NM spending exploded 80% since 2019: Now revenues are tapping the brakes

New Mexico’s long run of rapid revenue growth appears to be slowing, according to a new financial outlook presented to lawmakers this week.

Economists from the Consensus Revenue Estimating Group — representing three state agencies and the Legislative Finance Committee — delivered an updated forecast Monday that one legislator described as “very sobering.”

Wayne Propst, secretary of the Department of Finance and Administration, told lawmakers that the state’s cushion of “new money” has dropped sharply from earlier expectations.

“The total new money projection has been revised downward from the August forecast,” Propst said. “We were projecting $484.8 million in total new money… That has been revised downward to $105.7 million in total new money available to be appropriated when you convene in January.”

The adjustment reflects reduced projections in several major revenue categories, though lawmakers will still have substantial one-time resources available. Propst noted the state expects about $2.8 billion in nonrecurring dollars for the upcoming budget process. “It’s money that will be available for you to appropriate… as nonrecurring in fiscal year 2027,” he said, typically used for special projects, capital investments, or one-time appropriations.

The latest estimate also shows New Mexico will collect about $13.4 billion in recurring revenue during the fiscal year ending June 2026 — roughly $212.6 million less than the previous year and below the growth originally forecast in August. Lower oil prices and fluctuations in corporate income tax collections contributed to the adjustment.

Still, Rep. Nathan Small, D-Las Cruces, who chairs the LFC, urged lawmakers to remain grounded but not alarmed. “This is not a doom forecast, but it is a very sobering forecast,” he told colleagues.

A significant one-time boost — roughly $511.9 million from State Land Office lease and royalty activity — helped offset the softer recurring outlook.

Propst emphasized that, compared to other states now facing deficits, New Mexico remains financially stable. “Even in a worst-case low oil price scenario, we are still in a position where we’re not needing to look at recurring appropriation expenditure reductions,” he said.

The broader context includes several years of unprecedented growth fueled by the boom in the Permian Basin. LFC Director Charles Sallee noted last week that state spending has increased by roughly 80% since 2019, supporting major initiatives such as tuition-free college, pay raises, and substantial deposits into long-term trust funds. New Mexico now has more than $64 billion across various investment funds — the second-largest structure of its kind in the nation.

With production expected to plateau in coming years, Sallee said lawmakers must ensure that the investments made during the boom years deliver measurable returns. “We’ve got to make those investments count,” he said.

Several legislators suggested Monday that the tightening revenue picture may limit discussions about tax cuts or tax code changes during the 30-day session. “While we’ve done a great job, maybe this is not the year to have a tax package discussion,” said Rep. Derrick Lente, D-Sandia Pueblo.

Longer-term forecasts remain positive, with recurring revenues projected to reach approximately $14.4 billion by fiscal year 2028.

The revenue estimates — updated twice annually by executive and legislative economists — serve as the foundation for budget drafting during the upcoming session.

Lawmakers also discussed potential impacts of federal budget changes and national economic conditions, though analysts stressed that New Mexico remains well positioned due to its reserves and long-term investments. Officials are continuing to study how federal funding adjustments may affect major state programs, including health care and safety-net services.

Two special sessions were held this fall to address related fiscal considerations.