The Seal of the State of New Mexico inside the Roundhouse on Jan. 10, 2024. A multi-agency team of New Mexico forecasters released new budget projections Tuesday that predict the state will continue to be on solid financial footing, with nearly half a billion dollars in “new” money. (Photo by Anna Padilla for Source NM)
Economists tasked with predicting New Mexico’s financial health said Tuesday the state will generate a little more than $14 billion in revenue in the upcoming fiscal year, a figure that means the state will have nearly half a billion dollars in “new” money to spend when they craft the budget early next year.
Lawmakers with the interim Legislative Finance Committee heard new projections Tuesday about how much the state is expected to generate in revenue via taxes, investment returns and oil and gas royalties over the next few years. One key estimate they provide is how much “new” money lawmakers will have for the upcoming fiscal year, which is the amount of projected revenue minus how much the state will spend this fiscal year.
Department of Finance and Administration Wayne Propst, whose agency is one of four that team up to develop statewide economic forecasts, said the forecast is just the latest positive sign for the state’s financial health after years of record growth and revenue.
“I keep thinking that one of these days I’m going to have to show up with some bad news,” he told lawmakers. “But fortunately, today is not that day. The fiscal position of the state of New Mexico remains strong.”
In total, the roughly $14.1 billion the state expects to generate in revenue in the fiscal year beginning Sept. 1, 2026 is about $485 million more than the total amount the state is currently spending this fiscal year, which is approximately $13.6 billion.
That $485 million in “new” money prompted celebratory news releases from Gov. Michelle Lujan Grisham and fellow Democrats in charge of the Legislature, who said it will help soften the blow of expected federal spending cuts that could mean the state will have to step in to pay for low-income health insurance or food assistance.
“New Mexico’s strong revenue projection announced in Las Cruces today is good news at a time when the federal government is ruthlessly slashing revenues that states have historically relied on,” Lujan Grisham said in a statement. “Today’s announcement that our state can expect nearly a half-billion dollars in additional revenue will help us protect the essential services for New Mexicans that Washington has abandoned.”
According to state House Democrats, the “One Big Beautiful Bill” Congress and Trump enacted late last month will mean at least $305 million less in federal funding in the budget that lawmakers will craft during the legislative session beginning in January. The governor’s office put that figure at about $200 million each year for the next few years, primarily due to tax code changes.
In response to the new forecasts, House Democrats championed their approach of investing a glut of oil and gas royalty payments into revenue-generating reserve funds, saying that the investment strategy has removed volatility from the budgeting process and insulated essential services from price fluctuations in the oil and gas sector.
Oil and gas revenues are expected to contribute about one-third of the state’s general fund over the next few years, but that figure would have been close to 50% if the state hadn’t diverted excess oil and gas revenues into trust funds that fund early child education, behavioral health or other reserve funds, according to estimates forecasters released Tuesday.
“Despite the constant stream of chaos coming out of Washington, D.C., New Mexico’s economic outlook remains strong thanks to years of hard work and smart budgeting,” said House Speaker Javier Martínez (D-Albuquerque), in a news release.
In addition to the federal cuts, forecasters have predicted a slowdown in oil and gas growth and prices in the next few years, a message they they repeated Tuesday. Ismael Torres, the LFC’s chief economist, said the slowdown and uncertainty around President Donald Trump’s economic policies should give lawmakers caution when crafting the state’s spending plan.
Along with unpredictable effects of federal policy on the global economy, Torres also mentioned that lawmakers have greatly increased the amount of money they’ve dedicated to non-recurring spending, including significant multi-year funding commitments.
He said continued growth in that type of spending is reducing the amount of funds lawmakers can put in reserves could end up hamstringing lawmakers if expected future revenues “don’t materialize.”
“As economists, you might hear us say that there’s a lot of uncertainty always,” he said. “But this time I really mean it.”
