BREAKING NEWS!

UPDATE ON PROJECTED BUDGET SHORTFALL FROM SEN. JOHN A. SMITH

Just got off the phone with Sen. John A. Smith, who had some updated information about the budget

Background:  WTI (West Texas Intermediate) oil, which is what New Mexico exports, collapsed today from a price of $53.88 per barrel on February 20--the day the legislative session closed--to less than $28.00 this morning (March 9).  This represents nearly a 50% drop in prices, which deeply affect the revenue stream coming from oil to the state coffers in taxes.  At this moment (2:30 pm MDT) the price has bounced back to about $31.00, a slight increase.  

Interview with Sen. Smith

This morning Sen. Smith calculated the shortfall at about $225 million in state revenues.  If the price of oil remains at the $51.00-$31.00 level, he estimates about a $440 million shortfall from what the legislature appropriated.  That represents well over 5% of the entire budget approved last month.

In current negotiations, it appears, the Governor is thinking about trimming some non-recurring General Fund items passed by the legislature, instead of trimming the road fund, as Sen. Smith had suggested this morning.  She is also thinking about cutting some of the capital outlay funding passed during the 2020 session.

Senator Smith emphasized to me that if the Governor "does not cut enough expenditures on her first swipe, and the price of oil continues to remain this low, we would have to have a special session to address it."

He also asserted  that in his discussions with the Transportation Department, it turns out that there are about $300 million in funding for roads, approved last year in the 2019 session, that have not yet been committed to specific road projects.  His suggestion this morning to trim $225 million in road expenditures is based on his calculations that, given the delay in spending the road money from last year, this would not affect the timing of schedules for another year and a half to improve roads.  It would give everyone enough time to work out some fiscal solutions.

"It is better to overkill than to underkill, at this point, because of the uncertainties lying in the future," he said.