(The Center Square) – The New Mexico Consensus Revenue Estimating Group has a more optimistic revenue outlook for Fiscal Year 2026.
The group recently presented the state’s Legislative Finance Committee projections that expect a 2.8% increase in General Fund revenue to $13.4 billion for Fiscal Year 2026. That includes $659.6 million in “total new money,” according to a press release from the New Mexico Department of Finance and Administration.
The updated projections come due to the state’s decisions to increase distributions of oil and gas revenues to the Severance Tax Permanent Fund and the Early Childhood Education and Care Trust Fund, along with its decision to cut taxes.
“In the past five years, we’ve been able to provide significant tax relief for New Mexico families and businesses and still invest in our future,” Governor Michelle Lujan Grisham said. “Our economy remains strong, and our General Fund reserves are at historically high levels.”
New Mexico’s Consensus Revenue Estimating Group features economists from the Departments of Finance and Administration, Taxation and Revenue, Transportation, and the Legislative Finance Committee.
The projections define new money as “estimated revenue for FY26 minus total appropriations for FY25,” the release said.
“The past definition of ‘new money’ was estimated revenue of the new budget year minus recurring appropriations from the current fiscal year, which equaled lofty totals,” the release said. “The new definition provides the legislature an accurate lens for sustainable additional spending.”
The CREG economists calculated that the state has $3.55 billion left in reserves for the current fiscal year, pending 2025 legislative appropriations.
The state expects a 6.5% drop in corporate and personal income tax collections in Fiscal Year 2025, due to its new Child Tax Credit and reformed personal income tax bracket, along with other tax credits. However, the state expects a 2% growth in income tax collections in Fiscal Year 2026.
In Fiscal Year 2025, the state also expects a 1.8% increase in Gross Receipts Tax revenue, while oil and gas revenue are expected to fall by 2.3%.
“The steps we’ve taken to make our tax code more progressive and provide meaningful relief for families have been done in a fiscally responsible way, allowing us to improve services and set aside resources for the future,” Taxation and Revenue Secretary Stephanie Schardin Clarke said.
Additionally, investment income is increasingly becoming a larger revenue source for New Mexico because it decided to put windfall oil and gas revenues into the Severance Tax Permanent Fund and the Early Childhood Education Trust Fund, plus the “increased constitutional distribution to the general fund from interest revenue on the Land Grant Permanent Fund,” the release said.
Interest earnings to the general fund will rise by nearly 13% from $1.88 billion in Fiscal Year 24 to $2.13 billion in Fiscal Year 2026, the release said.
“The actions that the Legislature and this administration have taken over the past several years to diversify our revenues and prepare for the eventual slowdown in oil and gas revenues are already starting to have an effect. It shows that we can invest meaningfully in programs for New Mexico and be fiscally responsible at the same time,” Department of Administration Secretary Wayne Propst said.
