Senate finance hears revenue estimate as Moody’s upgrades state bond rating; HR1 and corporate tax shifts cut forecasts

Moody’s Analytics upgraded New Mexico’s bond rating while officials warned the committee that federal tax changes and volatile corporate payments have reduced the state’s near-term revenue outlook.

Wayne Props of the Department of Finance and Administration told the Senate Finance Committee that Moody’s "raised the state's bond rating across the board," a move he said reflects bipartisan fiscal discipline and will likely lower the state’s borrowing costs. But presenters also flagged substantial forecast adjustments: the consensus revenue estimate added only about $105.7 million in recurring "new money," while recurring personal and corporate tax projections were revised downward.

The revenue presentation showed personal income tax down 2.9% for FY25 and a revised downward forecast of roughly $58 million in FY26 and $54 million in FY27 compared with the August estimate. On corporate collections, the presenter said the FY26 forecast for gross corporate income tax was reduced by about $310 million and pass-through entity estimates by roughly $9 million, a combined roughly $320 million downward revision. The presenters attributed the revisions partly to provisions in the federal bill HR1 and to taxpayer behavior, including corporations drawing down carry-forward credits instead of making estimated payments.

Chief economist Torres (Legislative Finance Committee) described labor-market risks and narrow job gains concentrated in health care and cautioned that corporate income tax collections are a major source of volatility. "To meet our revenue expectations we'd need a pretty dramatic recovery in corporate income taxes through the rest of the year," he said, noting recent corporate payments were substantially weaker than in prior years.

Officials also flagged a large one-time payment from the State Land Office of $363 million that the consensus group treated as nonrecurring and excluded from the recurring revenue baseline. That nonrecurring classification means the amount is included in total revenue for accounting but not in the recurring revenue projection legislators should rely on for long-term commitments.

What happens next: committee members asked about downside risks—federal policy changes, oil-price scenarios, and pipeline constraints for natural gas—and pressed staff on monitoring updates. Presenters said stress tests show the state could weather a deep oil-price drop without cutting agency base budgets but might need to pare nonrecurring appropriations.

The committee is scheduled to continue budget work during the 30-day session; revenue tracking will be updated as new receipts arrive and staff may produce a mid-session forecast if warranted.