Windfall from oil and gas revenue boosts chances of New Mexico pay raises, policing

SANTA FE — New Mexico government economists on Friday announced a new surge in state income as legislators consider proposals to raise pay for public school teachers, a possible hiring spree for local police officers and new efforts to bolster essential public services amid the coronavirus pandemic.

The new revenue forecast predicts a $1.6 billion surplus in state general fund income in excess of current spending obligations for the fiscal year starting on July 1, 2022.

The petroleum sector accounts for most of the new money because of record-setting oil production in New Mexico's portion of the fertile Permian Basin oil and gas formation.

New Mexico has overtaken North Dakota as the nation's second-largest oil producer behind Texas. Natural gas production also has accelerated in New Mexico.

The new state government income forecast — revised upward by more than $200 million since August — sets a benchmark for budget negotiations when the Legislature convenes in January 2022 to craft a general fund spending plan for the upcoming fiscal year.

Economists from the Legislature and three state agencies warned that state government finances are closely linked to world oil prices that could recoil from any signal of economic recession, as health officials closely monitor the omnicron variant of COVID-19.

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New Mexico's economy has recovered about two-thirds of the jobs that were lost at the outset of the pandemic in 2020, said state Taxation and Revenue Secretary Stephanie Schardin Clarke

“We still have a big percentage of our population that is in a difficult financial situation,” Clarke said. “We see the stock market doing so well. … I just want us not to forget that there is a whole sector of the economy that has not experienced those gains.”

Income for many state residents has dropped with the expiration of federal stimulus payments.

New Mexico authorities have spent more than $600 million in federal pandemic aid to replenish the state unemployment insurance trust without raising taxes on employers, with more than $1 billion pandemic aid still unassigned.

Gov. Michelle Lujan Grisham, a Democrat, is urging legislators to take action soon to appropriate that federal relief — soliciting spending bills during a special legislative session focused on redistricting that begins Monday and extends indefinitely in advance of the year-end holidays.

Democratic Senate finance committee Chairman George Muñoz of Gallup wants the Legislature to consider depositing the pandemic aid in the state general fund, which he said would buy time to thoroughly examine infrastructure projects and ways to provide better education and training to New Mexico's workforce.

Lujan Grisham is calling for a 7% pay raise for public school workers and higher minimum pay for teachers at various stages in their careers. She has roughly outlined a proposal that would provide $100 million to boost staffing at state and local police agencies.

New Mexico's political divide over federal energy policy was on prominent display Friday, as legislators on the state´s lead budget writing committee peppered economists with questions about the oil sector of the economy.

Republican state Sen. Gay Kernan of Hobbs warned that future state government income would be at risk if the U.S. government imposes a moratorium on oil lease sales on public lands.

The state expects to receive $1.44 billion in annual income from oil and natural gas production on federal land through payments for royalties and lease bonus payments.

¨I think it´s a huge risk down the road,¨ Kernan said. ¨I do think we are going to see an impact."

The Biden administration in November recommended an overhaul of the nation’s oil and gas leasing program to limit areas available for energy development and raise costs for oil and gas companies to drill on public land and water.

More: Benefits of oil and gas debated in Congress as feds ready to lease more land in New Mexico

The state is expected to end the current fiscal year in June of 2022 with a general fund balance of $2.5 billion — equal to about 35% of annual spending commitments.

As recently as 2017, New Mexico temporarily slashed spending to state colleges and universities in response to faltering oil prices and reduced government income.

Looming over the budget surplus are New Mexico's commitments to underwrite a portion of Medicaid coverage for people with low income.

Enrollment in the program surged during the pandemic and supplemental federal payments are set to expire in the spring of 2022.

This article originally appeared on Las Cruces Sun-News: Windfall from oil and gas revenue boosts chances of New Mexico pay raises, policing