Using Energy Revenues, New Mexico Offers Free In-State College

Sam Winstel
Posted October 7, 2019

The U.S. energy revolution is at work for New Mexico and the state’s higher education system.

Gov. Michelle Lujan Grisham made national headlines last month by announcing free tuition at public universities for all residents, regardless of family income. That’s all 29 of the state’s two- and four-year institutions beginning next fall, benefiting an estimated 55,000 New Mexico students.

Thanks to the state’s natural gas and oil development.

Surging energy production will play the lead role in funding the New Mexico Opportunity Scholarship. Gov. Lujan Grisham interviewed this week by MSNBC:

“You know we are in a very good situation currently. … Oil and gas, we’re an extractive industries state and so we’re seeing a billion dollars in revenue and to put that in perspective for a small state like New Mexico in terms of population, our total state budget is about $7 billion. So it’s significant resources and we've made the decision that investing it in education … I have no doubt this will change the dynamic of New Mexico forever.”

No question, New Mexico is energy rich. According to the U.S. Energy Information Administration, the energy revolution in New Mexico’s Permian and San Juan basins have made the state No. 3 in the nation in crude oil production and No. 9 in natural gas production. Developing these abundant and reliable resources contributed $20.1 billion to the state’s economy in 2018, and provides affordable energy for Americans while delivering good-paying jobs and state and local tax revenues. And now, unprecedented access to better education for all New Mexicans.

Ryan Flynn, executive director of the New Mexico Oil and Gas Association:

“Big, bold ideas like this are the type of transformational opportunities New Mexico now has because of the success and growth of the oil and natural gas industry. This is a great example of how the Governor can leverage increased oil and natural gas production to the benefit of all New Mexicans regardless of where they live, work, or go to school.”

It's just the latest example of natural gas and oil helping improve New Mexico. In fiscal year 2018, the natural gas and oil industry contributed $2.2 billion to the state general fund – nearly one-third of the fund’s total revenue – which supports education, infrastructure, healthcare and public safety programs across New Mexico. Of this revenue, $822 million and $240 million were allocated to public education and higher education, respectively. And in April, Gov. Lujan Grisham authorized an expanded education budget, up from $446 million to $3.2 billion, allowing for a 6% pay increase for state educators.

The benefits of a thriving energy industry extend beyond funding for public education. Earlier this year, New Mexicans for Economic Prosperity found that the average state household saved more than $1,100 in taxes in 2018 as a result of economic activity on New Mexico trust lands – where natural gas and oil development accounted for 93% of that revenue. Plus, the industry supports over 80,000jobs, helping to drive down the statewide unemployment rate over the past few years.

Still, increased investment in energy infrastructure – like pipelines, wells, roads and refineries – is essential to accommodating the state’s growing natural gas and oil production. Properly developed infrastructure could add as much as $60 billion to New Mexico’s GDP by 2030

Additionally, policies that support industry innovation, like hydraulic fracturing and horizontal drilling, are vital to sustainable energy development. Former Lt. Gov. John Sanchez explained the importance of hydraulic fracturing in a recent op-ed in the Santa Fe New Mexican:

“[T]he tax windfall New Mexico has gotten from the fracking revolution has allowed us to significantly increase funding for education in recent years, even as we’ve grown our budget surplus … Fracking generates billions of dollars for state and local governments and provides thousands of New Mexicans with their livelihoods.”

The New Mexico Opportunity Scholarship serves as an example of the unexpected advantages of natural gas and oil production, and the numerous beneficiaries of expanded energy development. With ongoing support from policymakers and private investors, the industry can continue to fund local and statewide initiatives, and reinforce economic and educational progress in New Mexico and across the U.S.