(The Center Square) – Over the past 20 years, the tax revenue collected for New Mexico's state budget has fluctuated wildly, following the booms and busts of the ever-fluid oil and gas market.
The New Mexico Oil and Gas Association reports that 39% of the state's general fund in fiscal 2019 was attributed to oil and gas proceeds. New Mexico is the third-largest oil producing state in the nation.
"The volatility of the market affects the state in a variety of ways, from direct job losses in the energy sector, to negative impacts on our bond ratings, to challenges in funding our schools and healthcare programs," Rob Black, president and CEO of New Mexico Association for Commerce and Industry, told The Center Square.
"While New Mexico has taken steps to smooth out the boom and bust cycles with the tax revenue stabilization funds and increased annual reserves, it still makes long term budgeting and maintaining appropriate state staffing levels difficult," said Black.
Paul Gessing, president of New Mexico's Rio Grande Foundation, said in a Las Cruces Sun News op-ed that Democrats suggest the state break free of its dependence on oil and gas.
"Any transition that allows for less dependence on the revenue from oil and gas will take decades and frankly will be dependent on oil and gas revenues to provide the necessary capital and educational investments for it to be successful," Black said.
Without that heavily relied upon source, the question becomes how to fund state government.
Gessing suggests using the 2021 session to consider reforms that would make the state more competitive and business-friendly. Though tax increases may be a quick solution to a revenue shortfall, they will not make New Mexico more competitive in the areas of jobs and economic growth.
"As New Mexico looks toward economic recovery, it is important that the road to recovery goes through main street," Jason Espinoza, New Mexico state director of the National Federation of Independent Business, told The Center Square.
"No one has greater incentive, responsibility or ability to lead an economic recovery than New Mexico's small business owners. Therefore, lawmakers have a special obligation to ensure that public policies help spur economic growth by taking into account the unique perspective of those who own and operate a small business in New Mexico," Espinoza said.
"To be more competitive, New Mexico must invest in training and educating our workforce; we must invest in infrastructure that supports business development like broadband, roads, rail lines and physical infrastructure like lab space. We must reform our regulatory and tax systems to be more efficient, fair, and consistent and we must build an ecosystem that supports entrepreneurism and innovation," Black said.
"When thinking about raising taxes, we can’t be a penny wise and dollar foolish or we will kill growth in New Mexico."