New Mexico’s Democratic candidates for governor are turning a sudden rush of oil revenue into a defining question: what should a state do with money that arrives as the Iran war tightens global oil supplies and drives prices higher. The Strait of Hormuz has contributed to an energy bottleneck that, in turn, has boosted oil income in New Mexico, a rare Democratic-dominated state where fossil fuels underpin programs ranging from education to health coverage.
Deb Haaland, the former U.S. Interior secretary and one of two Democrats running to replace Gov. Michelle Lujan Grisham, said the windfall is difficult to stomach politically because of the deaths tied to the conflict. Speaking as she campaigned for the Democratic nomination, Haaland said: “It’s hard for people to think about, ‘Oh great, we have this windfall,’ and children are getting killed on the other side of the world.” She later argued that New Mexico should treat the moment as an opportunity to invest in families while the conflict continues.
Haaland, a member of Laguna Pueblo who could become the first female Native American governor in the U.S., said her proposal would use energy-boom revenue to increase New Mexico’s child tax credit and expand the refundable working families tax credit, which would most benefit people with low incomes. She also framed the decision as broader than a partisan budget exercise, saying: “We have obligations to try to have a better world overall,” and adding, “I think we can do that.”
Her Democratic rival, Albuquerque District Attorney Sam Bregman, took a different approach to the windfall by arguing for near-term measures aimed at easing inflation. He said he wants to offset inflation with one-time $500 checks from the state to residents making less than $200,000 a year and to waive personal income taxes for residents 65 and older. Bregman described the revenue as belonging to residents, saying: “It is the resources of the people that’s generating that revenue,” and “We ought to give it back to the people.”
The political stakes are sharpened by how New Mexico’s oil system feeds its public finances. New Mexico produces more oil than any state besides Texas, and its revenue from taxes, royalties and lease sales helps cover programs including college tuition, school meals, health insurance and a new initiative for free universal child care. As oil prices surge, money flows into trust accounts meant to reduce reliance on fossil fuels over time, providing investment income that underwrites Medicaid, early childhood education, infrastructure projects and expanded mental healthcare.
The candidates’ arguments also reflect a broader discomfort inside New Mexico’s political establishment about being fiscally dependent on oil income. Lonna Atkeson, a political science professor who directs the LeRoy Collins Institute at Florida State University, said progressive Democrats in the state often avoid acknowledging the reliance. “For New Mexico and New Mexicans and especially the progressive left — which sort of controls the state — it’s always something they really don’t want to admit or talk about or get angry about,” Atkeson said. “Like, ‘We should not be funding our stuff with that money.’ I’ve heard those arguments.”
The scale of the windfall is a central feature of the campaign. State budget and accountability officials estimate that for every $1 fluctuation in the average annual price of oil, New Mexico sees a roughly $59 million swing in state government income. Based on war-time price changes, the state is likely to see an estimated $850 million surge in annual income for the budget year ending in June alone—about 12% of annual general fund spending, according to the legislative budget and accountability office.
Republican candidates are using the same budget arithmetic to argue for faster tax changes and for pressure on child-care spending. Pollster Brian Sanderoff, who is president of Research and Polling Inc., said Republicans are emphasizing proposals to “eliminate income taxes,” and Sanderoff pointed to political context in which no Republican has won a statewide office since 2016. Others, including Republican businessman Doug Turner, are also advocating changes that would include means testing for childcare benefits.
The childcare program, meanwhile, has faced legal action from Duke Rodriguez, a cannabis entrepreneur and Republican candidate for governor. The lawsuit says the childcare program was implemented in November by Lujan Grisham without required authorization from the Legislature, even though supporting legislation passed this year. A court has ordered the administration to respond within 30 days.
Some Republican candidates argue that the oil-driven revenue should be treated as an opening to restructure state finances for the longer term. Gregg Hull, a former three-term mayor of Rio Rancho, said the state should consider adopting a tax structure similar to places with no personal income taxes, and he argued that personal income taxes account for $2.2 billion in annual state government income, offsetting about a fifth of annual general fund obligations. Hull said he wants to funnel budget surpluses into infrastructure projects in New Mexico’s main oil-production zone, and he added: “This morning, when I was looking at a price of a barrel of oil, I said, ‘Well, that’s not great for consumers, but it’s awesome for New Mexico.’”
Across the race, one common thread remains: New Mexico’s governor will oversee a state investment council managing a roughly $68 billion nest egg, including investments intended to help offset the costs of K-12 education. Whether candidates treat that financial cushion as proof the state should double down on the oil economy—or as leverage to reduce fossil-fuel dependence—will likely define how the Democrats reconcile their progressive priorities with the reality that the state’s budget has been buffeted by wartime energy markets.