Financial consultants warned members of the Revenue Stabilization & Tax Policy Committee Monday that the state鈥檚 reliance on the notoriously boom-and-bust oil and gas sector is risky. They implored lawmakers to reform taxes and diversify the economy to protect itself.
Director of PFM Group Consulting LLC Ryan McNeely told lawmakers that it's not a question of if, but when, the oil and gas industry will begin to falter. The group that production, which fuels about a third of state revenue, could peak around 2030.
鈥淵ou all know that that means that policymakers sort of need to ride this rollercoaster of volatility,鈥� he said. 鈥淎nd it just so happens that right now you鈥檙e in that portion of the rollercoaster where you鈥檙e going up the slope, but there will likely be an inevitable bust in the future, and you鈥檒l have to take that ride with it.鈥�
Using various price and production scenarios, that could mean New Mexico falls between $26 billion and $36 billion short of the revenue the state may be expecting over the next 15 years.
PFM recommends lawmakers look at this moment of record oil and gas production as a short-term opportunity.
鈥淚t鈥檚 a time for prudence,鈥� McNeely told the panel. 鈥淎nd a way to reinvest these resources in a way that will pay off in the long run.鈥�
The group recommends lawmakers diversify the economy and reform the tax code with a focus on increasing equity.
They recommend creating higher income tax brackets, eliminating the capital gains deduction, and enacting an estate tax among other changes.
They told lawmakers that the state mostly evaluates its economic development efforts using job creation, but should concentrate on state revenue and employment, especially of those who鈥檝e been left behind.
鈥淭here鈥檚 a whole population in New Mexico that is not benefiting from that increase in revenues and has experienced persistent poverty over time,鈥� McNeely said. 鈥淎nd that鈥檚 something that we think you all should look to address in the longer term.鈥�
The consultants told the panel that, as more New Mexicans increase their earnings, the better insulated the state will be from a downturn, since those residents will pay more in taxes and be less likely to need government services.
The Your New Mexico Government project is a collaboration between 九色网 and New Mexico PBS with support from the Thornburg Foundation.
