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Legislative economists warn of slower growth, oil-price risk and rising nonrecurring spending
Summary
Legislative Finance Committee economists told the committee New Mexico’s FY27 revenue estimate is roughly $14.1 billion with about $484 million of new money; they flagged a heavy rise in nonrecurring appropriations and sensitivity to oil and gas prices that could require re‑prioritizing recurring expenditures.
Ismael "Izzy" Torres, chief economist for the Legislative Finance Committee, presented the consensus general fund revenue estimate and economic outlook to the Legislative Education Study Committee in Gallup. Torres said three takeaways framed his briefing: the total revenue pool for the budget year is about $14.1 billion; the committee can expect roughly $484 million of new recurring money for FY27; and the macroeconomic picture includes mixed signals—what Torres called a "nervous economy" driven by recent federal policy changes.
Torres outlined why the revenue outlook has softened versus recent years: downgraded GDP and employment growth expectations, higher inflation pressures, and oil and gas price risk. He highlighted that a $1 change in annual oil price translates to roughly a $57 million impact on New Mexico revenues and estimated that a $10 downward revision in oil price could reduce revenues on the order of hundreds of millions. He also noted a structural shift: nonrecurring appropriations have risen materially and were cited in the briefing as approaching $3 billion in recent years, which reduces future-year budgetary flexibility.
On reserves and insulation, Torres said the state’s revenue‑insulating mechanisms (distributions to severance tax permanent funds, early childhood and behavioral health trusts before the general fund) blunt the immediate effect of lower oil and gas revenues on the general fund. He warned, however, that those trust funds would absorb a substantial share of any revenue shock and that reserves will fall as year‑end adjustments and executive orders are processed.
Lawmakers used the presentation to probe policy choices. Committee members asked whether to prioritize recurring appropriations, expand permanent funds to stabilize revenue long-term, or invest one-time funds in programs now. Torres and LESC staff outlined a "fiscal playbook" approach: set conservative revenue assumptions, maintain reserves to buy time for strategic decisions, and use evaluations to prioritize high-value recurring programs if cuts become necessary.
Torres also described the GROW fund mechanism and how some appropriations are set aside for multi-year spending; he noted that the fund balance was sized to provide medium-term cushion while allowing program spending over several years. The session closed with members requesting visual scenarios that compare short-term investments versus long-term permanent-fund growth to aid the upcoming October budget discussions.
What happens next: LFC will provide additional scenario charts and the long-term revenue estimate next month; committee members asked staff to present short- and medium-term trade-offs when the LESC returns to the budget calendar.
