With the oil boom in southeastern New Mexico still going strong — and money from oil and gas revenues continuing to gush into state government’s coffers — a leading legislative budget hawk said this week that if the price of oil doesn’t drastically change, the state could receive more than $1 billion in additional tax dollars next year.
State Senate Finance Committee Chairman John Arthur Smith, D-Deming, told an interim legislative subcommittee on transportation that a windfall of $1.1 billion to $1.3 billion will occur “unless the international scene changes and the revenues fall.”
Crude oil prices dipped earlier this week to less than $50 a barrel, partly credited to fears of a trade war with China. But oil price rallied late in the week to more than $52 a barrel after the U.S. blamed Iran for attacks on two tanker ships near the Strait of Hormuz.
David Abbey, director of the Legislative Finance Committee, said Friday that formal revenue projections for next year will be available in August.
A spokesman for Gov. Michelle Lujan Grisham said Friday that the governor is eager to see those projections in August. “But if things hold, that would be a great source for funding early childhood education, economic development and diversification and other areas,” Tripp Stelnicki said.
While most probably consider having billions of dollars in new cash to be good for the state, Smith warned all the extra money could bring its own problems.
“The more recurring [expenditures] we increase, the harder the fall’s going to be,” he said, recalling years in the not-too-distant past in which drops in oil and gas revenue led to severe state budget crunches.
Transportation advocates are pushing for additional expenditures on state roads — aided by rosy projections about additional money. But Smith was wary, using school building projects in recent years as an example.
“We threw so much money out there that the price kept going up. … We’re running the same risks with transportation dollars,” Smith said. “We want to make sure we’re getting competitive bids.”
In a news release, Sen. Ron Griggs, R-Alamogordo, said large contractors already busy with construction projects “could likely increase their bids for additional projects, potentially making road construction more expensive than it already is.”
Senate Republican Leader Stuart Ingle, R-Portales, agreed with Smith that lawmakers must be cautious in deciding how to use the anticipated budget bump.
“All of this additional money could come with additional problems and the state needs to be watchful,” Ingle said. “The money needs to be invested responsibly and projects need to be ready to go, so these investment dollars do not sit idle for years and years.”
Because the issue of the possible windfall arose at a meeting of a concerning transportation infrastructure, lawmakers’ initial ideas on what to do with the money dealt with roads and highway improvements.
In a news release this week, Sen. Pat Woods, R-Broadview, picked up Smith’s discussion of trying to bring small road construction contractors back to the state.
“Many have had to leave New Mexico searching for out-of-state work when they could not bid on large projects due to their limited bonding capacity,” he said. “We want them back. We want them back in the state building roads and bridges. Additional investment dollars could lure them back.”
Smith at the meeting noted the state has about $10 million tied up in unspent funds dedicated to highway rest areas.
In the current budget year, the Department of Transportation is spending $400 million in one-time funds for road projects, as well as $75 million in recurring funds.
In April, Lujan Grisham signed a $7 billion budget — the largest in state history and an 11.6 percent increase in spending over the previous budget. The budget includes a reserve of about 20 percent.