Oil And Gas Revenues Drive Education Funding in New Mexico, Colorado
Two new studies released in January underscore the importance of oil and natural gas revenues’ impact on education funding in New Mexico and Colorado.
The New Mexico Oil and Gas Association (NMOGA) pointed to a report by the New Mexico Tax Research Institute (NMTRI) on the “state and local revenue impacts” that showed more than $2.2 billion in oil and natural gas tax revenues for New Mexico’s general fund for 2018, a jump of $465 million from the previous fiscal year.
That figure represents approximately 32 percent of the state’s overall general fund revenue.
“Across New Mexico, communities and public schools are seeing the enormous impact and benefits provided by a thriving oil and natural gas industry in our state,” NMOGA Executive Director Ryan Flynn said in a statement. He noted 2013 was “a record-breaking year for oil and natural gas production in New Mexico, and as a result our state has unprecedented opportunities to invest in public education, build new roads, and invest in other parts of our economy.”
Funding for education in New Mexico soared to $1.06 billion in 2018, with $822 million for primary and secondary education, and another $241 million for higher education, an increase of $128 million in one year, according to NMOGA.
The state’s general fund revenues are comprised of more than a dozen direct revenue streams, including the oil and gas school tax, natural gas processors tax, oil and gas conservation tax, land grand permanent fund income, severance tax permanent fund income, and land office income.
NMOGA’s estimates that New Mexico saw the equivalent of nearly $2,500 per pupil in funding from the state’s oil and gas industry this past fiscal year. Viewed another way, the $822 million boon to educational revenues could fund an additional 17,500 teachers, buy nearly 7,500 school buses, or provide nearly 387 million school lunches.
Those projected figures translate into real dollars in the classroom, one New Mexico legislator argued.
“Anyone who attends a public school or college in New Mexico is the beneficiary of the oil and gas industry,” wrote State Rep. Rebecca Dow (R-38) in December. She said that during the current session “it’s up to all of us to ensure critical education funding keeps flowing to our classrooms without needless regulations on one end and unfunded mandates on the other.”
“In my district, more than $21 million in revenue went to thousands of students ranging from Pre-K all the way to graduate students at Western New Mexico University. This funding pays our teachers, buys gas for school buses and keeps the lights on in classrooms all over the state,” Dow added.
Geographically, most of New Mexico’s production is centered in the state’s prolific Permian Basin, located in the southeast, and the San Juan Basin near the Four Corners region. But money generated from oil and gas development funds infrastructure and road building, law enforcement, and the state’s “rainy day” fund to education.
“Record-breaking can and should be the new norm for New Mexico, but that also goes hand-in-hand with continuing the policies that have allowed oil and natural gas development to flourish,” Flynn added.
But the introduction of a bill in the state legislature calling for a four-year moratorium on hydraulic fracturing in New Mexico would threaten that critical revenue stream, as Western Wire reported last week.
“I would immediately expect that if this legislation were to pass, you would see the mass exodus of both large and small oil and gas producers away from New Mexico to other states,” Jim Winchester, Executive Director of the Independent Petroleum Association of New Mexico (IPANM), told Western Wire. “Essentially, not only is this a deal breaker in the ability to use the latest techniques to extract oil and gas here in New Mexico, but it would isolate us as a state that would be an island that would not be capable of retrieving this resource.”
New Mexico’s revenue was bolstered by the third highest tax revenue on oil and natural gas production at 11.5 percent, the report found. The rate was lower than those for Montana or Texas (12.8 percent) but comparable (though higher) to other nearby or competitive states like North Dakota (10.5 percent) or Colorado (9.3 percent).
In Colorado, a report from Vital for Colorado, a statewide group of business leaders focused on energy policy, found that for the five years between 2013 and 2017, the state saw more than $3.3 billion in revenues derived from oil and natural gas development, generating $669 million per year in primary and higher education funding.
Vital for Colorado’s board includes membership from the Colorado Business Roundtable, Colorado Chamber of Commerce, and the Aurora Chamber of Commerce, among other organizations.
“[T]his briefing explores the number and magnitude of K-12 and higher education revenue streams tied to oil and gas development, using published historical data and estimates for local and state assessed property taxes, revenues from energy development on state and federal lands, corporate and personal income taxes and state sales taxes,” Vital’s authors wrote.
“The groups behind Proposition 112 have long argued that oil and natural gas development could be wiped off the map in Colorado and our state would be completely fine. That’s a fundamentally unserious argument. It didn’t work when Proposition 112 was on the ballot and it won’t work now,” Simon Lomax, a research fellow for Vital, told Western Wire.
“It’s a matter of common sense that when you live in a major energy producing state like Colorado, the energy sector generates a lot of funding for public schools, higher education and other essential services,” Lomax added. “But because there isn’t a single line item in the state budget that brings all the different revenue streams together, anti-oil and gas groups are always trying to minimize how much energy development supports the tax base in Colorado, not to mention the broader economy.”
Among the sources of revenue: oil and gas production’s assessment rate of 87.5 percent, 12 times the rate that residential property owners pay, and three times that levied on commercial property. Those property taxes represent more than $2.2 billion alone for K-12 and higher education over the five years studied.
Also included in the state’s educational funding haul were revenues from state-owned mineral development managed by the Colorado State Board of Land Commissioners ($568 million), personal income taxes from the state’s more than 100,000 industry employees ($198 million), corporate income and sales taxes ($363 million), and federal mineral grants ($11 million).
“The first part of that mission is to generate revenue for Colorado schoolkids, using the land and resources that were given to us at statehood … Approximately 80% of the revenues generated by the Colorado State Land Board come from oil and gas. That amounts to about $1 billion over the last 10 years,” said Matt Pollart, District Manager for North Central Colorado, Colorado State Land Board.
What’s at stake? Just as in New Mexico, Colorado could see oil and gas revenues disappear quickly if the state changes its regulatory structure, according to Vital’s analysis.
“[M]easures that create a hostile regulatory environment for oil and gas development in Colorado have the very real potential to cut public education funding and derail plans for new spending priorities, including higher teacher pay and a more than $200 million proposal for universal full-day kindergarten,” the report concluded.
Lomax argued that the impact on education by the state’s oil and gas industry should be guided by facts, not political rhetoric.
“With this research paper, the state business community is simply trying to keep things in perspective and keep the debate focused on facts. There are strong connections between energy development and other public policy priorities in Colorado, especially funding for our public schools, and it’s wrong for the single-issue campaigns run by 350.org and Food & Water Watch to pretend otherwise,” he said.