New Mexico Economic Development and Revenue Strategy
The Bottom Line and the Need to Act
◆ Despite current budget surpluses, New Mexico faces a series of interrelated
challenges that stem from the State government's disproportionate reliance on revenue
from the oil and gas industry.
◆ Over-reliance on taxes and royalties generated by oil and gas production subjects
critical State services, including public education, public health, and public safety to the
unpredictable "boom and bust” cycles of an increasingly volatile fossil fuel industry. Since
2020, New Mexico has experienced an accelerated version of the historical cycle of boom
and bust, with crude oil prices fluctuating from $115 per barrel to negative $38 per barrel.
◆ While no one can credibly claim to predict the future with total accuracy, and current State
forecasted growth trends represent one plausible scenario, the range of potential
outcomes over the long-term is far more variable than State policymakers may
assume.
If the structural revenue gap is of sufficient magnitude, the State will require
unprecedented gains in other economic sectors and other sources of revenue to
offset the potential losses in oil and gas revenue. Such gains may be extremely difficult to
achieve given the current structure of New Mexico's tax code and economy.
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