SANTA FE, N.M. — Efforts by New Mexico to save and invest portions of a financial windfall from local oil production are paying off as revenue from state government investments exceeds income taxes for the first time, according to a new forecast Monday.
General revenues from the state’s two multi-billion permanent funds and interest on treasury bills are expected to rise to $2.1 billion for the fiscal year between July 2024 and June 2025, surpassing the $2 billion income from personal tax will exceed.
The investment returns are intended to ensure that critical programs – ranging from child care subsidies to tuition-free education at colleges and trade schools – endure. when oil revenues falter amid a possible transition to new energy sources.
At the same time, lawmakers this year revised personal income tax rates to cut taxes in the nation’s second-largest oil production state, after Texas.
“We are not a poor state anymore,” said Democratic Gallup state Sen. George Muñoz. “We have things we can win on: free education, child care… low taxes for working families, for children. And it’s all because we’ve done a lot of work to set this up for the future.”
The comments came Monday during a legislative panel where economists from four government agencies released an income estimate for the coming year. The figures will form the basis for budget negotiations when the Democratic-led Legislature convenes in January.
State government revenues, which are closely tied to oil production in New Mexico, continue to grow, albeit at a slower pace, as lawmakers discuss new investments in social programs aimed at reducing crime and homelessness.
Economists estimate the state will collect a record $13.6 billion in general fund revenue for the fiscal year running from July 2025 to June 2026, up 2.6% from the current period.
This year’s revenue increase leaves room for another $892 million in state spending in the coming fiscal year, a 7% increase, according to the Legislature’s Accountability and Budget Office. State revenues are expected to exceed current annual spending commitments by $3.4 billion.
New Mexico lawmakers are pushing to open new savings accounts.
One proposal would set aside as much as $1 billion in a trust to fund mental health and addiction treatment spending in response to public frustration with crime and homelessness. Lawmakers are also likely to revise a stalled proposal to create a trust for Native American education that could expand indigenous language education.