydNM or reach him via email at dboyd@abqjournal.com.