Source NM is right: New Mexico state budget is booming. Its economy isn’t (making the case for bold tax reductions)

Yesterday it was reported that New Mexico has yet another massive budget surplus on its hands thanks to revenue from the oil and gas industry. The Rio Grande Foundation has been reporting and analyzing New Mexico’s economic situation since long before the oil boom started. We asked the question then (in 2018), “would New Mexico’s politicians squander the opportunity?” The answer appears to be “yes,” but that’s not just our take. Check out this article from Source NM which we consider to be a credible, center/left online journalism organization.

While the article notes massive growth in the State’s sovereign wealth fund which now stands at $75 billion, the fact is that New Mexico’s economy outside of oil and gas and data centers is weak.

Ismael Torres, chief economist for the (LFC), told lawmakers that investment income (from oil and gas $$) is expected to become the state’s second-largest source of state general fund revenue by 2030, surpassing oil and gas revenue as well as personal and corporate income taxes combined.

But forecasters had a warning for lawmakers too. The strength of the state budget is masking weakness in the broader economy.

“We’re still seeing an economy that I would describe as either tepid or maybe stuttering,” Torres told lawmakers. “We’re struggling to find our footing.”He pointed to faltering wage growth and stubborn inflation, while describing investments as the “golden goose for the general fund.”Without them, he said, state revenues driven by the economy are growing very little.

New Mexico’s job market is growing slowly. The state had 5,800 more jobs in June than it did a year earlier. Forecasters expect little improvement overall, projecting employment growth of 0.6% this fiscal year and just 0.2% the following year.

Wage growth is slowing also. University of New Mexico economists recently cut their forecast for wage and salary growth this fiscal year from 4.7% to 3.8%.

Ironically (or perhaps in line with New Mexico’s anti-business attitude and approach, data centers are the other area of New Mexico’s economy (besides oil and gas) that is doing well. The article goes on to note that “Construction-related gross receipts taxes jumped 18.5% in the last fiscal year, fueled in part by data-center construction in southern New Mexico.”