ALBUQUERQUE, New Mexico — Declining oil and gas prices will continue to cut into revenues in the next fiscal year but the state has enough money to follow through with education reforms and public safety mandates, New Mexico's top finance official told lawmakers Wednesday.
Tom Clifford, the head of the Department of Finance and Administration, updated members of the Legislative Finance Committee on the latest revenue outlook during a meeting in Taos.
Revenues from oil and gas are expected to be around $840 million for the 2016 fiscal year, according to the department. That's more than 16 percent less than the last fiscal year.
However, Clifford estimates that New Mexico could see $293 million in new revenue for the 2017 fiscal year if projections pan out for a slight rebound in oil prices and increases in income and sales taxes.
"I think the economists have tried to build in some balance of the risks in this forecast," he said in an interview after the meeting.
But legislative analysts have suggested there's a chance the recurring revenue for this fiscal year could take a $120 million dive due to the risks of oil prices alone. They warned lawmakers that the state's sensitivity to the industry has dramatically increased in recent years.
Every $1 change in the price of oil now has a $15 million effect on New Mexico's general funds, according to the analysts.
The U.S. Energy Information Agency on Wednesday also lowered its forecast for crude oil prices through next year, citing uncertainty in the global market. The agency says increasing supplies also are helping to keep prices down.
In New Mexico, oil companies broke their annual production record in July at more than 130 million barrels, beating a record that had stood since 1969.
Lawmakers voiced concerns during Wednesday's meeting given that last year's revenue estimates were continually scaled back as oil prices dropped and the time neared for them to begin crafting the state's $6.2 billion budget.
Clifford said with prices now down to $50 a barrel, the risk is somewhat less.
"It's an inherent characteristic of the commodity markets that these prices fluctuate. When prices go down, supply goes down. It's a self-correcting mechanism," he said. "I think we'll see that play out but the timing is unpredictable. It may be six months, it may be a year but I do think that it will cycle back."
Clifford said New Mexico has healthy reserves that will allow the state to continue funding public safety services and a slew of education reforms that were supported by Gov. Susana Martinez's administration and approved by the Legislature during the last session.
He told lawmakers New Mexico is in a better position than fellow oil-producing states such as Oklahoma, which cut agency budgets to fill a $611 million shortfall during its legislative session earlier this year. He said New Mexico has been recognized by Moody's Investors Service for its budgeting and for maintaining its reserves.