New Mexico's Oil Income Investments Now Surpass Personal Income Tax Revenue
Efforts to invest oil windfall grow the state budget and fund new social programs
SANTA FE, N.M. — A significant shift is taking place within New Mexico's state finances, as the latest forecasts reveal stunning growth in the state's investment earnings from oil production. For the first time, New Mexico’s income from investments is slated to eclipse revenue derived from personal income taxes. This projection emphasizes the state's strategic move to not only benefit from its oil resources but also capitalize on them for sustained growth and program funding.
The general fund income, sourced from the state's multibillion-dollar permanent funds and interest accrued from treasury accounts, is expected to reach $2.1 billion for the fiscal year spanning from July 2024 to June 2025. This figure is poised to outstrip the anticipated $2 billion collected through personal income taxes. This transition shifts the paradigm of revenue sourcing for the state, highlighting the investments as pivotal to future financial security.
The earnings from these investments are not just numbers on paper; they play a direct role in supporting key social programs. Lawmakers are counting on these funds to underpin initiatives such as childcare subsidies and the provision of tuition-free education at colleges and trade schools. This strategy is particularly salient as the globe anticipates potential downturns following fossil fuel reliance. By bolstering investment strategies now, New Mexico aims to prepare for any future volatility inherent to the oil market.
Meanwhile, recent legislative changes have also seen adjustments made to personal income tax brackets. New Mexico has taken steps to lower tax burdens, affirming its position as the second-largest state for oil production following Texas. “We’re not a poor state anymore,” stated state Senator George Muñoz of Gallup. “We’ve got things we can win on — free education, childcare ... low taxes for working families and children. And that's all due to the groundwork we've laid for our future.”
These sentiments were echoed during recent discussions at legislative panels where economists from four separate government agencies released these estimates. Such projections lay the groundwork for forthcoming budget negotiations as the Democratic-led Legislature gears up for its session beginning January.
New Mexico’s climb shows no signs of plateauing just yet. Economists forecast the state’s income to soar even higher, with expectations of reaching approximately $13.6 billion between July 2025 and June 2026. This number marks a 2.6% increase over the current period, reinforcing the belief among officials and the public alike of the state's prosperity entering the next fiscal year.
This growth presents opportunities by creating room for additional spending on various state initiatives. The increase of $892 million, translating to about 7%, provides ample opportunity for investments aimed at potentially addressing pressing social issues, including crime and homelessness.
New savings accounts are on the legislative agenda, aiming to allocate up to $1 billion to support mental health and addiction treatment. This effort acknowledges the increasing public concern around rising crime rates and homelessness, both of which have prompted citizens to call for comprehensive reforms. Legislators have also expressed intentions to revisit previously shelved proposals, such as establishing trusts dedicated to Native American education, advocating for Indigenous language instruction programs.
Overall, the state appears poised for positive change through the allocation of oil revenues to broader social needs. New Mexico’s strategic approach offers hope for maintaining stability and growth even as it transitions away from dependence on oil.
Through careful financial planning and foresight, New Mexico is charting new territory for the future, demonstrating how states can effectively utilize natural resources to not only grow their economies but uplift their communities.