SANTA FE – The economic fallout in New Mexico from the coronavirus pandemic is likely to wipe out between $2.1 billion and $3.9 billion in previously anticipated state government income by mid-2021, a group of state economists announced Wednesday.

The rough forecast provides a baseline for discussion on rewriting the state budget during a special legislative session slated for mid-June that has implications for spending on everything from health care to public education.

A memo from staff economists at three executive agencies and the Legislature outlined two scenarios for the economic downturn and recovery. Both involve plummeting state revenues from personal income taxes and gross receipts taxes on sales and services, as well as faltering income from severance taxes and federal royalty payment on oil production that is focused in Permian Basin of southeastern New Mexico.

“The preliminary review shows reserve balances are likely insufficient to cover the extent of revenue declines,” the memo says.

The decline in revenue far outstrips the $1.25 billion earmarked for New Mexico under the main federal coronavirus relief package that was designed to help businesses, workers and the health care system. Additional federal relief was earmarked for Native American communities.

New Mexico Gov. Michelle Lujan Grisham plans to call the Legislature to a special session the second week of June to rewrite the $7.6 billion general fund spending plan for the fiscal year that starts on June 30.

In 2019 and early 2020, lawmakers approved new multibillion-dollar investments in roads, health care and public education – raising pay for teachers and extending the school calendar. The expansion in spending was underwritten in large part by record-setting oil production that has stalled in response to a price collapse and supply glut for petroleum.

The state’s current emergency health order that limits business activity and public gatherings extends through May 15, while health officials have warned that more time may be needed to slow the spread of COVID-19.

State economists acknowledge that the depth and duration of the economic decline still is difficult to gauge.

The governor wants the Legislature to consider temporarily tapping more money from the state’s $18 billion Land Grant Permanent Fund to shore up state finances and the economy, at the risk of reducing routine annual distributions over the long run.

Public schools are the main beneficiaries of annual distributions from the fund that paid out $747 million in 2019.