Oil and gas, gross receipts tax, investment income buffer New Mexico against federal cuts

The Midweek Newsletter By Trip Jennings
Courtesy of NM In Depth

This week’s newsletter is a tale of four numbers that are important as Gov. Michelle Lujan Grisham and the Legislature could head into a special legislative session in the coming month to respond to lower levels of federal dollars flowing into New Mexico. ​

• $390 million
• $485 million
• $200 million
• $4 billion
  
  

The $390 million is how much revenue outpaced state spending for the just-ended fiscal year that ran from July 1, 2024 through June 30.

The $485 million is the estimate by which revenue will outpace spending for the fiscal year we’re in now, which runs from July 1 to next June 30.

The $200 million, on the other hand, is how much New Mexico can expect to lose per year on average between the current fiscal year and fiscal year 2030 due to the budget reconciliation bill President Donald Trump signed into law last month.

The $4 billion is the amount of operating reserves tucked away in the event New Mexico is hit with an emergency.

State lawmakers took in these numbers during a Tuesday presentation from state economists and officials in the Lujan Grisham administration.

While the numbers don’t paint a rosy picture exactly, it is not as dire as some might have expected for a state more dependent on federal dollars than almost any other in the country. New Mexico finds itself adjusting to a Trump administration that is determined to cut federal social safety net programs that New Mexico relies on to plan its annual budget.

If you’re a budget nerd, a nifty graphic on the Legislative Finance Committee website shows where New Mexico’s revenues come from — it’s an assortment of taxes and interest earned on investments — and how much revenue flowing into the state’s coffers has grown over the last decade.

Sources: History of Revenues - LFC Files; Forecast - August 2025 Consensus Revenue Estimate

A decade ago, state revenues came in just under $6.5 billion. This fiscal year, they are expected to top $13.7 billion, or a difference of $7 billion.

The growth largely has been driven by a historic period of oil and gas production that is expected to produce $3 billion in revenue, or nearly $2.2 billion more in revenue than in the 2017 budget year (We’re in the 2026 budget year). Revenue earned off the state’s investments has also grown by more than $1.4 billion, from under $750 million in 2017 compared to an expected $2.2 billion for this budget year.

Also noteworthy: revenue produced by the gross receipts tax, New Mexico’s largest pot of state dollars, has jumped by $2.3 billion over the past decade, from $2 billion to $4.3 billion.

As to whether this assortment of revenues will be enough to make up for a reduction of federal spending over the long term is anyone’s guess. But for the short term, New Mexico seems to be in a good place, according to Wayne Propst, who leads Lujan Grisham’s budget agency.

“Despite the external challenges New Mexico will face in the years ahead, our state has the resources to remain stable and on solid footing,” Propst said in a statement Tuesday. “Our healthy additional revenue provides the capacity for a special session, giving lawmakers the ability to address funding gaps in essential services that we’re already seeing.”

​Added Taxation and Revenue Secretary Stephanie Schardin Clarke:  “New Mexico’s economy remains resilient despite challenges presented by federal actions. State policymakers have put New Mexico on a financial bedrock to endure for decades to come.”

​NUMBER OF THE WEEK
$7 billion
The growth in revenue flowing into New Mexico over the past decade.