New Mexico’s record-breaking oil output is expected to generate an unprecedented multibillion-dollar surplus for the state government throughout the 2018 fiscal year, state economists stated Wednesday.
In accordance with forecasts from four state agencies, which include the Legislature’s budget and accountability office, annually state general fund income will rise to $13 billion for the fiscal year which operates from July 2024 to June 2025, representing a $3.5 billion, or 36%, surplus across current annual general fund spending obligations.
Over the last five years, New Mexico’s yearly oil production has surpassed twofold, propelling the state to second place after Texas.
The energy business generated record-breaking revenue for the state last year from severance taxes and federal royalty payments, whereas the oil industry also increased government revenue through sales, corporate, and individual income taxes.
Rising Oil Production Equals Higher Pay and Free Education
Rising crude oil production has enabled New Mexico in recent years to increase public salaries, expand access to no-cost daycare, and provide tuition-free college to its inhabitants — all while laying aside billions of dollars in various “rainy-day” emergency accounts including investment trusts.
The trusts are intended to sustain public programs while reducing future reliance on the fossil fuel sector as oil supplies decrease, demand falls, or both. A state fund for early childhood education, established in 2020, already has a $5.5 billion balance.
This year’s legislation will shift excess petroleum money to the state’s severance tax permanent fund, which will produce investment income and subsidize development projects.
By 2028, new deposits of $2.2 to $3.1 billion are projected.
In recent years, lawmakers have responded to budget surpluses by enacting tax relief as well as direct rebates, such as $500 payouts for people or $1,000 per household in June, and a progressive reduction in sales and business service taxes.