ALBUQUERQUE, N.M. (KRQE) – New Mexico still has a long road to economic recovery, but there is one area taxpayers have exceeded expectations. The latest economic data presented to state lawmakers Wednesday shows a huge infusion of federal dollars spent in New Mexico helped prop up state revenues.
The data was presented by state economists in front of a meeting of the Legislative Finance Committee Wednesday in Santa Fe. While in-state retail sales dropped nearly 10 percent in the early months of the pandemic compared to 2019, the state was able to cash in on increased personal income being spent online.
“Despite high unemployment and businesses operating at limited capacity, retail spending actually increase during the pandemic,” said Dawn Iglesias, chief economist for the Legislative Finance Committee. “The growth in online sales completely offset any declines in in-person retail spending (across April, May and June.)”
State economists say the one-time $1,200 federal stimulus checks coupled with weekly unemployment bonuses were major factors in the state seeing increased spending. Compared to the same time frame in 2019, retail spending was up 11 percent in April, May and June.
While retail spending appears to have slowed in July, economists say activity remained up about 8.5%. Economists estimate the extra federal cash helped personal income increase about nine billion dollars between April and June in New Mexico.
The total economic picture remains tough. After losing over 100,000 jobs in April in New Mexico, economists say roughly 1/3 of those jobs have come back. State economists also believe many New Mexicans have left the labor force entirely.
Meanwhile, the state estimates that will only see an increase to about half of the lost jobs during the pandemic rehired by the end of the year. The latest estimates indicate it might not be until 2025 before New Mexico reaches its pre-pandemic economic levels.
The state’s budget doesn’t appear to be a dire situation though. New Mexico House Finance Committee Chair Patty Lundstrom says she doesn’t foresee any major cuts in state government this current year in part because of better than expected consumer spending.
“It did surprise me,” Lundstrom said of the increased consumer spending. “I think we did a good job with that House Bill 6, I think that if we hadn’t done that, that would have been a tremendous loss of revenue to our state.”
House Bill 6 passed in 2019, allowing the state to charge a flat, roughly five percent tax on all internet sales. By 2021, local governments in New Mexico will be able to add their own local sales taxes on online purchases.
With current revenues, the state is also anticipating it should be able to return to 25 percent reserves by next summer after dipping into those funds to help balance the last budget.