NM’s revenue growth said to slow for first time this decade, but state still flush, analysts say

The Roundhouse in Santa Fe pictured Jan. 24, 2024. Lawmakers will have more than $650 million in new money to spend this upcoming session, according to forecasts released Wednesday. (Photo by Patrick Lohmann / Source NM)

New Mexico’s budget is expected to have .2% less revenue this fiscal year than last thanks to a slowing global oil market. But it’ll still be enough to give lawmakers more than $650 million in new money to spend at the legislative session come January.

That’s according to fresh projections released Wednesday by an expert group of legislative and academic analysts — projections that state leaders tout as proof the state is on rock-solid financial footing to meet obligations and continue growing.

“The actions that the Legislature and this administration have taken over the past several years to diversify our revenues and prepare for the eventual slowdown in oil and gas revenues are already starting to have an effect,” said Wayne Probst, Secretary for the state’s Department of Finance and Administration, in a news release.

New Mexico is expected to generate a little more than $13 billion in revenue this fiscal year, which ends June 30, 2025, from taxes, investments and other sources. The $13.016 billion estimate this year is $19.7 million less than what the state pulled in last fiscal year.

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It’s the first time that the state was expected to collect less in revenues over the prior year since at least 2020, according to a chart in a 31-page report released Wednesday. Instead, growth has usually ranged anywhere from 2% and 20% since then, according to the report.

In 2026, revenues are expected to rise again about 3% above 2025 levels, according to the report.

Even as oil and gas revenue hit record levels, the volatility of the industry pushed lawmakers to try to use budget surpluses wisely and in ways that generate their own returns on investment.

In February, lawmakers passed a record $10.2 billion budget that spent much of the budget surplus on new trust funds overseen and invested by the New Mexico Finance Authority, as well as additional infusions of cash into existing return-generating funds that pay for early childhood education.

Because the state is meeting its legally required reserves, some money that would otherwise go into a reserve fund can go to the Early Childhood Trust Fund. According to the report, more than $680 million can be deposited into that fund this year. The state holds in reserves more than 31% of what it intends to spend this year.

Still, forecasters warn that the New Mexico economy will grow more slowly than the rest of the country, and they noted some challenges that could affect the state’s bottom line.

For one, New Mexico’s labor force participation rate – 57.3% – is far below the national average and hasn’t returned to pre-pandemic levels. And the state is expected to see less of a jump in oil production, down from the 30% increases seen in the last few years.

The state is expected to produce 735 million barrels of oil in the coming year. It produced 705 million last year, according to the report.