Mark Ronchetti on the campaign trail said if he was elected governor, he’d give New Mexicans of all ages a piece of the state’s booming oil and gas revenue through a rebate program tied directly to revenue from the industry.
Per a campaign announcement, Ronchetti promised every New Mexican regardless of age could receive $800 annually in direct payments from the State, based on the campaign’s interpretation of present production and revenue rates.
The payments would see $100 sent to everyone in the state for every billion dollars it takes in from the oil and gas industry, which the campaign valued at $8 billion. That valuation is a combination of General Fund revenue and other sources.
It’s one prong of an eight-part economic plan that Ronchetti said would reduce regulations on fossil fuels, cut taxes and impose added requirements for New Mexicans to receive unemployment benefits.
Like the Republican Party that nominated him to take on Democrat incumbent Gov. Michelle Lujan Grisham in November, Ronchetti came out as a strong supporter of oil and gas since announcing his candidacy.
His supportive stance on fossil fuels led to a failed run in 2020 against U.S. Sen. Ben Ray Lujan (D-NM), but Ronchetti hoped this year he would be able to rely on support from the state’s deep-red oil and gas regions in the southeast and northwest.
The rebate promise may garner Ronchetti votes from a New Mexico constituency still hurting from the economic hardship of the COVID-19 pandemic, while capitalizing on a recovering oil and gas industry centered on the prolific Permian Basin which New Mexico shares with Texas, but Ronchetti isn’t alone in the tactic.
This year, Lujan Grisham’s administration sent out two payments to New Mexicans ranging in total from $500 to $1,500, per the governor’s campaign.
That was also characterized as an “oil and gas rebate” amid growing revenue from the industry.
Ronchetti’s program would mimic Lujan Grisham’s to an extent but would tie the payments directly to oil and gas revenue, meaning as the industry and market grows so too could state money sent directly to taxpayers throughout the state.
“State government has never been bigger or richer than it is right now, while too many families and small businesses continue to struggle to make ends meet,” read a statement from Ronchetti’s campaign. “The excess energy revenue we’re seeing is not the Governor’s money to spend, and its best use is not in the hands of government bureaucrats.”
Delaney Corcoran, spokesperson for the Lujan Grisham campaign said Ronchetti’s rebate plan was “unoriginal” and that the incumbent’s policies since she took office in 2019 were chiefly responsible for the increased revenue her opponent relied on to rally support for his candidacy.
“If New Mexicans are looking for a governor they can rely on to send direct economic relief when times get tough, they already have one in Gov. Michelle Lujan Grisham,” Corcoran said in an email.
“Gov. Lujan Grisham has wisely invested oil and gas revenue into critical infrastructure – roads, bridges, broadband, water projects, growing our economy and small businesses, improving schools, promoting public safety, and diversifying our energy sector, all while providing relief checks to New Mexicans.”
Where would the money come from?
The rebate program alone, if $800 payments are made to about 2.12 million New Mexicans, per the 2020 U.S. Census, would mean about $1.69 billion sent from the State’s General Fund.
State economists projected this month oil and gas could bring in up to $2.5 billion in new money to General Fund, a sign of the growth that could drive up the rebates in the coming years.
In a May 2021 report, the Legislative Finance Committee (LFC) said New Mexico “typically” receives about $2 billion in direct oil and gas revenue to its General Fund, along with $500 million from sales and income tax on drilling and oilfield service.
That usually makes up about a third of the state’s budget, per the report.
The New Mexico Oil and Gas Association, an industry trade group, reported the industry sent $2.9 billion to the General Fund in 2021.
Ronchetti’s rebates were based on four revenue streams, two connected to the General Fund and reported by the LFC, and two paid to separate funds required by statute the amounts of which the campaign calculated on its own.
General Fund streams used to create the $8 billion valuation of oil and gas revenue included gross revenue to the Oil and Gas School Fund, projected by the LFC in August 2022 to bring in about $2.075 billion and gross federal mineral leasing royalties forecast at $2.356 billion, records show.
The other two sources of revenue used to determine the rebate amount were oil and gas revenue to New Mexico’s State Severance Tax Fund the campaign reported at $2.3 billion, and royalties paid on State land at $1.9 billion.
Those numbers were not publicly reported by State economists.
Instead, the campaign used an unnamed “economist and former secretary of New Mexico’s Department of Finance and Administration” to develop the severance tax and State Land royalty revenue amounts.
In total, the four revenue sources totaled about $8.6 billion which the campaign believed illustrated the full extent of the oil and gas industry’s growth in New Mexico, and formed the basis for the $800 payments.
The rebates would not be capped at a certain number of family members meaning there was no limit on how much money individual families could receive.
The campaign did not offer specifics regarding a “safeguard” in the proposal to allow payments to be adjusted or reduced should oil and gas revenues decline.
Ronchetti’s rebates a significant chunk of New Mexico’s budget
A signature piece of legislation enacted by Lujan Grisham earlier this year spent $75 million to make college tuition free for up to 35,000 New Mexican students, a move criticized by Republicans as excessive spending.
The cost of Ronchetti’s rebate plan would not be a small expenditure by comparison to other recent state appropriations.
In March following the finance-focused, 30-day Legislative Session Lujan Grisham signed a budget that marked a similarly-maligned $1 billion expansion in state government, while vetoing a $50 million list of small capital projects from lawmakers across the state.
If the $800 payments were sent to New Mexicans, Ronchetti’s plan would amount to about 19 percent of the entire 8.5 billion budget signed into law this year by Lujan Grisham, another spending move Republicans criticized.
The budget, or General Fund, was expected to increase annually for the next two fiscal years, per the latest data from state economists, driven by the oil and gas revenue Ronchetti hoped to share directly with taxpayers.
Recurring revenue, or money coming in every year to the fund, was projected to increase 14 percent between Fiscal Year 2021 and FY 2022, a growth of about $1.13 billion to about $9.22 billion in the last fiscal year that ended June 30, per a Wednesday report from the LFC.
Fiscal years in New Mexico run from July 1 to June 30 of the following year, denoted by the year they end.
Fiscal Year 2023 was expected to see more growth in recurring revenue to about $9.85 billion, the report read, while FY 2024 could climb as high as $10.86 billion.
The report credited the growth in state finances to a booming oil and gas industry which drove up severance taxes, gross receipts taxes and federal royalty payments which were expected to exceed five-year averages.
This could mean larger transfers to programs like the Early Childhood Trust Fund than projected in December 2021, and more money in the State’s General Fund, read the report.
“Additionally, consumer spending has remained strong, wage growth has been robust, and high oil and gas revenues are supported by global supply-side constraints raising prices and encouraging production expansion,” the report read.
This continued growth meant that if elected, Ronchetti would see payments from his rebate program become larger as a direct reflection of growth in oil and gas income to New Mexico.
State Rep. Cathrynn Brown (R-55), a designee on the LFC who represents parts of Carlsbad deep in the oil-rich southeast region, said Ronchetti’s proposal was well-timed to meet skyrocketing fossil fuel revenue.
She said the rebates would give New Mexicans more power in deciding how to spend future cash windfalls.
“The Ronchetti proposal deserves serious consideration, and the timing for this idea is right,” Brown said in a text message. “There is merit in letting New Mexico families be captains of how and where some of this money is spent as they know their cost-of-living requirements and unique economic situations far better than outsiders in government.”
Adrian Hedden can be reached at 575-628-5516, [email protected] or @AdrianHedden on Twitter.