New Mexico’s top budget official said Friday state economists are working on contingency plans in the event of a state budget crisis spurred by the new coronavirus.
But it’s still too early to know when the economic free fall will end, whether oil prices will continue declining or how a federal stimulus package may aid the state. For now, lawmakers and state economists are waiting to see what happens.
Department of Finance and Administration Secretary Olivia Padilla-Jackson said her department and state economists are closely monitoring the state’s revenue stream and working on financial forecasts that may help lawmakers decide whether they need to trim the state budget amid extreme market fluctuations spurred by the global coronavirus outbreak.
She said her department’s economists have met with Taxation and Revenue Department and Legislative Finance Committee experts to discuss the volatility in the oil and gas market and the economic impact of severely limiting hotels, restaurants and other businesses on the state revenue stream. New Mexico is heavily reliant on the oil and gas industry to fund public programs and state government.
zSo far, the state has had to dip into emergency reserves to fulfill portions of the governor’s emergency orders, “but the amount is minimal,” Padilla-Jackson wrote.
“As to when reserves could be needed, at this point, this is hard to answer,” she continued. “It depends on what oil prices do in the next few weeks and months. We are closely monitoring this situation and believe that current reserves would be more than enough to meet any kind of shortfall this fiscal year.”
On Thursday, key lawmakers said a special legislative session is most likely needed to take a hard look at whether the state can still pay for a $7.6 billion budget signed into law by Gov. Michelle Lujan Grisham after economic fallout from coronavirus infections and precautions.
Republicans have urged an immediate special session to dramatically scale back spending.
But key Democrats, including House Speaker Brian Egolf, Senate Majority Leader Peter Wirth, Senate President Pro Tem Mary Kay Papen and Finance Committee Chairman John Arthur Smith, have said it’s unwise to start planning financial revisions before they know how the market settles.
Economists have predicted an imminent recession spurred by COVID-19. However, oil prices rose sharply Thursday following the largest decline in two decades, and it’s unclear when and how the volatility may level out.
Democratic legislative leaders said they are also waiting to see what aid will be offered to New Mexico from the $1 trillion economic stimulus package being pushed through Congress.
The S&P 500 fell more than 3 percent Friday afternoon after rising earlier in the morning. Oil prices also have fluctuated wildly in the past 20 days.
In California, the governor has issued a “shelter in place” order, and New York and Illinois governors also urged residents to stay at home.
Lujan Grisham has advised state residents to stay at home as much as possible and imposed severe limitations on businesses meant to keep people out of contact with one another in the hope of saving lives and preventing hospitals from being overwhelmed with cases.
Lujan Grisham wrote in a letter to Republican and Democratic leaders in the House and Senate that her priority is public safety, but Lujan Grisham said she is also closely monitoring the economic situation.
“To prepare for a special session, I believe that we must first understand the long-term effects and needs arising from this emergency, have updated and reliable revenue projections, and have a clear picture of the full spectrum of assistance that the federal government will be providing to states,” the letter said.
“All of this information will be clarified in the coming weeks.”