Lawmaker: Revenue could fall $1.5 billion short of projections

A key New Mexico lawmaker on budgetary matters said state revenue could fall short of projections by $1.5 billion to $2 billion amid the COVID-19 pandemic and low oil prices — a bigger hole than legislators anticipated just two weeks ago.

Sen. John Arthur Smith, the influential chairman of the Senate Finance Committee, gave that range Monday as the potential hit to state revenue for next fiscal year, noting oil prices have continued to fall and the outlook for tax revenue worsens. He had previously suggested the revenue hole would be around $1 billion.

“The magnitude of our problem appears to be quite a bit larger than the $1 billion I alluded to a couple weeks ago,” said Smith, D-Deming.

Gov. Michelle Lujan Grisham and top lawmakers said last month a special legislative session likely would be necessary this year to shore up the budget amid the pandemic. At the time, the governor and Democratic leaders in the Legislature said they needed more clarity on revenue estimates and a federal stimulus package before they could prepare for such a session.

However, there still doesn’t appear to be much clarity on how federal assistance could help New Mexico’s budget, even after Congress passed a

$2 trillion federal stimulus package last week.

State and federal lawmakers said Monday the money states will receive from the massive stimulus bill can only be used for the COVID-19 public health emergency and not to shore up state budgets.

“There was some limited assistance to the state for COVID-related matters only,” said House Speaker Brian Egolf, D-Santa Fe. “The expectation is that there will be further legislation to deal directly with the budget crises that are facing literally every state in the country.”

David Abbey, director of the Legislative Finance Committee, said he hoped a potential new federal package related to the novel coronavirus might loosen the rules to allow states to use stimulus money to cover lost revenue.

“We are worried about maintaining spending for Medicaid and schools in HB 2,” Abbey said, referring to the main budget bill signed into law earlier this month.

He said given the current trajectory of oil prices and the virtual shutdown of many sectors of the economy, there may not even be enough money in the state’s giant Tax Stabilization Reserve to cover the lost revenue. That fund, which could be tapped in a special session, was holding $1.1 billion as of January.

“If the revenue outlook worsens substantially, there might not be enough in there,” Abbey said.

“The economy has shut down harder, oil prices are lower and the risk of losing production is greater than we thought 10 days ago,” he added.