By Dan Boyd / Journal Capitol Bureau Chief
SANTA FE – After several stagnant years, New Mexico’s economy is finally showing signs of growth.
Driven by a surge of drilling in the oil patch, the state’s gross domestic product – a key economic indicator – grew by 2.8 percent in the first quarter of this year, the third-highest growth of any state. Only Texas and West Virginia posted more robust gains, according to the federal Bureau of Economic Analysis.
That came after New Mexico was one of only 10 states to post a decrease in its 2016 gross domestic product, compared with the previous year.
“This is encouraging news for our families, communities and businesses,” Gov. Susana Martinez said Tuesday, while attributing the growth to tax cuts and streamlined regulations. “Through a relentless commitment to reforms … we’re growing and diversifying our economy and competing for jobs and investment with neighboring states like never before – and even beating them.”
Recent tax cuts include a 2015 package that renewed and expanded roughly a half-dozen tax incentives and controversial 2013 legislation that trimmed the state’s corporate income tax rate and expanded the state’s film rebate program, among other provisions.
Meanwhile, the positive economic indicators are also helping the state’s coffers, as the cash-strapped state was on track to take in more revenue than projected for the budget year that ended in June.
A Legislative Finance Committee report that tracked revenue collections through May found that mineral production taxes from the oil and natural gas industries made up more than half of an $121 million year-over-year revenue increase.
New Mexico has lagged behind its neighbors in job growth for several years and has posted one of the nation’s highest unemployment rates – the jobless rate was 6.6 percent in May – for most of this year.
But increased drilling activity and multibillion-dollar deals in the Permian Basin, which straddles Texas and New Mexico, have helped propel the state’s recent economic hot streak.
Specifically, technological advances like directional drilling and hydraulic fracturing have made it more efficient for oil producers to tap the region’s shale fields even though prices haven’t fully rebounded from several years ago, said Robert McEntyre of the New Mexico Oil and Gas Association.
And the numbers appear to back that up – there were 61 oil rigs in the state as of last week, compared with just 13 rigs in March 2016.