The state of New Mexico’s finances are too reliant on fossil fuels and it needs to start now finding alternative sources of revenue.
That’s theconclusion of a reportpresented Monday to the Revenue Stabilization and Tax Policy Committee by the national consulting firm PFM.
While dollars from oil and gas have led to a multi-billion dollar windfall for the state, the report says that could change quickly and with reliance on gas and oil expected to wane for other power sources, reliance on fossil fuel revenues is unsustainable.
PFM Director Ryan McNeely told lawmakers now is the time to act, particularly since the state is currently flush with cash.
“(It’s) a once in a lifetime opportunity. The state has enormous surplus revenues at its disposal at the current moment,” he said. “To reduce the risk and uncertainty related to potential out year budget gaps the state should act now to reform its existing tax structure and expand efforts to grow a more equitable and sustainable state economy. Tax reform and economic expansion are both essential to this.”
Some of PFM’s recommendations include reforming the personal income tax structure including eliminating the capital gains deduction, reinstating the estate tax and broadening the gross receipts tax base.
Such changes may be a hard sell to lawmakers and New Mexicans.
There were also questions about other revenue sources the report didn’t go into, such as revenue from the alternative fuels like electricity and hydrogen that would be replacing fossil fuel consumption.
Santa Fe Representative Tara Lujan says now is the time to focus on investment in alternative fuels, but they could be future source for state income.
“Right now we know our renewables aren’t revenue builders. We’re just not in the place for that because we are really building out the infrastructure,” she said. “The modernization of the grid (is) one giant example of where we need to move so taxing those industries really isn’t where we need to be right now, we need to be in the investment process right now.
But everyone is agreeing that changes need to be made, but it won’t be easy.
According to the PFM report New Mexico has a potential fossil fuel revenue gap over the next 15 years of $26 to $36 billion.