New Mexico lawmakers are mulling changes to capital financing programs as the amount of untapped funding allocated to projects from state appropriations or raised through bond issues is at a historically high level due to rising construction costs and a dearth of construction workers.
The state's Legislative Finance Committee this week reported an estimated
That includes unspent funding from state appropriations or raised through the issuance of severance tax bonds, which are backed by a lien on oil and gas production tax revenue.
The historically big backlog is being driven by escalating construction costs and a shortfall in qualified construction workers, according to Cally Carswell, the legislature's capital outlay analyst.
"You are likely to receive several billion dollars in new capital outlay requests for the 2024 session in a construction market that is already saturated if not oversaturated, where it's difficult to start new things or even complete some of the projects we already have in the pipeline," she told lawmakers Tuesday.
She said the situation "underscores the need for serious project vetting, for effective prioritization of requests and appropriations, and better coordination of capital outlays with other funding sources."
State Rep. Tara Lujan expressed interest in making changes.
"If we're already at capacity of our workforce for these projects that we have that probably are not going to get complete for a number of years, then we really need to restructure this and reform this completely," she said.
In the meantime, the committee is awaiting responses due next week to a survey asking local governments to report projects that are delayed or stalled due to cost overruns with the goal of providing information that could allow the legislature to prioritize the completion of existing projects before funding new ones.
Carswell also warned that full utilization of severance bond debt capacity could jeopardize New Mexico's bond ratings and suggested capping annual bond capacity at a lower level would generate savings that could be directed to a new capital reserve or to the Severance Tax Permanent Fund.
Current long-term
A future decrease in volatile oil and gas tax revenue is also a concern.
"Declining severance tax revenues are likely to make it difficult for the state to both finance new capital projects and to maintain the investments it is making today," the Legislative Finance Committee report said. "This challenge will weigh on the general fund as it becomes a replacement source for capital at a time when general fund revenues will already face headwinds from declining oil and gas production."
Oil production in New Mexico hit an estimated record high of 658.7 million barrels in fiscal 2023, according to the state's August revenue forecast, which
The state has taken steps to insulate its general fund from swings in fossil fuel-related revenue.
