House Tax Committee reviews revenue forecast, warns reliance on oil and gas remains a risk

The New Mexico House Taxation and Revenue Committee on its orientation day heard a detailed revenue briefing from state tax and budget analysts that highlighted a continued shift in the state's revenue mix away from direct oil-and-gas receipts and toward investment income created by earlier transfers to permanent and trust funds.

The presentations by Stephanie Chardon Clark, Cabinet Secretary of the Taxation and Revenue Department, and economists from the Legislative Finance Committee and Department of Finance and Administration gave lawmakers the state's consensus forecast, including a general fund estimate of about $13.6 billion for fiscal year 2026 and a "total new money" figure of about $892.3 million to allocate next session.

Why it matters: New Mexico's budget remains sensitive to energy markets because oil and gas affect gross receipts, corporate and other tax lines. Presenters said recent law changes that route windfall energy revenue into permanent funds and trusts have insulated the general fund, but the state still faces substantial downside risk if oil prices and production fall sharply.

Key takeaways

- Consensus process and headline numbers: Cabinet Secretary Stephanie Chardon Clark described the state—s consensus revenue estimating process and the forecast inputs. "We have a consensus revenue estimating process across both the executive and legislative branches," Clark said. The forecast projects roughly $13.6 billion in general fund revenue for FY26.

- "Total new money": Analysts explained a budgeting shift that produces a single "total new money" figure for FY26 (the updated revenue estimate for FY26 minus prior-year appropriations). The figure cited in the briefing was about $892.3 million. A fiscal office economist summarized: the total new money figure is the size of the pie available for both recurring and nonrecurring spending in the upcoming budget year.

- Investment income rising: Presenters said recent transfers of excess oil-and-gas receipts into the severance tax permanent fund, the Early Childhood Education Trust Fund and other investment accounts mean investment earnings will become a major, less-volatile revenue source. Analysts said investment income is projected to grow and could become the second-largest general fund source in the next few years.

- Energy still matters and stress tests show downside risk: Officials described a range of scenarios. Under a severe low-oil-price scenario, the consensus stress test showed general fund revenues could fall by about $600 million in FY25 and more than $1.4 billion in FY26, with cumulative multi-year impacts in the billions. Presenters warned that while transfers to permanent funds reduce volatility reaching the general fund, a prolonged production or price shock could still force spending reductions or use of reserves.

- Gross receipts tax and recent tax law changes: The gross receipts tax (GRT) remains the largest single source of general fund revenue. Presenters noted that recent legislative rate and base changes reduce measured GRT growth this year but underlying economic growth remains moderate. They also described recent changes to the income tax code (new brackets, a child tax credit, an expanded working families credit and a Social Security exemption) and said those measures materially changed the state's progressivity profile.

- Tax expenditure reporting and transparency: Taxation and Revenue staff described the annual tax-expenditure report required by statute and will provide the committee with detail on credits, deductions and exemptions and their estimated fiscal cost.

Committee process and direction

The committee chair opened the session as an orientation and said many bills with fiscal impact will be tabled early and combined into a tax package later in session; the chair also emphasized start times, a 24-hour rule for amendments and the importance of bipartisan communication. Tax and revenue staff and LFC economists said they will provide FIRs and other analyses on bills throughout the 60-day session.

What was not decided

No bills were taken up or voted on during the orientation meeting. Committee members asked questions about the forecasts, stress-test scenarios and the cost of possible policy changes (for example, an exemption of healthcare services from the GRT), but the meeting did not include motions or legislative action.

Next steps

Analysts will continue to produce fiscal impact reports and revised estimates as new data arrive. Committee members were invited to follow up with Taxation and Revenue and Legislative Finance staff for scores and technical briefings in advance of upcoming bill hearings.