New Mexico’s oil fields are delivering a wartime windfall that Democratic politicians in the state are receiving with the kind of awkward gratitude usually reserved for a gift you would rather not have received. As the war in Iran chokes global oil supply through the Strait of Hormuz, the resulting price surge is funneling hundreds of millions of dollars into a state treasury that funds some of the most progressive social programs in the country — and generating an uncomfortable election-year question for the candidates running to manage it.
For every dollar the average annual oil price fluctuates, New Mexico’s government income swings by roughly $59 million. That ratio, applied to wartime price levels, translates to an estimated $850 million surge for the budget year ending in June alone — equivalent to 12% of annual general fund spending, according to the state Legislature’s budget and accountability office.
The money floods into a state where fossil fuel revenues already underwrite college tuition, all school meals, a Medicaid program with the nation’s highest enrollment rate, and a newly launched universal child care initiative. It is a policy architecture built on oil and gas extraction in a state where Democrats dominate elected offices, oppose the war, and have spent years pledging to transition away from the fuels that keep the treasury solvent.
“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,” said Deb Haaland, the former U.S. Interior Department secretary running for the Democratic nomination for governor. Haaland, who worked to limit unfettered oil and gas exploration while serving in President Joe Biden’s Cabinet, is now campaigning on using the revenue to expand the state’s child tax credit and boost refundable working-family tax credits — payouts that would most heavily benefit people with low incomes.
“We have obligations to try to have a better world overall,” Haaland said. “I think we can do that.” A member of Laguna Pueblo, Haaland could become the first female Native American governor in U.S. history.
Her opponent for the Democratic nomination, Albuquerque-based District Attorney Sam Bregman, is proposing a more direct distribution. Bregman wants the state to send one-time $500 checks to every resident making less than $200,000 annually, and to waive personal income taxes for residents 65 and older. “It is the resources of the people that’s generating that revenue,” Bregman said. “We ought to give it back to the people.”
On the Republican side, three candidates are competing for the nomination in a state that last elected a Republican to statewide office in 2016, and they are proposing more aggressive tax relief still. “Republicans are using the ‘e-word’ — eliminate income taxes,” said Albuquerque-based pollster Brian Sanderoff, president of Research and Polling Inc.
Republican candidate and former Rio Rancho Mayor Gregg Hull has embraced the boom with less ambivalence than his Democratic counterparts. “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,’” Hull said. He is campaigning on joining the ranks of states with no personal income tax — including Texas and Wyoming — and on funneling budget surpluses to infrastructure projects in the state’s primary oil-extraction zone.
Another Republican candidate, Doug Turner, describes wartime prices as an opportunity to overhaul the state’s tax code and advocates means testing for child care benefits. Candidate Duke Rodriguez, a cannabis entrepreneur who previously served as human services secretary under former Gov. Gary Johnson, has gone further: he is suing to stop the universal child care program, alleging it was implemented by Gov. Michelle Lujan Grisham without required legislative authorization — though supporting legislation passed this year. A court has ordered the administration to respond within 30 days.
“We don’t have a resource problem, what we have is a real results problem,” Rodriguez said. “We just spend and spend and spend with no accountability.”
The structural reality beneath the campaign rhetoric is that much of the revenue never reaches the general fund for politicians to allocate. Surges in oil income automatically flow into a series of trust accounts designed to generate investment income that gradually reduces the state’s reliance on fossil fuels — underwriting Medicaid, early childhood education, infrastructure, and an expansion of mental health care. The winner of the governor’s race will take a seat on a state investment council overseeing a roughly $68 billion nest egg.
That arrangement has “tempered discomfort among many Democrats with dependence on oil income” in a state with entrenched swaths of extreme poverty, said Lonna Atkeson, a political science professor who has analyzed voting behavior in New Mexico and directs the LeRoy Collins Institute at Florida State University.
“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.”
New Mexico is not the only state contending with the windfall. Alaska has forecast an additional $1.05 billion for the current fiscal year and the one beginning July 1. Justin Theal, a senior officer for The Pew Charitable Trusts who researches state fiscal trends, said energy-reliant states like North Dakota, Alaska, New Mexico, and Wyoming are being affected most directly — though he described the situation as “a double-edged sword” because rising energy costs also raise expenses for households and businesses, potentially dampening consumer spending and reducing sales tax revenues.
New Mexico’s heavy crude moves from the Permian Basin to Texas distribution hubs and refineries along the Gulf Coast. Prices could remain elevated with no end to the war in sight despite a fragile ceasefire. The money will keep arriving — and the candidates will keep trying to figure out how to talk about a revenue surge that feels, to many of them, more like a moral test than a celebratory moment.