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State revenues looking OK

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By Harold Morgon

Decent news about state government finances came to the Legislative Finance Committee at the group’s August meeting held in Angel Fire.
“Decent news” means revenue into the general fund—$5.7 billion for fiscal year 2013, the current budget year—is expected to beat planned spending by $35 million with larger margins expected the next two years.
So-called “new money” for the next budget year (FY 14), which will be addressed by the 2013 legislative session, is estimated at $198 million. New money is next year’s projected revenue minus appropriations for this year.
The meeting was quiet, the room small, the crowd modest – maybe 50, including presenters. Good news is boring.
The LFC’s August 2009 jaunt to Angel Fire provided a quite different scene. The room for that gathering was twice the size of this year’s. The crowd was at capacity, almost hanging from the figurative rafters. The tone was negative, toward nasty.
Projected revenues were some hundreds of millions short of appropriated spending.
This year LFC chair Sen. John Arthur Smith, Deming Democrat, bragged, properly, on the LFC’s role during the unhappy times. The LFC and the staff anticipated the downturn.
“Their excellent work” helped in major ways to bring the state through the troubled times.
The revenue forecast is a consensus among state economists, and, as with all things from economists, “on the other hand” elements exist.
The national and state economies provide context.
Nationally, said Demesia Padilla, Taxation and Revenue secretary, we are “likely facing a long, slow recovery.”
The state economy, while acknowledged, wasn’t emphasized. Wage job growth the next three fiscal years, projects the University of New Mexico, looks blah.
The University of New Mexico sees 1.2 percent this year (FY 13) with 1.2 percent and 1.5 percent the next two years. The state lost 2,600 wage jobs between July 2011 and July 2012, hardly a happy start toward that mediocre 1.2 percent performance.
Federal spending, always a matter of huge interest to state government, may be getting greater worry these days with the looming “fiscal cliff,” possible millions more in Medicaid spending, “inherently volatile” energy prices and much more.
The federal effect may show in the poor performing business and professional services job sector.
Tom Clifford, Department of Finance and Administration secretary, suspects the job losses may be national laboratory related. Contractors to the labs and other research institutions are in the same job sector. They employ many thousands, reduce employment first, and don’t get headlines.
“A major downside risk, “ said Elisa Walker-Moran, chief LFC economist, is $70 million in “carry-forwards from the renewable energy production tax credit.” The credits may be held for five years and used any time against taxes owed which would reduce state revenue.
Other risks come from the rapidly growing high wage tax credit and difficulties estimating personal income tax payments.
Oil prices are expected to stay around $85 per barrel the next four years with production increasing. Natural gas prices will drop to around $6 per million cubic feet as volume grows past 1,000 billion cubic feet.
Each dime change in natural gas prices means an $8.5 million change in general fund revenue, Walker-Moran said.
Taxable gross receipts were nearly $49 billion during FY 12, with nearly 28 percent of the $2.4 billion growth coming from mining, which includes oil and gas.
State revenue will be $5.9 billion in FY 14, the forecast says, a 4.1 percent increase from this year. It is anticipated that the state will continue adding to its piggybank, known as the reserve fund.
The state now has a producing gold mine. A movie, “The Lone Ranger,” brought a temporary gold mine to Angel Fire as the LFC met.
Rooms were full and people were happy.