(The Center Square) – Recent projections show New Mexico's budget surplus is $440 million more a December projection thanks mostly to oil and gas production, according to economists. 

Gross receipts tax collection was also running $248 million higher than expected due to inflation and higher prices for goods, Legislative Finance Committee chief economist Ismael Torres told the committee earlier this month, the Albuquerque Journal reported.

Paul Gessing, president of the Rio Grande Foundation, said the budget surplus doesn't say much about the state's overall economy.

“To be blunt, it doesn't say a great deal about the economy, because the vast majority of the revenues coming in are oil and gas-related,” he said. “We've seen a massive surge in production over the last, slightly over a decade.”

The economy may be doing okay, though as of March the state still had the highest unemployment rate in the country, Gessing noted.

Experts expect oil and prices eventually will turn around, but the Biden administration is not very enthusiastic about expanding leases and development, according to Gessing.

Many different factors affect the industry, but oil and gas production is at least sustainable because New Mexico has a production-driven boom, he said.

“The production is due to new formations being discovered using fracking and those kinds of processes. So it was a production-driven boom before it was a price-driven boom,” Gessing said.

Republican and Democratic lawmakers wanted cautious approaches to spending based on oil and gas revenue, the Albuquerque Journal reported. Republicans worried about the uncertainty of future production and some Democrats were concerned about the industry’s role in climate change.

New Mexico’s economy has other aspects beyond just oil and gas. Federal stimulus funds, along with the rebounding economy that has opened up slowly after COVID, are both factors, according to Gessing.

“It's not just oil and gas. But I would say oil and gas is by far the most prominent player in the budget surplus,” he said.

New Mexico’s recent legislative session mostly was geared toward the elimination of much of the Social Security tax and a reduction in taxes on military pensions, he said. A slight reduction was made to the gross receipts tax, which Gessing said performs in some ways like the sales tax but it also taxes businesses and many services.

The gross receipts tax impacts a lot of small businesses and even nonprofit organizations, which are charged gross receipts tax on the services they are provided.

“It makes doing business in New Mexico more costly and not as attractive as it is in other states,” Gessing said.

“[The New Mexico Legislature] had a special session that they passed rebates, tax rebates that will go out to New Mexicans, and even some people who didn't pay taxes,” he continued.

Those tax rebates have not been sent out to state residents yet. They'll also be available to seniors who didn't pay taxes and potentially illegal immigrants, Gessing said.

“But we haven't gotten to the point where there's any controversy yet over people who shouldn't be receiving those checks, but it'll come out,” he said.