Consensus forecast shows smaller out‑year growth, HR 1 and oil changes chill revenue outlook

SANTA FE — New Mexico’s revenue forecasters told the Revenue Stabilization & Tax Policy Committee that the state closed FY25 stronger than expected but faces weaker growth over the next several years, in part because of changes in federal tax law and falling energy prices.

Secretary Stephanie Chardon Clark, who began the committee’s consensus revenue presentation on the August forecast, said national and state economic projections now assume modest growth and a slowing labor market. “There’s been a relatively huge change to the price forecast for oil, but the general fund will not shoulder a dime of that,” she said, describing statutory transfers that move windfall oil and gas receipts out of the general fund and into permanent and trust funds.

The panel — which included the Department of Finance and Administration’s chief economist Leo Delgado and Legislative Finance Committee chief economist Ismael Torres — described several offsetting developments. DFA reported stronger collections in FY25 with gains in gross receipts tax, personal income tax and investment income; Delgado said a preliminary estimate put total FY25 collections near $13.65 billion. LFC’s brief, published Aug. 19, described FY26 year‑over‑year recurring revenue growth near 0.4%, a sharp slowdown from prior forecasts.

Why the moderation: presenters cited national headwinds—trade and slower federal spending—and specific policy effects. The August forecast incorporates assumed conformity with provisions of HR 1 that reduce personal and corporate income tax bases; Secretary Chardon Clark said the consensus group reduced state corporate income tax revenue by about $114 million per year as a result of HR 1’s SALT cap and related provisions, and reduced PIT by items that together sum to tens of millions of dollars annually.

Forecasters also called out a federal reconciliation of mineral royalties under the Federal Royalty Resiliency Act. “The federal government is clawing back an estimated $150 million in federal royalties,” Chardon Clark said; she and LFC staff said the clawback timing remained uncertain but had been included in the forecast as a downside adjustment.

Still, the agencies said the general fund’s exposure to oil price swings has diminished because of statutory transfers to the severance tax permanent fund, early childhood and behavioral‑health trust funds and a newly created Medicaid trust fund. Delgado said FY27 ‘new money’—the estimated increase in resources available for new recurring appropriations—was roughly $485 million under the August consensus estimate.

Torres urged caution. LFC’s ‘money matters’ brief describes the forecast as a snapshot and lists downside scenarios—the most severe showing revenues falling well below appropriations. Torres highlighted labor‑market fragility, rising consumer delinquency and the possibility of a federal government shutdown as risks that could shave growth.

Committee members pressed for more disaggregated information. Representative Lundstrom asked for a sectoral breakdown of matched taxable gross receipts to separate trade from transportation and utilities; Rep. Lundstrom and others also requested measures beyond GDP—such as default and delinquency rates—to better capture financial stress in lower‑income households. LFC and DFA staff agreed to follow up and circulate the requested data to the committee.

The forecast will be updated in December; presenters said new IRS and federal guidance on HR 1, along with year‑end revenue closing, could materially change estimates.

What’s next: agencies will refine the consensus estimate in the December report and provide committee members with the requested sectoral and household‑stress metrics. The committee receives another set of briefings in October and a fuller set of budget materials ahead of the legislative session.