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LAS CRUCES - It will likely take the state of New Mexico three years to recover economically from the COVID-19 pandemic, members of the state House Appropriations and Finance Committee were told last week.
“It will take three years to recover to pre-pandemic, and pre-pandemic wasn’t exactly a stellar, robust economy,” Chairwoman Patricia Lundstrom, D-Gallup, said.
New Mexico tends to bounce back from economic downturns at a slower rate than the national average, said Dawn Iglesias, chief economist for the Legislative Finance Committee.
The state itself has weathered the economic impacts of the pandemic fairly well, and, with a big assist from the federal CARES Act, will actually be able to increase spending by more than $160 million for the next fiscal year, reported Stephanie Schardin-Clarke, secretary of the New Mexico Taxation and Revenue Department.
Schardin-Clarke said the total amount of wages paid in New Mexico is recovering at a much faster rate than the total number of jobs, demonstrating a “K shaped” recovery in which those at the top end are going up and those at the bottom are going down. That is especially true for those in the tourism and hospitality industries, she said.
From November 2019 to November 2020, the state lost more than 61,000 jobs, Schardin-Clarke said. Traditional unemployment benefits have expired for many laid-off workers, who must now find other forms of assistance.
“We face the reality that low-income-wage-earning New Mexicans are going to be the last to get their jobs back,” said Rep. Phelps Anderson, R-Roswell. “I hope in this legislative session we pass some initiatives to take care of that.”
Revenue was down by nearly 70 percent in the leisure and hospitality sector, Iglesias said. Small businesses in general suffered the most losses, but overall retail spending had actually increased by 8 percent.
The state government saw a big drop in revenue at the start of the pandemic, caused mainly by a drop in oil prices, Schardin-Clarke said. The Legislature held a special session in June to make spending cuts needed to ensure that the budget remained in balance.
Oil was selling at $38 a barrel in June when the budget fixes were made, Iglesias said. It is now over $50. That means the state itself will be in a much better position financially than many of its residents.
“We could see a sizable General Fund revenue increase without a general recovery if (oil) prices stay high,” Schardin-Clarke said.
Iglesias noted, however, that without assistance from the federal government, the state would have been forced to take $1.1 billion from its reserves fund last year. Part of the challenge in drafting the budget this year will be trying to predict what, if any, additional assistance may be coming from Congress.
Debbie Romero, acting secretary for the state Department of Finance and Administration, said that along with increased spending for the General Fund, there will also be more than $400 million in capital outlay money for infrastructure projects throughout the state.
But she warned that, while projections are now better than they were in June, they still trail those from this time last year. And, decreased travel will continue to be a drag on oil prices as long as the pandemic continues, Romero said.
“The bottom line is, New Mexico is really sensitive to an energy downturn and a national recession, and it highlights the need for us to maintain healthy reserve levels,” she said.
Rep. Dayan Hochman-Vigil, D-Albuquerque, asked about the impact of a new Biden administration moratorium halting new oil and gas production on federal lands. When Iglesias said it had not been considered in current estimates, Lundstrom requested additional analysis be done.
House Appropriations and Finance Committee Vice Chairman Nathan Small, D-Las Cruces, said the state needs a more stable and reliable revenue stream.
“This time it was the pandemic. The last time it was OPEC in December. The next time, who knows,” he said.
Walter Rubel can be reached at firstname.lastname@example.org.