The crash in oil prices has lawmakers desperately slashing spending.
Budget Crisis at Roundhouse (Updated)
BY DENNIS DOMRZALSKI
New Mexico state government is facing a budget shortfall of up to $900 million for the current fiscal year and state revenues are in free fall thanks to plunging oil and gas revenues, State Sen. John Arthur Smith said Thursday.
“We still don’t know where the bottom is on our revenues. This is a free fall in revenue that I have never experienced, and I’ve been here 28 years,” Smith, a Democrat from Deming and the chair of the Senate Finance Committee told reporters in a briefing on the budget.
Smith said the budget recently approved by the Republican-controlled House will undergo severe changes in the Senate. He added that he is hoping to work with Gov. Susana Martinez’ administration to cut spending so as to avoid the need for a special session down the road.
Smith refused to blame the administration or the legislature for the plunging revenues, saying the fall in oil and gas prices is beyond anyone’s control. He added that the administration has done the right thing in asking state agencies to find ways to cut their current budgets.
“I hope this does not become a partisan-charged issue,” Smith said, adding that there are still people in denial who want increased spending for the next fiscal year’s budget.
The current fiscal year began on July 1st and ends on June 30th. The current budget was based on oil prices in the $55-a-gallon range. Thursday morning, oil was trading for below $27 a barrel.
UPDATE, 12:15 p.m.:
Tax revenue through the first five months of the current fiscal year was down by nearly $400 million over the same period last year, Smith said, adding that if the trend continues, the deficit could be between $700 million to $900 million.
Gross receipts taxes were off by $100 million, oil and gas revenue was down by $190 million and compensating taxes declined by $30 million, Smith said. In addition, corporate income taxes were down by $70 million.
“I don’t know what we are going to do at this stage,” Smith said.
In addition to cutting services and reducing expenses, the state could dip into is budgetary reserves. But those reserves for the current fiscal year are projected to be $380 million, or 6.1 percent of recurring appropriations, according to the most recent estimates from the Legislative Finance Committee. The state could also raise taxes, but Martinez has been pretty much opposed to any tax increases.
It’s estimated that one third of the state’s $6.3 billion general fund budget comes from oil and gas revenues. Noting that the oil and gas industry “has carried the [budgetary] load” for a long time, Smith said the state needs to diversity its economy. He also added that other oil and gas-dependent states like Louisiana, Oklahoma and Wyoming are also facing free falling revenues and severe budget shortfalls.
Dennis Domrzalski is an associate editor at ABQ Free Press. Reach him at firstname.lastname@example.org.
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