The state’s chief transportation economist is painting a gloomy picture of future finances around improving New Mexico’s roads.
At an Albuquerque meeting yesterday with the Legislative Finance Committee, Michael Morrison told lawmakers that as vehicles get more fuel efficient, state revenue derived from the oil and gas industry will eventually reach a peak and then drop.
At the same time, he predicts, the funding required to repair and construct roads in the state will skyrocket.
“Not only are we expecting road fund revenues to decline quite dramatically, we are also expecting road fund construction costs to increase pretty dramatically," Morrison said.
"We’re looking at about 138 percent between 2024 and 2050 for increasing road costs. Pair that with a decline in road fund revenue of about 14 percent. Combined affect is looking pretty dire for road construction going forward.”
State officials estimate that 35 percent of New Mexico’s general fund revenue comes directly or indirectly from the fuel industry.
Morrison’s comments were part of a joint presentation from four state economists on New Mexico’s long-term revenue outlook.
Two ways in which other states mitigate for lost revenue due to fuel efficiency, Morrison said, is by hiking registration fees and implementing so called “road user charges.”
He mentioned four states—Hawaii, Oregon, Utah, and Virginia that have implemented road user charges.
That’s an electric-vehicle era approach to generating road revenue based on the metric of miles driven rather than fuel consumed.
Morrison never suggested that New Mexico should raise its per-gallon fuel taxes, but he did point out that the state hasn’t revised fuel taxes for inflation in decades.
The tax on gasoline hasn’t been revised for inflation since 1996. Diesel hasn’t been revised for inflation since 2004.
As a result, New Mexico’s gasoline tax remains at 17 cents per gallon, the fourth lowest in the nation, where the average is more than 32 cents per gallon.
New Mexico is ninth lowest in diesel tax, at 21 cents per gallon, compared to the national average of 35 cents per gallon.
One positive long-term trend that came up later in yesterday’s LFC meeting was that permanent fund investments in New Mexico will surpass oil and gas as the state’s leading source of revenue by 2039.
State officials estimate that the permanent fund will distribute more than 2 billion dollars to the general fund in fiscal 2025, but by the end of the decade, the number is expected to rise to 4.7 billion dollars.
The Legislative Finance Committee continues its series of budget meetings today, with session topics including child welfare and the strategic water supply.
