Can New Mexico depend on oil and gas to fuel its schools?

Educators in New Mexico demanded the state find a more reliable source of revenue for public schools which are currently dependent on oil and gas for the bulk of its budget.

The fossil fuel industry, one of New Mexico’s main economic drivers, most recently busted during the COVID-19 pandemic when the price per barrel of domestic crude dropped below $0 per barrel for the first time in history.

This led to a drop in oil and gas production in New Mexico, jobs losses and turned a $2 billion surplus into a $400 million deficit in the state’s budget last year.

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In a Monday letter to New Mexico Gov. Michelle Lujan Grisham, a collection of education and child well-being advocacy groups including the New Mexico chapter of the National Education Association (NEA) – the largest teacher union in the U.S. – voiced concern to state leadership about the cyclical nature of oil and gas and that New Mexico’s dependence on the industry led to difficulties in planning for the future.

“Public education in New Mexico requires stable and sufficient revenue. Today, our state revenue system continues to be overly reliant on a volatile and declining industry: fossil fuel extraction,” the letter read.

“While this industry has provided significant revenue for New Mexico’s public schools over the years, our students have also suffered from funding cuts when the industry experiences downturns.”

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The letter applauded Lujan Grisham’s efforts to provide permanent education funding through the State’s Permanent Fund but argued the State should take additional steps to ensure revenue for any state fund comes from more stable sources of revenue.

“While these steps are positive, we are concerned that they are not sufficient to maintain, much less improve, our system of public education,” the letter read. “Recent education funding gains must be secured with stable revenue streams that are not dependent on the whims of international oil markets.

“If we are to make the transformative changes needed to ensure that each individual student truly has an equal opportunity to succeed, future revenues must be more diverse and sufficient to support and expand our current educational programs.”

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Superintendent Gerry Washburn at Carlsbad Municipal Schools (CMS), in the oil-rich Permian Basin region of southeast New Mexico, said that while economic diversity was necessary for a predictable budget and balanced revenue streams, oil and gas was a strong fiscal supporter of public education and local communities and would not easily be replaced.

“I think the quandary we have is that oil and gas has been relied upon heavily for education.” Washburn said. “It’s an industry that will continue to be plagued by up- and down-swings. You take the environmental concerns and add that to the equation and people are looking for something they perceive as more environmentally friendly and stable.”

But oil and gas provides billions to local school districts and public education across the state, Washburn said, and efforts to stymie development without a well-thought-out alternative, he said, would only lead to more financial hardship for New Mexico’s schools.

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He said growing industries like cannabis and film, pushed by the State administration, had not been proven adequate to replace fossil fuel revenue, and Washburn doubted if New Mexicans would support higher taxes to make up the difference.

“We’re talking about replacing billions of dollars. That’s going to take a lot of thought,” he said. “Any other option, they come with costs the general public might not be willing to incur.”

While oil and gas was a long-standing contributor to education, Washburn said the state must not rely on one industry, finding others to create “backstop” when oil and gas revenue is down to help stabilize the economy.

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“I think that diversifying the sources of funding for education is a noble idea,” he said. “We’re rapidly moving into an environment where we’re heavily reliant on oil an gas for state operations. You don’t ever want to be reliance on one source of funding.

“During a downturn, everything is affected.”

And oil and gas also served as a strong partner to the district and community, Washburn said, supporting schools with projects like XTO Energy’s $100,000 donation to the district to provide tablets and internet connectivity to students to attend remoted classes during the COVID-19 pandemic after in-person classes were shut down by the State.

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“Oil and gas has been a tremendous partner for CMS,” Washburn said. “They’ve been a tremendous partner for education as a whole.”

That local presence could also translate into addressing the environmental concerns, Washburn said, through collaboration with the industry as oil and gas workers live in Carlsbad and have an interest in keeping the air clean to breathe and water safe to drink.

“They want to do their business efficiently and responsibly. They live in the community, so they want it to be as environmentally conscious as possible,” he said. “The people that are in these industries are people that understand the need to protect the environment.

“I think if we engage in these conversations, we’d be in a more positive place than we are right now.”

In 2019, an analysis from the American Petroleum Institute and New Mexico Oil and Gas Association estimated oil and gas contributed $18.8 billion to New Mexico’s gross domestic product (GDP), about 17.9 percent of the state’s total GDP in 2019

NMOGA Chairman Leland Gould said the data was indicative that as New Mexico and the U.S. recovers from COVID-19, fossil fuels will play a major role in economic recovery and continued funding for education throughout the state.

“People in every community and corner in New Mexico depend on oil and natural gas for daily energy needs and basic government services, and we’re ready to do our jobs to deliver these critical resources,” he said.