The NM Economy & State Finances, 2018

New Mexico Women’s Agenda Friday, January 19, 2018

University of New Mexico Bureau of Business and Economic Research

Dr. Lee A. Reynis Research Professor Department of Economics Lreynis@unm.edu

National Economy Real Gross Domestic Product

NATIONAL ECONOMY Percent Change in US Real Gross Domestic Product

Seasonally Adjusted at Annual Rates

Note: These are not the contributions to percent change.

Where we were a year ago

$0

$20

$40

$60

$80

$100

$120

West Texas Intermediate Spot

$0

$1

$2

$3

$4

$5

$6

$7

$8

$9

$10

Natural Gas Price (per Million Btu) Henry Hub Cash Market

Oil and Gas Prices and Production

Shale crude-oil production from seven major U.S. oil plays is expected to see a monthly climb of 111,000 barrels a day in February to 6.549 million barrels a day, according to a report from the Energy Information Administration released Tuesday (1/16/18). Oil output from the Permian Basin, which covers parts of western Texas and southeastern New Mexico, is expected to see the largest climb among the big shale plays, with an increase of 76,000 barrels a day. February West Texas Intermediate oil settled on the NY Merchantile Exchange…at 63.73 per barrel. – Jan 16 Market Watch

0.0

2.0

4.0

6.0

8.0

10.0

12.0

120,000

125,000

130,000

135,000

140,000

145,000

150,000

01 02 03 04 05 06 07 08 09 10 11 12 13 14 15 16 17

Total Nonfarm Employment (Left Axis) Unemployment Rate (Right Axis)

US Non-Farm Employment and Unemployment

%

New Mexico and US Employment Annual Growth Year Over Year

NM Covered Employment (QCEW) and FORUNM Forecast US Payroll Employment (CES) and Global Insight Forecast

-5.0%

-4.0%

-3.0%

-2.0%

-1.0%

0.0%

1.0%

2.0%

3.0%

4.0%

5.0%

02 03 04 05 06 07 08 09 10 11 12 13 14 15 16 17 18 19 20 21 22

NM

US

Graph from NM Dept of Workforce Solutions, Monthly Labor Report, Nov. 2017 These data are from the CES, which BBER finds more current but less reliable than QCEW. CES is Re-benchmarked annually to the QCEW. Note that mining and construction have been the leading sectors, followed by prof/bus services.

NM Employment Gains and Losses by Industry

Unemployment Rates Since 1997: US Total, Women, Hispanic, 16-19 Yrs

6.1% 0.0 -0.6

New Mexico Unemployment

The unemployment rate for New Mexico fell 0.0 percentage points in

November 2017 to 6.1%. The state unemployment rate was 2.0 percentage

points higher than the national rate for the month. The unemployment rate in

New Mexico peaked in May 2010 at 8.3% and is now 2.2 percentage points

lower. From a post peak low of 6.1% in October 2017, the unemployment rate

has now grown by 0.0 percentage points.

Unemployment Rate: New Mexico, National

Note: Recessions shown in gray

BLS current population survey (CPS),

For years now, New Mexico has had one of the highest if not the highest rate of unemployment in the country.

Gender Earnings Ratio, 1955 -2016, Full Time Workers

Median Annual Earnings and Gender Earnings Ratio for Full-Time Year-Round Workers, 15 and Older by Race/Ethnicity, 2015, 2016

Source: Institute for Women’s Policy Research

Earnings

Personal Income

Gains/Losses in Healthcare and Mining are moderating

Source: US Bureau of Labor Statistics, QCEW.

8,000

6,000

4,000

2,000

0

2,000

4,000

6,000

8,000

10,000

2011

2012

2013

2014

2015

2016

2017

Healthcare

Mining

Government

Other

Increased drill rig activity and oil production with

WTI prices near $50/barrel

Source: EIA, Baker Hughes, ONGARD, IHS Global Insight.

0

20

40

60

80

100

120

0

50

100

150

200

250

300

Drill Rigs & WTI Price/Barrel

Production Index

Oil Production Index

Drill Rigs (Right)

WTI Price (Right)

Change in Medicaid Payments

Source: US Bureau of Economic Analysis, Table SQ35.

-0.5%

0.0%

0.5%

1.0%

1.5%

2.0%

2.5%

-$600

-$300

$0

$300

$600

$900

$1,200

$1,500

$1,800

%

Millions $

Increase in Medicaid Transfers - Left

Increase as % of Total Personal Income - Right

Regions in New Mexico have not been pulling

in the same direction

-6%

-4%

-2%

0%

2%

4%

6%

Albuquerque

Non-Metro

Source: US Bureau of Labor Statistics

Improving State Finances

Consensus Revenue Forecast (FY17 and FY18)

Source: NM Legislative Finance Committee

Preliminary

FY17

Estimate

FY18

Total Recurring Revenue

$5,905.5

$5,941.1

Total Nonrecurring Revenue

$556.1

$18.7

TOTAL Revenue

$6,461.6

$5,959.8

Total Recurring Appropriations

$6,103.6

$6,082.2

Total Nonrecurring Appropriations

$27.0

$0.0

TOTAL Appropriations

$6,130.6

$6,082.2

Balance

$331.0

($122.4)

Beginning Reserves

$147.7

$504.8

Ending Reserves

$504.8

$382.4

Reserves as % of Recurring Appropriations

8.3%

6.3%

Gain/Loss in General Fund Accruals (FY17 v FY16)

Source: NM Legislative Finance Committee

$38.1

$1.6

$11.9

$53.5

($48.3)

$61.8

$69.4

($31.5)

$39.1

($60)

($40)

($20)

$0

$20

$40

$60

$80

Gross Receipts

Compensating Tax

Selective Sales *

Personal Income Tax

Corporate Income Tax

Mineral Production

Rents & Royalties

Investment Income

Other Recurring

Millions $

Gross Receipts & Taxes by County: 2017Q2 vs. 2016Q2

Source: NM Taxation & Revenue Department, RP

-

80s

(15,000)

0

15,000

30,000

San Juan

Otero

Rio Arriba

Cibola

Colfax

Taos

Santa Fe

Curry

San Miguel

Luna

Torrance

Chaves

Valencia

Remaining Counties

Los Alamos

Eddy

Lea

Bernalillo

Net $106 million, 12%

Gross Receipts

Gross Taxes

$ Thousands

(150,000)

100,000

350,000

600,000

Otero

Chaves

Rio Arriba

Taos

Lincoln

Roosevelt

DONA ANA

Quay

Other 17 Cos

San Juan

Unclassified

Santa Fe

Torrance

Valencia

Eddy

Lea

Bernalillo

Net $.8 billion, 6.8%

Gross Receipts & Taxes by County: 2017Q2 vs. 2016Q2

Net $106 million,

12%

Gross Receipts

Gross Taxes

($100,000,000)

$900,000,000

Utilities

Mgt of Companies

Private Education Srvs

Public Administration

Arts, Entertainment,...

Agriculture

Information

Adminitrative...

Hospitality

Finance & Insurance

Healthcare

Profession & Tech

Other Services

Real Estate

Wholesale

Construction

Transportation

Manufacturing

Mining

($50,000,000)

$0

$50,000,000

Unclassified

Agriculture

Arts, Entertainment,...

Public Administration

Private Education Srvs

Transportation

Manufacturing

Adminitrative Services

Mgt of Companies

Retail

Finance & Insurance

Hospitality

Utilities

Real Estate

Wholesale

Other Services

Healthcare

Mining

Profession & Tech

Construction

Net $1.8 billion,

6.8%

Source: NM Taxation & Revenue Department, RP

-

80s

$ Thousands

Tax Stabilization Reserve Fund (‘Rainy Day’ Fund)

$0

$2,000

$4,000

$6,000

$8,000

$10,000

$12,000

$14,000

-$200

-$150

-$100

-$50

$50

$100

$150

$200

Reserve Fund ($ Millions)

Actual Change in Balance

Projected Contributions under 2017 Legislation

$ Oil Value (Right)

o

2017 Special Session HB2 bill to tie funding of Tax Stabilization Reserve

Fund (‘Rainy Day’ Fund) to Oil is a significant step forward.

o

Best Practices suggest a need for clearer guidelines for withdrawals.

Changes to Tax Stabilization Reserve Fund (Actual vs. 2017 Legislation)

and Value of NM Oil Production

NM Oil Sales ($ Million)

-4%

-2%

0%

2%

4%

6%

8%

10%

02 03 04 05 06 07 08 09 10 11 12 13 14 15 16 17 18 19 20 21 22

US

NM

Annual Growth in Personal Income, NM and US

Days Each State Could Run on Total Balances, FY00 to FY 17

-10.0

0.0

10.0

20.0

30.0

40.0

50.0

60.0New Mexico

50-state median

Source of Data: Pew Charitable Trust