New Mexico Braces for Slowdown in Oil Income

State seeks new revenue streams and bolsters public spending as oil-generated surplus is projected to decline

New Mexico, the nation's No. 2 oil production state, is grappling with how to manage and spend its petroleum-generated income, which is expected to slow down as global demand for oil wanes.
The state is projected to have a $3.5 billion general fund surplus for the year running through June 2025, largely driven by oil and natural gas production in the Permian Basin.
New Mexico is seeking new revenue streams to shift its dependence on oil, including a $500 million initiative to treat fracking wastewater, despite criticism that it might encourage more petroleum drilling.
The increase in government income has allowed the state to expand agency budgets, reduce taxes, and bolster spending on public education and colleges, which account for about 58% of annual state general fund spending.
Despite the increase in funding, the state's education system is struggling, with only 38% of students reading at their grade level and a high school graduation rate of 76%, well below the national average of 87%.