New Mexico state government reaps budget windfall from oil
SANTA FE, N.M. (AP) — The state of New Mexico is likely to inherit a new, multibillion-dollar financial windfall largely from surging oil production and robust energy prices in the era of war between Ukraine and Russia. State government economists are revising upward estimates of government income that are the basis for budget negotiations by lawmakers when they meet in January 2023.
On Tuesday, they estimated state government income of nearly $12 billion for the fiscal year running from July 2023 to June 2024. That income would exceed current annual spending obligations by $3.6 billion, or 43%.
The forecast enhances the spending authority of newly reelected Democratic Gov. Michelle Lujan Grisham and members of a Democratic legislative majority.
Lujan Grisham last week outlined new goals for combatting childhood poverty by expanding daycare subsidies and providing meals at schools free of charge.
If the income forecast comes to fruition, billions of dollars will automatically flow to accounts reserved for early childhood education initiatives.
Money is pouring into government accounts from a variety taxes and fees. Much of it can be traced to oil and natural gas development in New Mexico’s portion of the Permian Basin that stretches across the southeast corner of the state and western Texas.
New Mexico in 2021 became the No. 2 oil producer in the nation behind Texas and continued to set local production records as recently as September.
The Legislature’s budget and accountability office said state government is relying increasingly on income from the fossil fuel industry that could eventually falter, though not immediately.
“As a recession begins in many parts of the world, expectations for global oil demand have fallen, bringing energy prices with it,” a written analysis from the agency states. “Despite the lower prices, energy companies in New Mexico have continued to drill at … expanding rates, as well as increasing the productivity per well.”