Dec. 9—As he drove into work Monday morning, Wayne Propst was thinking he had picked a pretty good time to be Cabinet secretary of the New Mexico Department of Finance and Administration.
For good reason.
Unlike years past when cuts have been needed, revenues for the state are continuing to grow at a moderate pace — and for the upcoming fiscal year that starts in July, total “new money” is estimated to be $892.3 million, an increase of $233 million from the budget forecast in August.
“New money” is the difference between the current budget and expected revenues in the next fiscal year.
“The amount that the pie has grown since August is an additional $233 million that will be available to be appropriated by you come January,” Propst told lawmakers Monday. “We generally see that as a bucket of money that you can appropriate for recurring expenses going forward.”
Slowing inflation and an easing interest rate environment has improved the economic forecast, according to a report presented to the Legislative Finance Committee.
Propst cautioned there are risks to the forecast, including a drop in oil prices. But even under the worst-case scenario of low oil prices, which would result in about $600 million less in nonrecurring money, Propst said the state is in a position to weather the storm.
“We would not … be in the position where we are asking agencies to search under seat cushions for dimes and nickels to operate their agencies,” he said. “We’re not even close to that under the worst-case scenario, [which is] just a testament to the remarkable place that the state of new Mexico is in terms of our revenues.”
In closing, Propst said, “The good news is there is no bad news in this revenue forecast.”
The scope of new federal policies under the administration of President-elect Donald Trump “will direct the magnitude of downside and upside risks” to the forecast, according to a report by a collection of economists from three state departments and the Legislative Finance Committee known as the Consensus Revenue Estimating Group.
“We have a set of new risks to the forecast that are just based on federal policy changes that are expected to occur in the next calendar year around things like trade, immigration, things of that nature, tariffs,” Stephanie Schardin Clarke, secretary of the Taxation and Revenue Department, told lawmakers.
Recurring revenues for the state for the current fiscal year are up $247.3 million from the last estimate in August.
The $13.26 billion in estimated recurring revenues represents a 1.6% increase over fiscal year 2024.
“Although growth in revenue has slowed, the amount available for appropriation remains high due to fiscal restraint in recurring appropriations and higher base revenues,” according to the LFC report.
Ismael Torres, the LFC’s chief economist, said the latest forecast is on “track” with the August estimate.
“We’re about 2% different from August, so not a big change,” he said. “Now, of course, what that translates to in terms of the general fund for the budget year is about $200 million, so a little bit more than pocket change for you all in this revenue estimate.”
Torres said total recurring revenues for upcoming fiscal year 2026 are estimated at $13.61 billion, a 2.6% increase over the current fiscal year.
Ending reserve balances for fiscal year 2024 are estimated at $3.16 billion, or 33% of recurring appropriations.
“Before any legislative actions, we expect reserves to be 38%, or $3.9 billion in [fiscal year 2025], but as you all … make nonrecurring appropriations [in the upcoming legislative session], that will reduce the balance in FY25, so we don’t expect that they’ll stay at 38%,” he said.
Rep. Harry Garcia, D-Gallup, urged fiscal restraint, saying the more revenue the state brings in, “the more we spend.” When he first took office in 2016, he said the state was “completely broke.”
“We were taking funding from schools and everything we could just to survive,” he said. “I don’t want to see that happen again in another five, 10 years, and that’s very possible.”
Follow Daniel J. Chacón on Twitter @danieljchacon.