A rebound in oil prices is helping New Mexico stay on track to balance revenues and spending this fiscal year without resorting to further austerity measures, state economists and taxation officials told lawmakers Monday.
Spot prices for West Texas crude oil hovered around $39 a barrel on Monday — up from the $27-per-barrel range in February when New Mexico lawmakers forged a $6.2 billion spending plan for the coming fiscal year. The rebound in oil prices was offset to some extent by a decline in the number of oil rigs and reduced oil production.
Those and other economic indicators were presented Monday to lawmakers on the Legislative Finance Committee as they study whether the state is on track to balance its books during the budget year ending in June, and beyond.
Rep. Larry Larranaga, R-Albuquerque, said he didn’t see any major changes in the state’s economic fortunes during the past month, though he remained wary.
“Things didn’t change that much, but there’s not enough solid information to make a definitive assessment,” he said after hearing from experts.
Executive agencies have curbed hiring and suspended nonessential travel as New Mexico draws down reserves to pay for day-to-day government operations. Reserves are expected to decline about $400 million by the end of the fiscal year ending in June — something not seen in at least two decades — to make up for revenue revisions tied to low energy prices and weaker-than-expected tax receipts.
Economists with the state Taxation and Revenue Department noted that some reduced oil production in the Permian Basin in southeastern New Mexico was only temporary — the result of a severe winter storm that interrupted output for six days.
David Abbey, staff director at the Legislative Finance Committee, sounded a note of caution. Abbey said low natural gas prices also are taking a bite out of state coffers. Recurring state revenues for the six months ending in December declined by 11 percent to $2.84 billion, from $3.19 billion the previous year, he said.
Reserve balances are expected to shrink by mid-year to 5.6 percent of annual general fund spending. Economists at the Legislature say an ideal level for reserve balances is 10 percent. That keeps borrowing costs down and provides a spending cushion if tax receipts and royalties shrink further.
New Mexico plans to shave spending slightly next year, while shifting more money to Medicaid, state prisons, police, teachers and child protective services.