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Ups and downs of NM economy in recent years driven by forces beyond local control◦ Dramatic boom & bust in the OGAS sector

State’s economy kept above water by Medicaid expansion (PIT and health care employment growth)◦ The positive effects of these external inputs has subsided since Q1 2017

Higher selective sales royalties & tax collections have contributed to short-term forecast strength◦ Balanced budget without further spending cuts

Improvements in housing markets have not materialized into an expansion of residential construction (single family homes)

Continued uncertainty regarding national affairs (ACA, tax reform)

Protests related to High Wage Jobs, HealthSouth D&O, and Chemical Reagents claims

Federal Tax Reform effects on PIT and CIT

LANL current contract expiration and new contract uncertainty

GRT34%

Selective Sales9%

PIT24%

CIT1%

Energy-related

14%

Investment/Earnings13%

Other5%

$2

$3

$3

$4

$4

$5

$5

$6

Jul Aug Sep Oct Nov Dec Jan Feb Mar Apr May Jun

Billi

ons

Monthly Matched Taxable Gross Receipts by Fiscal Year

FY09 FY10 FY11 FY12 FY13 FY14 FY15 FY16 FY17 FY18

$47,620 $48,290 $47,881

$43,831$46,599

$48,969 $50,158 $51,095$54,497

$50,872 $51,467

$1,840 $1,858 $1,832 $1,634 $1,822 $1,928 $1,918 $1,992 $2,095 $1,957 $2,014

$0

$1,000

$2,000

$3,000

$4,000

$5,000

$6,000

$7,000

$8,000

$9,000

$10,000

$0

$10,000

$20,000

$30,000

$40,000

$50,000

$60,000

FY07 FY08 FY09 FY10 FY11 FY12 FY13 FY14 FY15 FY16 FY17

Mill

ions

Mill

ions

Matched Taxable Gross Receipts and General Fund Gross Receipts Tax

Matched TGR (left Axis) GF GRT (Right Axis)

$10,

575

$1,8

49

$6,7

98

$3,9

10

$2,3

97

$969

$10,

298

$1,9

63

$5,4

37

$3,8

51

$1,7

87

$903

$10,

717

$2,0

51

$5,2

27

$3,9

86

$2,5

30

$1,1

23

$10,

994

$2,0

43

$5,1

27

$4,1

71

$3,0

20

$1,4

95

$11,

180

$2,0

83

$5,4

15

$3,9

51

$3,2

04

$1,6

67

$11,

085

$2,1

93

$5,4

31

$4,0

40

$3,3

93

$1,7

87

$11,

607

$2,4

85

$6,0

44

$5,2

38

$3,3

52

$1,8

23

$11,

124

$2,2

54

$6,1

37

$5,8

12

$1,8

61

$1,2

71

$11,

247

$2,5

55

$6,4

87

$5,8

82

$1,9

03

$1,0

65

$-

$2,000

$4,000

$6,000

$8,000

$10,000

$12,000

$14,000

Retail Trade Health Care Construction Prof. Sci & TechSvcs.

Mining & Extraction Manufacturing

MatchedTaxableGrossReceiptsSelectSectorsFY2009‐ FY2017

DollarsinMillions

FY2009

FY2010

FY2011

FY2012

FY2013

FY2014

FY2015

FY2016

FY2017

$(27

8)

$114

$(1,

361)

$(59

)

$(61

0)

$(66

)

$419

$88

$(20

9)

$135

$743

$221

$277

$(8)

$(10

0)

$185

$490

$372

$186

$40 $2

88

$(22

0)

$184

$172

$(95

)

$111

$16

$89 $1

89

$120

$522

$292

$612

$1,1

98

$(41

)

$36

$(48

3) $(23

2)

$94

$574

$(1,

491)

$(55

2)

$123

$302

$350

$70

$42

$(20

6)

$671

$707

$(31

1)

$1,9

72

$(49

4)

$96

$(2,000)

$(1,500)

$(1,000)

$(500)

$‐

$500

$1,000

$1,500

$2,000

$2,500

Year‐Over‐YearChangeofMatchedTaxableGrossReceiptsSelectSectorsFY2009‐ FY2017

DollarsinMillions

FY09‐FY10

FY10‐FY11

FY11‐FY12

FY12‐FY13

FY13‐FY14

FY14‐FY15

FY15‐FY16

FY16‐FY17

8YearDiff.

$(90)

$(70)

$(50)

$(30)

$(10)

$10

$30

$50

$70

$90

$110

$130

Mill

ions

LFC's Gross Receipts Tax: 60-Day and Other Credits -- Impact on General Fund

Total YTD June - May 12-Mo Period Deviation From Trend FY July forward cumulative sumSource: CRS Matrix from TRD

-12% 31%

17% 19% 5% 8%

-27%

35%

-10% -18%

54%

-8% -35%

4%$34$44

$52

$61 $65$70

$51

$69$62

$51

$78$72

$47$49

-50%

-40%

-30%

-20%

-10%

0%

10%

20%

30%

40%

50%

60%

FY04 FY05 FY06 FY07 FY08 FY09 FY10 FY11 FY12 FY13 FY14 FY15 FY16 FY17$0

$10

$20

$30

$40

$50

$60

$70

$80

$90

Mill

ions

General Fund Compensating Tax Revenue and Annual Growth Rates

YoY Growth Rate Comp Revenue Trend

0%

10%

20%

30%

40%

50%

60%

$0

$5,000

$10,000

$15,000

$20,000

$25,000

Jul-

12

Sep-

12

Nov

-12

Jan-

13

Mar

-13

May

-13

Jul-

13

Sep-

13

Nov

-13

Jan-

14

Mar

-14

May

-14

Jul-

14

Sep-

14

Nov

-14

Jan-

15

Mar

-15

May

-15

Jul-

15

Sep-

15

Nov

-15

Jan-

16

Mar

-16

May

-16

Jul-

16

Sep-

16

Nov

-16

Jan-

17

Mar

-17

May

-17

Shar

e of

Min

ing

from

Tot

al C

Om

p Ta

x

Thou

sand

s

Total Comp Tax and Share of Comp Tax in the Mining & OGAS Extraction (RP-90)

SHARE of Mining & OGAS Extraction from Total Comp (Right Axis)

Mining & OGAS Extraction ONLY

Total Comp Excl. Mining & OGAS Extraction

Total Comp

Column1 FY17 FY18 FY19August 2017 Estimate 1,285$ 1,310$ 1,326$ December 2017 Revisions 96$ 71$ 83$

December 2017 Consensus 1,381$ 1,381$ 1,409$ Annual Change, Dollars 54$ -$ 28$ Annual Change, Percent 3.9% 0.0% 2.0%

December 2017 CREG PIT Summary(Millions of Dollars)

NM PIT starts from Federal Adjusted Gross Income (FAGI)

◦ Any changes to FAGI will impact NM taxable income base

◦ Lines 7 through 22 on Federal 1040 enumerate sources of income

◦ Lines 23 thru 35 on Federal 1040 are adjustments to federal taxable income

◦ Line 37 is Federal AGI, the starting point for NM

Column1 FY17 FY18 FY19August 2017 Estimate 50$ 70$ 74$ December 2017 Revisions 20$ 35$ 36$

December 2017 Consensus 70$ 105$ 110$ Annual Change, Dollars (49)$ 35$ 5$ Annual Change, Percent -70.0% 33.3% 4.5%

December 2017 CREG CIT Summary(Millions of Dollars)

$0.0

$100.0

$200.0

$300.0

$400.0

$500.0

$600.0

$700.0

$800.0

$900.0

$1000.0

FY17 FY18 FY19 FY20 FY21 FY22

Mill

ions

Energy-Related Revenues

Severance Taxes FML SLO

All three revenue areas driven primarily by oil production

FY20 drop in Severance Taxes due to Oil & Gas Emergency Tax - first forecasted distribution to Tax Stabilization Reserve (7-1-6.61 NMSA 1978)

Continued high bonus sales at federal level

FY05 FY06 FY07 FY08 FY09 FY10 FY11 FY12 FY13 FY14 FY15 FY16 FY17 FY18 FY19 FY20 FY21 FY22

Volume - Dec 17 63 60 60 60 62 63 69 80 96 114 141 147 153 158 162 165 168 170

Price - Dec 17 $45.3 $60.0 $59.1 $93.7 $64.8 $71.3 $84.9 $89.6 $85.8 $95.1 $60.6 $37.8 $45.0 $47.5 $49.5 $50.5 $51.5 $52.5

$0.00

$10.00

$20.00

$30.00

$40.00

$50.00

$60.00

$70.00

$80.00

$90.00

$100.00

0

20

40

60

80

100

120

140

160

180

$/ba

rrel

Mill

ions

of b

arre

lsOil Prices and Volume, FY2005 - FY2022

FY05 FY06 FY07 FY08 FY09 FY10 FY11 FY12 FY13 FY14 FY15 FY16 FY17 FY18 FY19 FY20 FY21 FY22

Volume 1547 1520 1513 1431 1380 1295 1250 1227 1178 1185 1185 1175 1220 1230 1220 1200 1190 1180

Price $5.84$7.53$6.57$8.40$5.65$5.17$5.51$5.02$4.38$5.12$3.77$2.43$3.26$3.25$3.25$3.25$3.20$3.20

$0.00

$1.00

$2.00

$3.00

$4.00

$5.00

$6.00

$7.00

$8.00

$9.00

0

200

400

600

800

1000

1200

1400

1600

1800

Gas

vol

ume

mill

ions

of m

cfNatural Gas Prices and Volume, FY2005 - FY2022

A close review of the impacts of rate changes and deductions may impact New Mexico PIT and CIT

Sequestration Threat: At issue –federal tax reform if enacted is projected to trigger sequestration through Pay-as-you-go Act (PAYGO)

New Mexico Susceptibility

◦ Federal Mineral Leases – risk of holding annual sequestered amount and sequestering larger percentage

◦ Stress on Health Sector – large driver of economy 2% decrease (max) in Medicare rates to certain providers and plans; Indian Health Service (IHS) – budget decreases; Other Federal Health Centers – budget decreases. For New Mexico

prominent in rural and frontier regions of state.

◦ Drain on economic growth Contracts – Department of Energy, Department of Defense

Pojoaque casino new pact, applied beginning late October 2017

Escrow of 2+ years revenue status: negotiation continuing (~$10.5M)

Racino/gaming forecast turns slightly positive trend from slightly negative trend

Cigarette forecast up slightly, tobacco tax growth remains strong. Vaping still untaxed

Liquor forecast continuing downward trend

MVX forecast unchanged for FYs 18-20

Facebook using Industrial Revenue Bond, but will positively affect revenue via taxes on construction, salaries and indirect gross receipts

Thank you!

Our mission at TRD is to administer and enforce New Mexico's tax and revenue laws,

vehicle and driver licensing, and transportation programs in a manner warranting the highest degree of public

confidence.

http://www.tax.newmexico.gov/

trd - nmlegis.govx(1)s(4fjhyxav4y4qxr005t3d0xej))/handouts...our mission at trd is to administer and

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