New Mexico revenue estimates released Monday project state revenue levels are expected to surge to a record-high in the coming budget year. That could allow lawmakers to approve additional tax relief, salary increases and other initiatives during the 60-day session that starts next month. (Eddie Moore/Journal)

SANTA FE — New Mexico’s revenue growth shows no signs of slowing down, with the state set to enter uncharted budget territory amid high inflation, surging oil production and robust wage growth.

Specifically, new estimates released Monday by executive and legislative economists project the state will have nearly $3.6 billion in “new” money available for the budget year that starts in July 2023 — a figure that represents the difference between forecasted revenue and current spending levels.

In August, the amount of projected new money was pegged at about $2.5 billion.

The record-high revenue levels could allow state lawmakers and Gov. Michelle Lujan Grisham to approve tax relief for New Mexicans, additional teacher salary increases and other initiatives during the 60-day legislative session that starts next month.

But effectively spending the money could prove challenging, due in part to a state labor participation rate that — at about 56% of the working-age population — is significantly below the national average.

In addition, roughly $310 million in allocated budget dollars went unspent during the most recent fiscal year, in part due to federal pandemic funds being used to supplant state dollars.

The projected revenue levels for the coming budget year, if they materialize, would mean total state revenue would have more than doubled over the last seven years.

However, the revenue explosion has made New Mexico more reliant than ever on the oil and natural gas industries, with revenue from those sources projected to make up nearly 40% of direct state revenue in the coming budget year.

In all, about two-thirds of the projected revenue growth for the coming budget year is expected to come from revenue derived from the oil and gas industries.

Meanwhile, the revenue explosion also means higher-than-expected inflows into several state trust funds.

That includes an early childhood trust fund — established in 2020 — that is projected to have its balance surge to nearly $5.4 billion by the end of this year.