SANTA FE, N. M. (AP) — Government profits from oil production are slowing but far from over in New Mexico as the nation’s second-largest oil-producing state grapples with how much it can spend and how to set aside billions of dollars. long-term dollars in case the world’s thirst for oil wanes.
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The state is on track for a general fund surplus of $3. 5 billion for the year ending June 2025, according to new forecasts Monday. New Mexico state government’s annual profits have increased nearly 50% in the last three years, thanks in large part. to the production of petroleum and vegetable fuels in the Permian Basin, the country’s most prolific shale oil-producing region that stretches across southeastern New Mexico and parts of the country.
The state will receive a record $13 billion, exceeding its annual spending obligations by one-third, economists from four state agencies said in a presentation to a legislative committee. Monday’s forecast calls for a 2. 2% expansion in state government revenues, in addition to a 10. 2% expansion in the existing fiscal year.
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The estimate of government income sets a baseline for budget negotiations when the Democratic-led Legislature convenes in January, and could extend efforts to set aside money to ensure critical programs endure when oil income falters. The forecast cautions that slowing oil production and lower prices are expected to generate significantly less federal payments next year and beyond.
By the end of the decade, oil profits are expected to begin a long and steady decline, “becoming a drag on profit expansion as the world calls for downturns,” according to the report.
Production and incomes in the Permian Basin would decline in the long term if countries “delivered” on their promises under the Paris Agreement, said Daniel Raimi, a member of the Washington-based nonpartisan economic organization Resources for the Future, which does not advocate the emergence of a policy of sustainable progression over power politics. In 2015, countries in the United Nations meteorological convention signed an agreement to restrict global average warming to “well below” 2 degrees Celsius (3. 6 F) and continue efforts to restrict warming to 1. 5 degrees (2. 7 F).
“A lot of this is due to other policies implemented through governments around the world,” Raimi said.
About half of the New Mexico’s general fund revenue can be traced to the oil and natural gas sector through an array of taxes and royalties on petroleum production that takes place largely on public lands — and distributions that flow from the state’s $28 billion land grant permanent fund for education, which is nurtured by oil income and investment earnings.
New Mexico’s biggest source of profit is tied to global decisions about renewable energy generation, the adoption of electric vehicles and new nuclear power programs that could limit the use of fossil fuels.
The state is looking for new revenue streams that would adjust its dependence on oil, adding New Mexico Gov. Michelle Lujan Grisham’s proposal last week to help maintain freshwater aquifers with a $500 million initiative to fund wastewater treatment through hydraulic fracturing. Early critics fear that the allocation will only inspire more oil drilling.
“We’ve invested a lot of money in funds,” Lujan Grisham said at the United Nations meteorological convention in the United Arab Emirates, where calls to phase out the use of fossil fuels have been widely heard. deployed. ” But you also want to create revenue streams that feed into reliable funds. “
At the same time, expanding state revenues have allowed him to set firm budgets, cut taxes and offer news to families, while increasing spending on public schools and universities, which accounts for about 58% of the state’s annual general fund. expenditure.
In many cases, that’s more money than school districts and state agencies can spend, as lawmakers work to bring average school start and achievement rates into line with national averages.
“All the resources have been there to pay teachers more, set up after-school programs, and provide mentorship and support,” Charles Sallee, director of the Legislative Assembly’s Office of Budget and Accounting Skills, said in a recent presentation of the network. about the ability of the bureaucracy to organize and use its resources. In many cases, their capacity is limited.
Frustration came to a head in a legislative hearing that tested state spending on public education and stagnating average student outcomes in public schools.
Statewide, the proportion of students who can read at grade level is 38%. Math proficiency is 24%. The highest school start rate in the state hovers around 76 percent, well below the national average of 87 percent.
Funding is expanding as the student population shrinks, Democratic Sen. George Munoz of Gallup, chairman of the state’s budget-writing committee, said at a hearing in November.
“So we’re paying more for the kids and we’re still achieving that goal,” Munoz said. “What are we going to do to move the needle?”
The New Mexico Early Childhood Education Trust Fund, established in 2020, already has about $6 billion and is designed for an ambitious expansion of public preschools, free daycare, and home nurse visits for infants.
Last year, lawmakers agreed to set aside $150 million in a new land and water conservation fund and agreed to funnel more cash from petroleum and herbal fuel into a savings account for structural projects — $3 billion through 2027.
Legislators still are pushing to open new savings accounts. An emerging proposal would devote $100 million to a trust for Native American education including Indigenous language instruction among 23 tribal communities in New Mexico, including the Navajo Nation.
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