Record-breaking oil production in New Mexico to bring multibillion-dollar surplus
Introduction
The state of New Mexico is poised to experience a multibillion-dollar surplus in the next fiscal year due to record-breaking oil production, according to state economists. This surplus is expected to result in a 36% increase in annual general fund spending commitments, amounting to $3.5 billion. The estimates were presented to lawmakers, setting the stage for budget negotiations in the near future.
Impact on the State
New Mexico has witnessed a significant increase in oil production over the past five years, positioning it as the second-largest oil producer in the country, just behind Texas. This boom in the energy industry has led to a surge in state revenues from severance taxes, federal royalties, sales taxes, and corporate and personal income. As a result, the state has been able to invest in various public programs and initiatives.
The state’s Department of Treasury and Administration Secretary, Wayne Propst, expressed the unprecedented nature of these times, emphasizing the historical significance of the state’s current situation. With uncommitted general fund balances standing at over $4.3 billion, New Mexico has ample resources to further allocate towards public programs.
Concerns and Caution
While the surplus presents an opportunity for increased spending, several lawmakers have expressed caution about the sustainability of such commitments, considering the volatility of energy markets and production. State Representative Harry Garcia, for instance, highlights the need for careful spending to prevent encountering financial difficulties if the surplus disappears, as it did back in 2016.
Despite these concerns, New Mexico has made significant strides in utilizing the surplus to address crucial issues. The state has been able to raise public salaries, expand access to unpaid childcare, and offer tuition-free college education to its residents. Moreover, a financial cushion has been created in the form of emergency accounts and mutual funds, designed to support future obligations when oil reserves are depleted or demand declines.
Diverting Excess Revenues and Planning for the Future
In order to generate additional income and fund construction projects, New Mexico enacted legislation diverting excess oil revenues into the state’s permanent severance tax fund. By 2028, it is estimated that new deposits into the fund will amount to approximately $2.2 billion to $3.1 billion. This move aims to transition the state away from heavy reliance on oil and gas by focusing on investment income.
Democratic Senator George Muñoz emphasized the importance of reducing the state’s dependence on the fossil fuel industry. He praised efforts to generate more income through savings and investments, illustrating a commitment to diversifying the state’s revenue sources to ensure long-term financial stability.
Governor’s Response and Future Plans
New Mexico’s Governor, Michelle Lujan Grisham, expressed her support for the state’s strong earnings forecast, describing it as evidence that the state’s economic strategies are effective. While specific details about next year’s budget priorities were not provided, the Governor emphasized her commitment to making meaningful and long-term investments.
It is worth noting that in recent years, lawmakers have responded to budget surpluses by enacting tax breaks and direct refunds. Nonetheless, the Governor vetoed a series of tax cuts and breaks to protect the state’s finances, showcasing a balanced approach to managing the surplus.
Conclusion
New Mexico’s record-breaking oil production has brought substantial financial benefits to the state, with economists predicting a multibillion-dollar surplus in the coming fiscal year. While caution is warranted, the state has taken steps to diversify its revenue sources and allocate resources towards addressing key issues such as poverty, education, and healthcare. By leveraging the surplus effectively, New Mexico aims to transition from peak oil dependence to sustainable investment income.
Summary
Record-breaking oil production in New Mexico is predicted to result in a multibillion-dollar surplus for the state in the next fiscal year. Economists anticipate a 36% increase in annual general fund spending commitments, translating to $3.5 billion. This surplus is the outcome of the state’s booming energy industry, evidenced by a significant rise in oil production over the past five years. With uncommitted general fund balances exceeding $4.3 billion, New Mexico is well-positioned to invest in public programs and initiatives. However, caution is necessary to ensure the sustainability of these commitments, as energy markets and production can be volatile. To address this concern, the state has established emergency accounts and mutual funds to support future obligations when oil reserves are exhausted or demand diminishes. Additionally, legislation has been enacted to divert excess oil revenues into the state’s permanent severance tax fund, fostering investment income and funding construction projects. These measures aim to reduce New Mexico’s dependence on the fossil fuel industry and promote long-term financial stability. The state’s Governor, Michelle Lujan Grisham, supports the strong earnings forecast and intends to make meaningful and long-term investments. While tax breaks and refunds have been implemented in response to budget surpluses in recent years, careful consideration has been given to balancing spending increases and protecting the state’s finances. Overall, New Mexico’s record-breaking oil production presents opportunities for economic growth and improved public services, signaling a commitment to leveraging the surplus to benefit the state and its residents.
—————————————————-
table {
width: 100%;
border-collapse: collapse;
}
th, td {
padding: 10px;
text-align: left;
border-bottom: 1px solid #006699;
}
th {
background-color: #006699;
color: #FCB900;
}
| Article | Link |
|---|---|
| UK Artful Impressions | Premiere Etsy Store |
| Sponsored Content | View |
| 90’s Rock Band Review | View |
| Ted Lasso’s MacBook Guide | View |
| Nature’s Secret to More Energy | View |
| Ancient Recipe for Weight Loss | View |
| MacBook Air i3 vs i5 | View |
| You Need a VPN in 2023 – Liberty Shield | View |
Record-breaking oil production in New Mexico is likely to give the state government a multibillion-dollar surplus next fiscal year, state economists said on Wednesday.
Annual general fund spending commitments would grow to $13 billion for the July 2024-June 2025 fiscal year — a surplus of $3.5 billion, or 36%, over current annual general fund spending commitments, leading forecasters said Economists from four state agencies, including the Legislature’s Budget and Accountability Office.
The estimates were presented to a panel of leading lawmakers on Wednesday, setting the stage for budget negotiations when the legislature meets in January 2024, amid public concerns about crime, health care and the quality of public education in a state with high rates of child poverty and low labor force participation.
Annual oil production in New Mexico has more than doubled in the past five years as the state became the second-largest oil producer behind Texas. The energy industry provided the state with record-breaking revenues last year from severance taxes and federal royalties, while the oil sector also boosted state revenues related to sales taxes, corporate income and personal income.
“We are living in unprecedented and historic times in the state of New Mexico,” said Wayne Propst, secretary of the state’s Department of Treasury and Administration, in announcing the state’s earnings projections.
The money is piling up in government accounts. Uncommitted general fund balances topped $4.3 billion as of July 1, about 50% of annual government spending commitments.
Still, several lawmakers have expressed caution about new spending commitments — and whether they can be sustained as energy markets and energy production falter.
“My concern is that we have to be really careful about how we spend it,” said Grants Democratic state Rep. Harry Garcia. “If we continue like this and the money goes away again, we’ll be in big trouble. It happened in 2016 and how quickly we forgot.”
Soaring oil production has enabled New Mexico in recent years to raise public salaries, expand access to unpaid childcare, and offer its residents a tuition-free college — while setting aside billions of dollars for a variety of “rainy days.” Emergency Accounts and Mutual Funds.
The trusts are designed to support and facilitate public programs future dependence on the fossil fuel industry, when oil reserves are depleted or demand falls, or both. A state early childhood education foundation launched in 2020 already has assets of $5.5 billion.
Legislation passed this year will divert excess oil revenues into the state’s permanent severance tax fund to generate investment income and fund construction projects. By 2028, new deposits are expected to be between $2.2 billion and $3.1 billion.
“We are building our bridge from peak oil to investment income,” said Tax and Finance Minister Stephanie Schardin-Clarke.
Democratic Senator George Muñoz of Gallup, chairman of a lead budget committee, said the state’s huge budget surpluses would not last. He praised efforts to generate more income through savings and investments.
“We have an opportunity…to get the state to become less dependent on oil and gas,” he said in a statement.
Lawmakers have responded to budget surpluses in recent years by approving tax breaks and direct refunds — including payments of $500 to individuals or $1,000 per household in June and a gradual reduction in taxes on sales and business services.
Democratic Gov. Michelle Lujan Grisham signed into law in April repayable loans of up to $600 per child, a tax break for health care providers and new incentives for the film industry. But she rejected a series of tax cuts and tax breaks to protect government finances.
The governor said in a statement Wednesday that a solid earnings forecast from the state “proves that what we’re doing in the New Mexico economy is working.” Lujan Grisham also described her support for “meaningful and long-term investments” without giving any details on next year’s budget priorities.
—————————————————-