New Mexico's $10 Billion Budget 2/3rds Reliant on Federal Funding Oil and Gas Risky for Sustainability


The New Mexico legislature is in the final process of completing the state budget. Citizens of the state of New Mexico and most especially rural Southern New Mexico in counties such as Otero County, New Mexico take issue with the Federal government and Federal directives on money spent however the influence of funding from the Federal Government and jobs paid for by the Federal government cannot be understated. 

There is much talk about reliance on oil and gas proceeds for the state budget and the need to diversify the economy of New Mexico. The debate needs to extend to not only diversifying the economy from its reliance on oil and gas proceeds but also diversifying the economy from the trough of government spending which may not always be reliable as congress figures its way out of large budget deficits.

Otero County New Mexico facts:  37.28 percent were employed in government and government enterprises, thus rather we like it or not Otero County's economy is highly reliant on the government trough. Military and government are the largest employers in Otero County. Military employed 15.44 percent of the total employment of city, county state and federal government is almost 22%.

Specific to the state and local budgets New Mexico takes significantly more than it gives. New Mexico, West Virginia, Alabama and Mississippi all four rank within the top 10 for the ratio of federal funding to income taxes paid. Federal funding makes up 36.2% of the state budget. Revenues off of oil and gas taxes paid into the state from that sector of business accounts for another 1/3rd of the budget for the state of New Mexico. A majority of the land of which that oil and gas sits is Federal land with federal leases extended to the oil and gas companies. The reliance on good working relationship with Washington and the oil industry cannot be understated. This reliance on oil, gas and the federal government is a dependency that the legislature must address in the next few years or the risks to New Mexico are grave.

A full two thirds of the budget is at risk to the whims of two "industries" that will face significant pressures in the years ahead. The federal government must get its house in order and tackle the huge budget deficits it faces. Oil and gas industry taxes feeding into the New Mexico budget are short term and cannot be relied upon as sustainable income for more than a decade.

In the scope of spending the New Mexico state budget is small compared to other budgets ranking 30th in state spending. However, a point of interest is the proposed $10.19 billion-dollar budget for the state of New Mexico with a population of 2.1 million is less than the $14.6 Billion-dollar budget for the city of San Francisco, California with a population of less than half of New Mexico's at 813,000. The GDP of the San Francisco area is $655 Billion ranking it as the 8th largest economy in the world for a city. The GDP of the whole state of New Mexico is $94.66 Billion.

Under that backdrop and with little discussion and no solutions for economic diversity considered by the New Mexico legislature, New Mexico's largest budget spend ever is proposed.

The Senate Finance Committee unanimously approved its budget over the weekend. It would spend $32 million more than its counterpart approved by the House of Representatives on Jan. 31.

The difference means the Senate is seeking a 6.8% increase in spending over the last fiscal year. Like in the House, senators reined in spending in recognition that oil and gas taxes and royalties are predicted to level out. State lawmakers in three of the last five years increased spending by more than 10%. The House version this year has called for a 6.5% increase in spending, while Gov. Michelle Lujan Grisham called for a nearly 10% increase in her budget proposal.

If the Senate approves the budget during its hearing today, both chambers will reconcile any differences and then send it to Lujan Grisham for approval. They must do so before the 30-day legislative session ends at noon on Thursday.

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