New Mexico Outlook: 2022 Legislative Preview - Representative Patricia Lundstrom, LFC Chair David Abbey, LFC Director Presented to the New Mexico ...
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New Mexico Outlook:
2022 Legislative Preview
Representative Patricia Lundstrom, LFC Chair
David Abbey, LFC Director
Presented to the New Mexico Society of Association Executives
January 6, 2022STATE REVENUES AND
ECONOMIC OUTLOOK
2State revenues are projected to increase $886 million
in FY23, reaching $1.599 billion of “new money.”
Recurring General Fund Revenue
10,000
(in millions)
Recurring revenues are $9,049
projected to increase $8,085 $8,163 Other, $932
1% and 10.9% Y-o-Y in 7,500
Other, $826 Other, $871
Interest, $1,142
Fy22 and FY23 Interest, $961 Interest, $1,039 Rents & Royalties,
$993
Rents & Royalties, Rents & Royalties,
$853 $792 Severance, $829
Oil and gas revenues 5,000
Severance, $477 Severance, $604
account for 20% of Income Taxes, Income Taxes,
Income Taxes,
$2,107
$2,054
general fund increases
$1,991
in FY22 and 60% in 2,500
FY23 GRT, $2,914 GRT, $2,866 GRT, $3,047
0
FY21 FY22 FY23
3Higher oil revenues are driven by record-breaking oil
production in New Mexico.
Top Oil-Producing States West Texas Intermediate
Oil
2,500 6,000
Price Forecasts
(dollars per barrel)
$110
Texas
Thousand Barrels per Day (Excluding Texas)
5,000 $100
2,000
$90
Texas (thousand barrels per day)
$80
4,000
$70
1,500 New Mexico
$60
3,000 $50
1,000 $40
2,000 $30
North Dakota $20
2014:Q1
2015:Q3
2017:Q1
2018:Q3
2020:Q1
2021:Q3
2023:Q1
2024:Q3
2026:Q1
500
1,000
IHS Forecast 2021
WTI History
0 0
Jul-2011
Jul-2012
Jul-2013
Jul-2014
Jul-2015
Jul-2016
Jul-2017
Jul-2018
Jul-2019
Jul-2020
Jul-2021
Jan-2011
Jan-2012
Jan-2013
Jan-2014
Jan-2015
Jan-2016
Jan-2017
Jan-2018
Jan-2019
Jan-2020
Jan-2021
However, oil and gas prices
can be extremely volatile,
creating uncertainty in the
revenue forecast.
4In addition to the general fund, oil and gas revenues
will result in large transfers to the early childhood
trust fund.
Oil and Gas School Tax and Federal Royalty
Revenue
(in millions)
$3,000
Oil and gas revenues are expected 2,789 2,764
2,616 2,646
2,588
to increase $1.2b (77%) y-o-y in $2,500
180
FY22
364
576
1074
$1.3b to general fund $2,000 1508
$1.5b to early childhood trust 1,575
fund or tax stabilization $1,500
343
reserve 2223
2466
$1,000 2040
1691
1232 1281
$500
$0
FY21
FY22
FY23
FY24
FY25
FY26
Total General Fund Total TSR or ECE Trust Fund
5Significant volatility in revenues impedes on the state’s
ability to plan and execute based on stable budgeting.
Recurring General Fund Revenue & Appropriation Annual Growth
20%
17.5%
15.8%
15% 13.7%
12.7%
10.9%
10% 11.0%
7.3% 11.9%
7.4% 8.6% 5.8%
6.3% 4.5% 5.3%
5% 3.1%
3.5% 4.2% 4.2% 4.2% 4.2% 2.6%
4.3%
-2.7% 0.8% -1.7% -0.4% 2.9%
0%
-1.6% 1.0%
-0.3%
-1.9%
-5%
-7.8%
-9.8%
-10%
-11.6%
-11.2%
-15%
FY22 est.
FY06
FY07
FY08
FY10
FY11
FY12
FY13
FY14
FY15
FY19
FY20
FY21
FY 23 est.
FY09
FY16
FY17
FY18
Yr/Yr Recurring GF Appropriations Growth Yr/Yr Recurring GF Revenue Growth
Source: LFC Files
6Distributions to the ECE reduce the general fund’s
dependence on oil and gas revenues.
General Fund Revenues Dependent on Oil and Gas Industry
(percentage of recurring revenue)
50%
45%
43%
40% 38%
35%
30%
31%
25%
20%
15%
Distributions of excess severance tax and federal mineral leasing payments
10% reduces general fund dependence on oil and gas revenue
5%
0%
2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020 2021 2022 est 2023 est
% incl. permanent funds % if no TSR/ECE distribution % excl. permanent funds & TSR/ECE distrib.
7Personal income taxes are rising as the “k-shape”
recovery defines state job growth.
8As job openings rebound and the labor force shrinks,
governments are struggling to compete with the
private sector.
Wages and Salaries Y-o-Y Growth
2021
2020
2019
2018
2017
0.0 2.0 4.0 6.0
Government Wage & Salary Disbursements
Private Wage & Salary Disbursements
9A gross receipts tax cut and tax rebates in the
session could help with business competitiveness
and encourage consumption.
Selected Cities Combined Gross
Receipts Tax Rate History
Lower the state gross receipts tax rate by one- 9.0%
quarter of a percent;
8.5%
Anti-pyramiding provisions for business-to-
business services;
8.0%
Add new industries to those that deduct 7.5%
GRT charged on sales to other businesses; 7.0%
One-time working families tax rebate; 6.5%
Additional municipalities excluded from the 6.0%
hold harmless phase-out (those with 5.5%
population between 10-25 thousand); 5.0%
Limit local government GRT rate increases for 4.5%
five-years to prevent tax increases from
offsetting the state rate reduction. Santa Fe Las Cruces
Clovis Albuquerque
Farmington Hobbs
State Rate
10
Source: New Mexico Tax Research Institute, TRDTHE FY23 STATE BUDGET
11FY23 Agency Budget Requests
For FY23, state agencies requested an average increase
over 20 percent.
The requests prioritized hiring and included nearly
$290 million to fill an additional 2.2 thousand
positions
The additional personnel funding came in addition to
the estimated $90 million in existing surplus funding.
A number of agencies, including CYFD, the Corrections
Department, and the Department of Public Safety
requested funding for at least 200 FTE each despite having
sufficient funding to fill almost 400 positions.
12Salary and Pay Competitiveness
Comparison of Wage Growth
State of New Mexico Appropriated Increases v. NM and US Average Wage
8 Growth
7 Projection
6
percent change
5
4
3
2
1
0
2011
2012
2013
2014
2015
2016
2017
2018
2019
2020
2021
2022
2023
SONM Salary Appropriations New Mexico U.S. Average
Data on New Mexico and U.S. Average wage increases from BBER and reflects BBER projections for 2022-2026. SONM salary
appropriations in 2022 and 2023 based on LFC recommendations for FY23.
Source: LFC Files
Salaries paid by the State of New Mexico (SONM) have not kept pace with
the U.S. or New Mexico average growth. Projections indicate accelerating
wage growth in 2022 and 2023.
13FY23 LFC Recurring
Recommendation
Economists project a 21%, or about $1.6 billion, increase in “New Money” for FY23
(Projected Revenue minus Current Appropriations).
Of the 21%, the LFC recommendation would spend less than 14%, about $1 billion, but
of that amount:
8%, or more than half, goes to replace the use of one-time nonrecurring spending
in agency recurring budgets, including replacing temporary federal FMAP
increases, funding in schools’ SEG, fund FY22 raises in FY23 budget, other
replacement of one-time funding like the use of consumer settlement funds and
state engineer trust funds, and other unfunded liabilities like ERB.
3% goes towards FY23 compensation increases, including additional targeted
increases in agency budgets for state police, teachers, district attorneys and
judges.
The remaining 3% is for increases in agency costs, evidence-based (proven to work
through rigorous research) programs in education, health and human services and
criminal justice agencies, or for expansion of other committee priorities, such as
the DD waiver.
The remaining $583 million of new money is unspent and available for tax cuts and to
keep reserves at 30 percent.
14FY23 LFC Nonrecurring
Recommendation
The LFC recommendation includes one-time general fund and other investments
totaling over $2.4 billion, including full use of American Rescue Plan Act (ARPA)
state relief funds and about $180 million in public school reform funds. Virtually
all the special session spending of ARPA is contained in the LFC recommendation.
Major investments include:
Almost $500 million in transportation upgrades, including major projects.
Almost $650 million in economic development related investment.
$115 million in water infrastructure upgrades.
$158 million in rural jobs, natural resources and quality of life
improvements.
$418 million to improve college completion and meet workforce needs for
critical services, including behavioral health and education.
$74 million, plus anticipated federal matching funds, for costs related to
COVID-19, including support for hospitals and nurse staffing assistance.
$420 million for other special appropriations, including $30 million to
stabilize medical malpractice rates for doctors.
15NON-RECURRING REVENUES
AND CAPITAL OUTLAY
16Outstanding Capital
Outlay Projects
As of October 2021, the total
outstanding capital outlay funds total
approximately $2.3 billion.
This total includes 3,663 projects
authorized in previous years ($1.8
billion) and supplemental severance tax
bonds (SSTB) for public school capital
outlay ($569 million).
17Sources of Nonrecurring and
Infrastructure Funds
Coordinating funding sources and projects is critical to optimizing
infrastructure impacts.
In addition to the tables below, competitive federal grants will be
available for application, including bridges ($12.5 billion), electric
grid upgrades ($5 billion), orphaned well remediation ($1.5 billion),
and “middle-mile broadband ($1 billion).
Sources of Nonrecurring Funds Estimated New Mexico Allocations in the
State Sources Federal Infrastructure Investment and
Jobs Act (in millions)
Nonrecurring General Fund ~ $1 billion
Estimated NM
Spending Area Allocation
Bonding Capacity Over ~5 years
Severance Tax Bonds (STB) $663.5 million Roads, bridges, and major
$2,725
projects
Earmarked Funds (WTB, CIF, TIF) $152.4 million
Public transit $372
Supplimental STB $267.1 million Airports $90
General Obligation Bonds $259.7 million Electric vehicles $38
Total Bonding Capacity ~$1.3 billion Power infrastructure $38
Broadband $100
Federal Sources Water infrastructure $355
Wildfires $38
America Rescue Plan Act (ARPA) ~$1 billion
Cybersecurity $13
ARPA Capital Fund $133.1 million
Estimated Total $3,769
Source: US Chamber of Commerce, White House, and FFIS 182022 Large Capital Requests
Department of Transportation major investment projects, local
roads, and rest stops ($450 million)
New Mexico State Veterans Home new facilities ($60 million)
Public Safety Radio Statewide ($26.2 million)
Department of Public Safety ABQ Metro project ($21 million)
Mortgage Finance Authority Housing Trust Fund ($12 million)
University of New Mexico Center for Collaborative Arts &
Technology ($45 million)
University of New Mexico Health Science Center Children Psych
Center Replacement ($40 million)
New Mexico State University College of Engineering replacement
($25 million) and Health and Education replacement and
expansion ($17 million)
Senior Centers statewide ($22.5 million)
19THANK YOU
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