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Lea County staff presents conservative FY26 revenue forecast, warns of oil dependence
Summary
County staff told commissioners the general fund has grown rapidly but cited continued dependence on oil and gas, outlined conservative price assumptions (about $36/barrel oil, $2'$2.75/MCF gas) and proposed budgeting methods that aim to protect reserves while allowing modest spending increases.
Assistant County Manager Chip Lowe presented Lea County's preliminary FY2025'FY2026 general fund revenue outlook, stressing that recent years'rapid growth has moderated and that the county must budget conservatively because oil and gas remain the primary revenue drivers.
Lowe said general fund revenues rose from roughly $100 million in FY2021 to more than $290 million in FY2023, and that growth slowed in FY2024. "We saw astronomical growth," he told the commission, but added that national and state forecasts indicate production and prices could flatten. For budgeting, staff proposed using a conservative lower-bound oil price and a cautious production estimate to avoid sudden shortfalls.
Why it matters: Lea County receives a large share of its revenue from oil and gas activity. A downturn in prices or production would quickly reduce gross-receipts tax and related receipts; the county's conservative assumptions are intended to preserve operating reserves and sustain core services.
Key projections and assumptions disclosed at the meeting included using a $36-per-barrel anchor for oil and roughly $2'$2.75 per MCF for natural gas for budgeting scenarios, applying 75% of the prior 12-month average production to future projections, and carrying a multi-month operating reserve policy (the county maintains 15 months of general fund operating reserves plus one year of operating transfers). Under staff assumptions, projected oil-and-gas revenue for FY26 was presented as $61,000,000. Lowe also described methods for estimating the annual oil-and-gas equipment tax and property tax revenue, noting those figures will be adjusted when state-certified values are available.
Commission questions focused on forecasting methods and the county's dependence on rig counts. Lowe said the county relies on EIA and UNM Bureau of Business & Economic Research reports and will commission updates to local coefficients used in revenue models. "We take a very conservative view because we just don't know the future," he said.
What happens next: The commission will use these conservative revenue assumptions as staff finalizes the FY26 budget; the figures and assumptions can be adjusted during budget workshops as new data arrive.
Sources: Presentation by Assistant County Manager Chip Lowe to the Lea County Commission on Feb. 25, 2025. Direct quotes and numbers are taken from the transcript of the meeting.
