Editorial: NM needs to make the most of its last, and possibly last, boom cycle

“The uncertainty of oil and gas boom-and-bust cycles isn’t necessarily about doom and gloom. … It’s a time for prudence and a time to reinvest those resources in a way that will pay off over the long term.”

— Ryan McNeely, Director, PFM Group Consulting

It’s a cautionary tale that New Mexico leaders and lawmakers have heard for decades: Our state is overly dependent financially on the vagaries of the oil and gas market, and we shouldn’t rely on one-time income for recurring expenses.

This warning has taken on a new urgency as our state works to achieve zero-carbon emissions within a few years.

And yet it’s here, 2023, and the forecast of $3.6 billion in new revenue for the fiscal year beginning in July has prioritized many from the Legislature to our re-elected governor to education, healthcare, behavioral health and more affordable Living space for the coming session. All are important needs to consider.

And many of those recurring expenses would be covered by one-off oil and gas revenues. So what happens when O&G goes bust again? What happens when the day comes when we “leave it in the ground”?

That’s why it’s important to make lasting investments during this boom to make New Mexico prosper, with investments that attract industries, businesses and jobs, investments that provide our young people with a financial future to keep them going.

Anyone entering the next legislative session should heed the wise, bipartisan advice of people including Sen. George Muñoz (Gallup Democrat and Senate Finance Committee chair); Rep. Jason Harper (Republican of Rio Rancho, House Minority Chairman and member of that House’s Taxes and Revenues and Transportation, Public Works and Capital Improvements Committees); and PFM Group Consulting, which last month warned a legislative body that our state government’s over-reliance on an industry for revenue poses a long-term risk.

Even more damning was PFM’s statement that New Mexico has a “slow growth and high poverty economy,” with a declining population, low labor force participation, and a three-year poverty rate that exceeds all states except Louisiana and Mississippi. Unfortunately, Gov. Michelle Lujan Grisham denies that, crowing in her inaugural address this month that “an act of imagination is no longer required to envision a thriving New Mexico—we live it.”

For real? Too many statistics just don’t back that up.

PFM, whose research and analysis of the New Mexico household is funded by the Rockefeller Family Foundation, claims — as Harper has argued for years, and as Muñoz pointed out in a Jan. 1 Sunday Journal op-ed — there is indeed a way to get there, where the governor mistakenly believes us.

It’s about making New Mexico a competitive place to work and live. And that comes from well-paid jobs, a fair and more transparent tax system, and quality infrastructure. We would add targeting the next key industry and providing hand-ups instead of handouts to make more New Mexicans financially independent.

The legislator must finally seize the opportunity:

• Lower the tax rate on gross government receipts and increase the tax rate by eliminating many of the hundreds of tax breaks. There are also GRT quirks that penalize small businesses and entrepreneurs.

Some say many of the loopholes are rarely used and don’t generate much revenue – but the state has never been able to provide accounts. It’s time to figure out which tax breaks make a living and which don’t, and dump codes that prevent wealth from being settled here.

• Consider what taxes should be increased or decreased, and dedicate taxes on items to a related need, such as food. B. the tax on fuel for our crumbling highway/bridge system. Difficult to raise/add taxes when government revenues are high. But it’s also time to properly size NM’s control system.

• Invest in landmark, one-time investments including highways, water systems, bridges, airports, public transportation, high-speed internet and electric vehicle charging. Muñoz is right when he writes that the state’s important investments in education, from increasing teachers to free college, “will only pay off if our college grads can live and work and thrive in New Mexico,” and long-term investments in quality hardscapes will pay dividends in helping “attract businesses and employers and retain our young people”. And he points out pragmatically that this is one area where we get the most bang for our buck as local spending is leveraged by national games.

• Determine what will be our state’s next big revenue stream(s), and ultimately capitalize on what should be an amazing economic development synergy between national laboratories, military bases, research universities and the market economy, be they pharmaceuticals, medical devices and PPE; Aerospace; Microelectronics; advanced manufacturing; rare earth minerals; the base of the defense industry; or something else.

• Turn the welfare cliff into a slope. Too many New Mexicans are relegated to the ranks of the “working poor” because more hours, a raise, a promotion, or a second job wipe out their more valuable food, childcare, and/or health care benefits. Our labor force participation figures are dismal (just over half of NM’s working-age population, 56.7%, is actually working or looking for work). The cliff of benefits discourages both working and self-sufficiency, things every New Mexican deserves a shot at.

• Build on past successes by creating additional durable funds (like early education) that deliver amazing returns on growth and investment.

Muñoz’s guest column concluded, “We can seize this historic opportunity to make New Mexico prosper and mitigate the boom-bust cycle that has plagued our state for decades. Or we can spend recklessly and find ourselves in trouble in a few years when oil and gas prices inevitably crash again.”

We hope our leaders and legislators will take the steps to do the former. This is a pivotal moment, and their decisions will determine whether next year’s budget will truly produce a “prosperous” New Mexico for all.

This editorial first appeared in the Albuquerque Journal. It was written by members of the editorial board and is not signed as it represents the opinion of the newspaper and not that of the authors.