Lawmakers, guv debate impact of oil and gas prices

Several lawmakers are expressing doubt about the governor’s special-session plans in light of falling oil and gas prices, but the governor’s office says there’s nothing to worry about.

According to the revenue forecast from early July, the state will have $392 million for recurring expenses in next year’s budget and another $392 million for one-time expenses because of windfall revenues from oil and gas. The forecast was based on a number of factors, including oil prices of $134 a barrel and natural gas prices of $11.50 for each thousand cubic feet.

Since then, oil and gas prices have dropped significantly. Today, oil is trading at about $124 per barrel and natural has dropped to below $10 per thousand cubic feet. And the next revenue estimate isn’t due until September — after the special session of the Legislature begins on Aug. 15. Because of a number of other events taking place, including Indian Market in Santa Fe and the Democratic and Republican presidential nominating conventions — there’s a good chance the session will end before the new revenue forecast is released.

Based on the July estimate, Gov. Bill Richardson wants to spend $211 million on tax and other financial relief for New Mexico and $200 million on road funding. Most of that would be paid for with money projected by the more volatile non-recurring revenue estimate. The governor wants to put $20 million from the recurring estimate into tax relief and have the rest available for other recurring expenses including universal health care.

But some lawmakers say the drop in oil and gas prices since the revenue estimate was released have them worried.

“This looks very critical to me,” Rep. Luciano “Lucky” Varela, vice chairman of the Legislative Finance Committee, told The Associated Press on Friday. “We need to monitor this on a daily basis and see where we are headed. If it looks like it’s going to level off or continue to go down, then I think we have serious problems.”

“I think it’s more of a time that we had better be careful rather than sorry,” Sen. John Arthur Smith, the LFC chairman, told The Associated Press.

At a Friday news conference, Richardson balked at such hesitancy about his proposals, according to the news service.

“I’ve been dealing with pessimists in the Legislature, economists… that keep telling me the economy is not going to grow and we should be cautious. And I’ve been bold,” the news service quoted Richardson as saying. “My policies are working. Some volatility, maybe so. But we’ve always been able to afford what we need.”

Richardson spokesman Gilbert Gallegos said in an interview that short-term increases and decreases in oil and gas prices won’t affect the projections because revenue forecasters “contemplate the volatile nature of oil and gas prices, and the projections are pretty conservative.”

Gallegos also said the non-recurring money is deemed by legislative- and executive-branch forecasters as reliable. That’s why the governor wants to use that money for universal health care and use the more volatile non-recurring money for one-time tax relief.

“That is absolutely prudent,” Gallegos said. “… Does Sen. Smith believe we shouldn’t use that recurring ‘new money’ for teacher salaries or law enforcement or other programs? Or is he just being pessimistic about the governor’s health-care plan?”