Southeast New Mexico legislators prepare proposed fix for lost tax revenue for Carlsbad
Two Lea county state representatives have crafted legislation for a permanent fix for lost tax revenue after a measure for a temporary solution was vetoed in 2023 by Gov. Michelle Lujan Grisham.
House Bill (HB) 54 was prefiled Jan. 5 by Republicans Rep. Larry Scott (District 62) and Rep. Randall Pettigrew (District 61) and would create an all cities and counties fund, according to the New Mexico Legislature’s website.
Scott said HB 54 was an attempt to fix legislation that resulted in the loss of gross receipts tax (GRTs) funds to Carlsbad and Hobbs which were needed to pay for certain municipal services.
More: State lawmakers seek long-term fix for lost tax revenue for City of Carlsbad
Last year the governor vetoed Senate Bill (SB) 292 which would have provided $25 million to the City of Carlsbad in lost tax revenues from House Bill 6 passed in 2019 that changed the state’s tax code for where a service takes place and not where the business that provides the service is located.
House Bill (HB) 6 titled Tax Changes was enacted nearly two years after it was signed by the governor in 2019.
A closer look at House Bill 54
Pettigrew said the proposed legislation creates a fund to hold 8% of all state GRTs that would then revert to cities and counties in New Mexico.
“The plan would ensure that all local governments would directly benefit from the enhanced GRT revenue the state is receiving from the oil and gas boom,” Pettigrew said.
Financial projections from the State of New Mexico indicated the oil and gas industry contributed nearly $12.8 billion in recurring revenue in fiscal year 2024 and nearly $13 billion in fiscal year 2025.
Scott said HB 54 was based on a formula where a city receiving 70% of state GRTs would transfer 30% of the money to the county where the municipality is located.
More: Record $2.75 billion in New Mexico revenue driven by oil and gas industry
“Municipalities located in the oil and gas producing counties (Eddy and Lea) would receive a larger share of revenue,” Pettigrew said.
“However, all municipalities and counties will benefit (from HB 54)."
Larry Scott assesses chances of bill passing
The 2024 New Mexico Legislative starts at noon Jan. 16 and is a 30-day session, which are limited to budgetary items and matters placed on the governor’s agenda.
On Jan. 4 the governor released her executive fiscal year 2025 budget, which totals $10.5 billion in recurring spending, a 9.9% increase from the last fiscal year, read a press release.
Friday was the last day for New Mexico lawmakers to pre-file bills, and with just a month long session, Scott said HB 54’s passage was a “longshot.”
“The takeaway is the state is participating in unprecedented revenues out of Eddy and Lea counties,” Scott said.
A revised study commissioned by Eddy County and prepared by the Arrowhead Center at New Mexico State University (NMSU) in Las Cruces indicated Eddy and Lea counties contributed more than any other county to New Mexico's revenue stram.
More: Lea and Eddy counties continue leading in contribution to state revenue, study says
The report stated Lea County contributed $250,000 per person, while the state expended $35,000 per person. Eddy County contributed $239,000 per person with $32,000 expended on each person.
The study analyzed State of New Mexico county-level revenues and expenditures from 2015 through 2022, estimating the amount of revenue contributed to the state by each county and the state’s spending in each county on a per capita basis.
Mike Smith can be reached at 575-628-5546 or by email at MSmith@currentargus.com or @ArgusMichae on X, formerly known as Twitter.
This article originally appeared on Carlsbad Current-Argus: Legislators prepare long-term solution for lost revenue in Carlsbad
