“I’D RATHER BE IN NEW MEXICO THAN ANY OTHER STATE,” SAYS LEADING ENERGY EXPERT: Chamber Board Meeting Hosts House Finance Chair Rep. Patty Lundstrom and US Chamber Energy Policy Chief Christopher Guith

As part of the first remote Board meeting in its history, the Greater Albuquerque Chamber examined the economic outlook for New Mexico through the expertise of state legislative leadership and a national energy expert. Chair of House Finance and Appropriations (HAFC) Rep. Patty Lundstrom (D — McKinley & San Juan) and Senior Vice President for the Global Energy Institute at the U.S. Chamber of Commerce Christopher Guith tackled the state fiscal situation and global energy market, respectively.

Chairwoman Lundstrom opened her remarks to the Board by discussing the legislature’s solvency plan to tackle the budget shortfalls wrought by the COVID-19 pandemic and the disruption of global oil and gas prices and production. HAFC will open its work for the special session on June 17 with the latest revenue projections, while the previous projections showed a FY2021 shortfall of $1.7-2.4 billion.

One of the key factors will be how much flexibility the state will be given in how it can utilize $750 million in federal aid, but the plan to close budget holes in current and future fiscal years will likely involve rolling back public employee pay increases from 4% to around 1% and converting road construction appropriations to debt financing. “I can’t support salary increases beyond 1% with so many people in the private sector losing jobs,” said Chairwoman Lundstrom.

Rep. Lundstrom also described a plan to roll back one-time appropriations in the current state budget, and set a target for state reserves at 12-13%. “We’re trying to roll back re-occuring expenses and pull back on one-time appropriations,” said Chairwoman Lundstrom. “We’ll also try to afford the Governor flexibility in setting priorities for funding as we move ahead.”

In response to Chamber President & CEO Terri Cole’s question regarding the legislature’s plan if Congress fails to provide flexibility on how the state uses federal aid funding, Chairwoman Lundstrom described a plan involving taking credit for federal aid — much as the state’s education funding formula does for Impact Aid — in departmental budgets relevant to COVID-19 response. The Chamber recently sent a letter to Congressional leadership advocating for this type of flexibility to be provided in any future federal COVID-19 relief legislation.

Chamber Board Member and General Manager of Doubletree by Hilton Albuquerque Karl Holme asked about the state’s plans to continue to finance Department of Tourism programs to drive visitors to the state, and Chairwoman Lundstrom noted the importance of the billion-dollar tourism industry to the state’s economy, and discussed the difficulties in holding large conventions under COVID-19 gathering restrictions.

Chamber Board Member and Bohannan Huston, Inc. President and CEO Bruce Stidworthy asked about clawbacks in capital outlay projects, and Chairwoman Lundstrom articulated a plan to review and target projects with little to no movement toward being executed since the appropriation was made.

Chair Lundstrom also described the health and safety measures the legislature will be taking, including social distancing measures in committees and on the floor, limitations on when and how legislators can remain in the building, and the likelihood that the public will not be allowed to attend meetings or floor sessions.
 
In his presentation, Mr. Guith described the combined effects on energy markets of a “precipitous drop” in first quarter oil and gas demand from first China and then the rest of the world, and then a spring OPEC decision to increase production, flooding the market and reducing prices to target the market share of U.S. producers. Mr. Guith noted that these twin blows to American oil and gas development resulted in closing down wells — not just in New Mexico, where rig counts declined by more than a third, but across the oil-producing regions of the country — but the usual savings that would be passed on to consumers during a drop in oil prices didn’t materialize, as driving sharply reduced across the country due to local COVID-19 lockdowns.
 
Mr. Guith concluded his presentation on a more optimistic note, noting that both domestic and foreign demand is beginning to rise, and that New Mexico is uniquely well-positioned to bounce back because of the unique characteristics of production in the Permian Basin. “I’d rather be in New Mexico than any other state” when it comes to energy production, said Mr. Guith. “It’s not going to be as bad in New Mexico as it will be in many other places… New Mexico has done a really smart job of saving for a rainy day.”
 
Chairwoman Lundstrom has served as a state representative for District 9 for nearly two decades, was designated Chair of the New Mexico House Appropriations and Finance Committee in 2017, and serves as executive director of the Greater Gallup Economic Development Corporation.
 
Mr. Guith leads the Institute’s efforts to build support for meaningful energy and environmental action nationally and internationally through policy development, education, and advocacy. Prior to joining the U.S. Chamber in 2008, Christopher served as deputy assistant secretary for nuclear energy at the U.S. Department of Energy (DOE), where he developed the administration’s nuclear energy policies and coordinated the department’s interactions with Congress, stakeholders, and the media.

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