New Mexico Finance Administration Secretary Tom Clifford and Taxation and Revenue Secretary Demesia Padilla discuss updated revenue projections with state lawmakers during a meeting in Santa Fe, N.M. on Monday, Dec. 8, 2014. Clifford said lower oil prices have cut in half projections of new revenues for the state, leaving lawmakers with about $140 million less for the state budget. (AP Photo/Susan Montoya Bryan)
SANTA FE, New Mexico — State finance officials said Monday that New Mexico's economy is on the mend, but a drop in oil prices will leave lawmakers with less money as they prepare to hash out the budget during the upcoming session.
A forecast released Monday shows $141 million in new revenue should be available in the next budget year for spending increases on state government programs and public education.
That's half of what officials estimated in August, meaning the budget requests developed by Gov. Susana Martinez's administration in recent months will likely have to be revamped before the Legislature convenes in January for a 60-day session.
Tom Clifford, head of the state Department of Finance and Administration, said agencies were warned that the revenue projections would take a hit from lower oil prices, but he dismissed concerns New Mexico would have to make cuts or put education or other reforms on hold.
"This is adequate money for us to prepare a responsible budget that meets the highest needs of New Mexico," he said. "This situation does not call for us to raise taxes. It's not a dire situation. The responsible thing is we have to prioritize our funding."
The drop in revenue is a result of declining oil prices. Some officials said it's possible prices could continue to fall.
A $1 change in oil prices causes a $7.5 million change in revenue for the state's main budget account, Clifford told lawmakers.
The state relies heavily on taxes and royalties from energy production, with a little over $1.1 billion in revenue coming from oil and gas last year. That's expected to be down by about 10 percent for this fiscal year and drop another 5 percent the following year. The state peaked at $1.2 billion from energy taxes in the 2008 budget.
Sen. John Arthur Smith, a Deming Democrat who is chairman of the Senate Finance Committee, suggested fiscal responsibility outweigh any political promises that have been made to ensure New Mexico doesn't overspend or compromise its reserves.
Smith expected about half of the new revenues to go toward education spending.
Under the latest forecast, economic growth — including continued investment among oil and gas companies and strong oil production — is expected to slightly boost revenue collections next year to more than $6.1 billion.
The largest amount of revenue — about $2.2 billion — comes from gross receipts and compensating taxes on goods and services.
The revenue outlook provides for a 2.3 percent spending increase, and about $231 million should be available to finance capital improvement projects from bonds backed by severance taxes on energy production.
If the state and New Mexico's gaming tribes reach agreement on new compacts, accountants for the Martinez administration said that could result in at least another $15 million for the state.
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