Save It or Spend It? How New Mexico, Pennsylvania, and Texas Manage Oil and Gas Revenues for the Future

Energy development often provides substantial economic benefits as well as changes to environmental and health conditions for host communities. In this analysis, we seek to understand one aspect of energy development with important short- and long-term implications: how state governments collect and use oil and gas revenues. We focus on the top US oil- and gas-producing states: New Mexico, Pennsylvania, and Texas, which offer three distinct models for collecting and using revenue to manage current and future fiscal health. We find that New Mexico collects the largest share of revenues among the three states (roughly 20 percent of production value in 2023) and invests roughly half in long-term savings funds that will support education and other government services in perpetuity. Texas collects roughly 10 percent of production value and invests roughly one-fifth in long-term savings earmarked for statewide education, along with some investments in short-term savings. Pennsylvania collects just 3 percent and saves little to none for the future. Although New Mexico’s approach robustly supports statewide fiscal health, none of these states have policies to protect the finances of the local governments in host communities (specifically, counties, municipalities, and special districts), which may face significant fiscal risk from short-term booms and busts and longer-term risks from an energy transition.