For the first time in a long time, New Mexico lawmakers are getting some good financial news.
The state is on track to rebuild its reserves to more than 8 percent by the end of the fiscal year in June 2018, after once having almost completely exhausted them, if economic trends continue, according to a revenue report released Monday.
And the state can expect more than just the $25 million in “new” money – or revenue beyond this year’s spending levels – that was once forecast for next year’s budget. Just how much isn’t clear yet.
Jon Clark, chief economist for the Legislative Finance Committee, said the state may be seeing a “reverse whiplash” as oil- and gas-based sectors of the economy bounce back quickly.
This year’s revenue, in fact, could climb to nearly $6.1 billion, or $135 million higher than an estimate released in August. That growth, in turn, suggests next year’s revenue should also be a little better than expected.
“It really is starting to feel like we’ve come out of the bottom,” Clark said.
An uptick in revenue could allow state lawmakers to increase spending for cash-strapped agencies already seeking extra money next year – for the judicial system, Medicaid services and education, for example. Or the money could be used to bolster reserves, with state officials hoping to reach 10 percent or more.
The touch of optimism comes after a budget crisis over the past year – when New Mexico drained its reserves, endured damage to its credit rating and imposed spending cuts.
“We’re pleased to hear good news for a change,” said Sen. Carlos Cisneros, a Questa Democrat and chairman of the Legislature’s Revenue Stabilization and Tax Policy Committee.
But he also cautioned that there are risks, too, such as the federal effort to overhaul the tax system and the possibility of a not-for-profit group taking over Los Alamos National Laboratory – both of which could reduce state revenue.
The information shared with the committee Monday was a “revenue tracking” report. It isn’t a formal revenue forecast, which won’t happen until next month, in conjunction with economists who work for Gov. Susana Martinez’s administration. The legislative session begins in January.
But Clark said activity in the oil-rich Permian Basin in southeastern New Mexico is picking up, a continuation of the recovery from a crash in oil prices, a major source of revenue for the state.
Construction of a Facebook data center in Valencia County also provides revenue, he said.
The state’s general goal is to have reserves of 10 percent to 12 percent, to help offset the volatility in its revenue sources. At one point, the state was forecasting reserves would fall to just 0.4 percent.
Jeff Mitchell, director of the University of New Mexico’s Bureau of Business & Economic Research, delivered a more broad presentation on the state’s economic outlook. New Mexico, he said, appears to be headed into a period that will be less influenced by outside events, such as the Medicaid expansion backed by federal money.
“We can no longer look to, hope for, or blame … external factors for the performance of the state economy,” Mitchell told the committee. “Increasingly what happens in New Mexico will be the responsibility of New Mexicans.”
He suggested the state focus on growing businesses that already operate here, among other strategies. Colorado and Texas, he added, have succeeded with long-term investments in their education systems – something that can take decades – and by focusing on their own strengths, anything that gives them a comparative advantage over other communities.