This chart, prepared by the Legislative Finance Committee, shows the oil and gas revenue that would have been saved under this plan going back to 1986 had this rainy day fund been in place. Courtesy image
SANTA FE – The New Mexico House of Representatives overwhelmingly endorsed a proposal Tuesday night to establish a “rainy day” fund for surplus oil and gas revenue.
House Bill 191, sponsored by Rep. Larry Larrañaga (R-Bernalillo), would create an oil and gas stabilization reserve to save excess oil and gas revenues during boom years to cover revenue shortfalls during industry downturns. Oil and gas emergency school tax revenues in excess of the previous five-year average would be directed towards the reserve. Establishing the fund would help smooth revenue volatility and buffer the state from severe budget impacts during lean years.
For example, if this fund had been in place in 2007, it would have contained $365 million by the end of FY 2016 to help mitigate the state’s current budget situation.
“House Bill 191 creates a real rainy day fund for New Mexico,” Larrañaga said. “It levels out the revenue peaks and valleys the state receives from the oil and gas industry. Implementing this idea will protect the state from future budget scenarios like the one we have experienced this year. It’s a prudent plan, and I’m glad the House has voted to approve it.”
Larrañaga’s proposal is modeled after a similar reserve used by the State of Utah. Both the Legislative Finance Committee and the Department of Finance and Administration have voiced their support of the plan.
The House passed Larrañaga’s bill by a bipartisan vote of 46 to 18. House Bill 191 now moves to the Senate for consideration.