Although lower energy prices sent chills through state budget writers during the recent legislative session, New Mexico should end the fiscal year with more money than expected, according to an analysis released this week.
“The largest risks to the fiscal year revenue forecast have passed,” according to the General Fund Revenue Tracking update compiled by Legislative Finance Committee economists. The tracking covers actual receipts through April and revenue estimates through the 2014-15 fiscal year, which ended June 30.
In all, the state is expected to see 2.5 percent more revenue, about $155 million, than had been anticipated by a consensus group of forecasters that includes economists and policymakers from the administration of Gov. Susana Martinez and the Legislature.
The higher amount stems from more consumer spending, which is reflected in gross receipts tax revenues and other taxes paid by individuals and businesses on the purchase of goods and services. No doubt lower gasoline prices contributed to more travel and restaurant meals.
The big surprise has been the growth in corporate income tax revenue — up a whopping 62 percent through April, with the annualized increase expected to come in 17 percent higher than that reported in fiscal year 2013-14.
The growth has been a relative mystery to those watching the revenue stream over the past several quarters as the manufacturing and construction industries have stagnated throughout the year. But it might very well be a case where businesses that owed back taxes from previous years are paying them now as their own financial pictures improve.
A spokesman for the state of New Mexico Taxation and Revenue Department did not respond to inquiries.
The projected full-year growth is 6.5 percent for gross receipts tax and compensating tax; 4.8 percent for personal income tax; and 3.7 percent for investment and other taxes.
The biggest drop, as expected, was in oil and gas revenues, as the price of crude oil fell below $50 a barrel this week. Energy companies pay the state a royalty based on the value of the oil and gas that is extracted. A $1 decline in the price of crude costs the general fund about $6 million.
But while prices have dropped, more oil is being produced in New Mexico.
The Legislative Finance Committee expected to see the revenue to the state fall by 17.2 percent in the fiscal year. Instead, it is down only 8.2 percent through April.
“The more modest reduction in … revenue may be explained by stronger-than-expected oil production volumes,” according to LFC economists.
This article was written by Bruce Krasnow from The Santa Fe New Mexican and was legally licensed through the NewsCred publisher network.