State Land Commissioner Aubrey Dunn said both Gov. Susana Martinez and state lawmakers waited too long to address the state’s revenue shortfall, and the only way to dig out now is with immediate spending cuts and a tax increase.
“To me, this looks like a pretty big hole,” Dunn said. “To climb out, you have to both raise revenue and cut expenses.”
Dunn, a Republican, comes from a political family. His father and grandfather served in the state Senate, but he is quick to say that he’s not in the Legislature. He added that as of Thursday, he also wasn’t very popular with Martinez, who has pledged not to raise taxes despite the budget shortfall.
Before his election in 2013, Dunn served as a bank executive in both Roswell and Española, and from that he understands that budgets can’t be turned around quickly.
“If I had a budget, I can’t wait until the last month to make that budget work,” he said.
The problem, he said, is that most stable revenue sources, such as income taxes, cannot be changed until 2017 — and the state would not begin to see increases from that until several months later. But a temporary gasoline tax, one that was imposed on an emergency basis and then sunset as the price of oil increases, might be something the state should consider.
“A gas tax is one thing you can do, but it wouldn’t be popular,” he said. Dunn added that each 1-cent increase in the gas tax would raise $13.8 million for the state.
Dunn said sweeping reserves as an emergency measure to patch a budget with structural problems can create a bigger hole in 2018.
“Next year, there might be a billion-dollar shortfall,” he said.
Dunn also has a bird’s-eye view of state revenues from the data coming into the New Mexico State Land Office. Among the duties, the state land commissioner auctions leases to companies that want to pump oil and gas and extract other minerals from state holdings. Every time a barrel of crude oil is pumped, the company must pay a royalty or a tax for severing the product from the ground — thus the name severance tax.
Through January, the amount of money paid to the state by oil and gas companies is down 37.5 percent from a year earlier. Dunn also said the trend should give lawmakers more pause.
Companies that pay for a lease have five years to drill. Many who are two and three years into that time frame are just surrendering the leases, as they don’t see oil prices coming back soon enough to justify the expense of drilling.
“We’re having a big increase in lease cancellations,” Dunn said. “They’re just allowing them to expire.”
Contact Bruce Krasnow at [email protected].