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Oil slump further cuts state revenue

SANTA FE — New Mexico lawmakers could have less money available to spend next year than previously projected, as plummeting oil prices have led to the amount of “new” money estimated for the coming year to be pared back to $232 million — down more than $60 million from four months ago.

As a result, the top budget official in Gov. Susana Martinez’s administration said Monday that a requested funding increase for the state court system — of nearly 9 percent — will not be affordable.

Finance and Administration Secretary Tom Clifford also spoke against across-the-board pay raises for state workers, indicating the Martinez administration will instead push for targeted salary increases for certain job positions that have been difficult to fill and keep filled, such as social workers, State Police officers, corrections officers and computer specialists.

Some legislators, however, took issue with that stance because many state government employees have received only two salary increases in the past seven years.

“It is bothersome to me when I hear there isn’t any money for compensation increases,” said Sen. Howie Morales, a Silver City Democrat.

The new revenue estimates were unveiled Monday at a Legislative Finance Committee hearing at the state Capitol. The estimates, which are compiled by a team of executive and legislative branch economists, are key in lawmakers’ annual task of approving a balanced budget.

Although state spending has increased for four consecutive years, falling oil prices caused revenue estimates to be pared back twice last year and are having a similar impact this year.

In August, state and legislative economists pegged New Mexico oil prices at roughly $56 per barrel for the 2017 budget year, which starts in July 2016. That projection was lowered to $49 per barrel in the revenue estimates released Monday. Every $1 the state is off on its oil price projections equates to a state revenue adjustment of about $10 million, Clifford said.

Some-top ranking lawmakers said they remain skeptical that the $232 million in new money will materialize. New money is the differencebetween projected revenue for next year — nearly $6.5 billion — and the current state spending levels of about $6.2 billion.

“At this point in time, I think it’s fair to say we’re strongly suspicious,” said Sen. John Arthur Smith, D-Deming, the LFC’s chairman. “We hope the revenues materialize, but it’s going to be extremely painful if they don’t.”

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Meanwhile, Sen. Steven Neville, R-Aztec, said oil prices will have to increase in the coming year just to meet the projected cost per barrel. Oil prices slid to their lowest point in nearly seven years Monday, with U.S. crude oil closing the day at $37.65 per barrel on the New York Mercantile Exchange.

Like a few other states, New Mexico relies heavily on taxes and royalties from the energy industry — both oil and natural gas — to fund government operations. About 12.5 percent of the state’s direct general fund revenue stems from the oil and natural gas industries, according to the Department of Finance and Administration.

Although oil prices have plummeted, the state has experienced recent job growth in the education and health services sectors and an increase in revenue from income and sales taxes, Martinez administration officials said Monday.

“In New Mexico, we have done a very good job of managing our way through some very difficult circumstances,” Clifford told lawmakers.

In addition, a silver lining in the plummeting oil prices could be that New Mexicans are saving money at the gas pump. State residents will have about $600 million more to spend this year because of the low oil prices, Clifford said, although it’s uncertain how much of that money will be pumped back into the state economy.

Both the Legislature and the Martinez administration will roll out spending plans in advance of next year’s 30-day legislative session, which begins Jan. 19.

Among the big-ticket funding requests that have been presented to legislators in recent months are:

$85.2 million to keep up with skyrocketing Medicaid enrollment and a looming decrease in the federal matching rate for states that opted to expand their Medicaid programs.

Nearly $12 million for the Corrections Department to hire more officers.

$14.5 million more for judicial branch funding, which would go toward pay raises for court clerks and judges, among other expenses.

At a glance

State revenue estimates unveiled Monday project New Mexico will collect nearly $6.5 billion during the 2017 budget year. Some key figures:

$6.2 billion — Current size of state budget

$232 million — Estimated “new” money for next year

3.7 percent — Spending growth if all new money materializes and is spent

$49 — Projected oil price per barrel next year

This article was written by Dan Boyd from Albuquerque Journal and was legally licensed through the NewsCred publisher network.