New Mexico politicians grapple with oil windfall from Iran war that's both 'awesome' and awkward

RIO RANCHO, N.M. (AP) — The global oil bottleneck in the Strait of Hormuz has generated an enviable — and politically sensitive — financial windfall on the other side of the world in New Mexico, a rare Democratic-dominated state where fossil fuels are a bedrock of progressive social services.

New Mexico produces more oil than any other state besides Texas, and the state's revenue from taxes, royalties and lease sales helps cover the cost of college tuition, all school meals, health insurance and a new initiative for free universal child care.

Now that oil prices are surging from the conflict with Iran, money is flooding into the state treasury and creating an uncomfortable situation for Democrats who oppose the war and would rather reduce their reliance on fossil fuels.

“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 governor.

Haaland is one of two Democrats running to succeed Gov. Michelle Lujan Grisham, who is wrapping up her second term in office. A former congresswoman and state party chair, Haaland worked to limit unfettered oil and gas exploration while serving in President Joe Biden's Cabinet.

Now she wants to use money amid the energy boom to increase New Mexico's child tax credit and boost the refundable working families tax credit, payouts that would most benefit people with low incomes.

“We have obligations to try to have a better world overall," said Haaland, a tribal member of Laguna Pueblo who could become the first female Native American governor in the U.S. “I think we can do that.”

Her rival for the Democratic nomination, Albuquerque-based District Attorney Sam Bregman, said he wants to offset inflation with one-time $500 checks from the state to residents making less than $200,000 a year. He also wants to waive personal income taxes on residents 65 and older.

“It is the resources of the people that’s generating that revenue,” he said. “We ought to give it back to the people."

For every $1 fluctuation in the average annual price of oil, New Mexico sees a roughly $59 million swing in state government income.

That means the state is likely to see a $850 million surge in annual state government income for the budget year ending in June alone based on war-time price changes — equivalent to 12% of annual general fund spending, according to the state Legislature’s budget and accountability office.

New Mexico sends much of its relatively heavy crude oil from its patch of the Permian Basin to Texas distribution hubs and refineries along the Gulf Coast. Prices could remain high with no end in sight for the war despite a fragile ceasefire.

In New Mexico, surges in oil income automatically flow into a series of trust accounts designed to gradually reduce the state’s reliance on fossil fuels, helping the state generate investment income to underwrite Medicaid, early childhood education, infrastructure projects and an expansion of mental healthcare.

The strategy has tempered discomfort among many Democrats with dependence on oil income, in a state with entrenched swaths of extreme poverty and the nation’s highest enrollment rate in Medicaid.

“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,” 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. “Like, ‘We should not be funding our stuff with that money.’ I’ve heard those arguments."

The winner of this year's governor's race will take the helm of a state investment council overseeing a roughly $68 billion state nest egg, including investments that defray costs for K-12 public education.

New Mexico is not alone in reaping the financial benefits of the war. In Alaska, the state forecast an additional $1.05 billion for the current fiscal year and the one beginning July 1.

“It really is this small group of energy-reliant states like North Dakota, Alaska, New Mexico and Wyoming that are going be affected most directly,” said Justin Theal, who researches state fiscal trends as a senior officer for The Pew Charitable Trusts. He described the situation as “a double-edged sword.”

“It raises costs for households and businesses which can potentially dampen consumer spending and reduce sales taxes that almost every state relies on as well,” Theal said.

Three contenders for the Republican nomination are advocating for even more aggressive tax relief while oil prices are riding high.

“Republicans are using the ‘e-word' — eliminate income taxes,” said Albuquerque-based pollster Brian Sanderoff, president of Research and Polling Inc. A Republican last won election to statewide office in 2016.

At the same time, they're questioning whether universal childcare will be financially sustainable.

The program is coming under direct fire in a lawsuit from cannabis entrepreneur and Republican candidate for governor Duke Rodriguez. He previously served as human service secretary under former Gov. Gary Johnson, a crusader for limited government who unsuccessfully ran for president as a Libertarian.

The lawsuit alleges the childcare program was implemented in November by Lujan Grisham without required authorization from the Legislature — though supporting legislation was passed this year. A court has ordered the administration to respond within 30 days.

Reflecting on the state’s oil income, Rodriguez says, “We don’t have a resource problem, what we have is a real results problem. We just spend and spend and spend with no accountability.”

Republican businessman Doug Turner describes wartime oil prices as an opportunity to overhaul the state tax code and wants means testing for childcare benefits. He lost the 2010 Republican primary to then-district attorney Susana Martinez, who went on to serve two terms as governor.

Gregg Hull, a former three-term mayor of Rio Rancho on the outskirts of Albuquerque, wants New Mexico to join the ranks of states with no personal income tax like Texas and Wyoming. Personal income taxes account for about $2.2 billion in annual state government income, offsetting about a fifth of annual general fund obligations.

Hull said he wants to double down on the oil economy by funneling budget surpluses to infrastructure projects in the state's main oil-production zone.

“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.

Associated Press writer Becky Bohrer in Juneau, Alaska, contributed to this report.

Candidates for governor of New Mexico participate in a public forum in Rio Rancho, N.M., on April 28, 2026, ahead of a June 2 primary election: From left to right, they are Democratic Bernalillo County District Attorney Sam Bregman, Republican businessman Doug Turner; Republican cannabis entrepreneur and health care expert Duke Rodriguez, Democratic former U.S. Interior Secretary Deb Haaland, and Republican former Rio Rancho mayor Gregg Hull. (AP Photo/Morgan Lee)

FILE - A pump jack operates at sunset in the Permian Basin near Loving, N.M., on Tuesday, May 20, 2025. (AP Photo/Susan Montoya Bryan, file)

Bernalillo County District Attorney Sam Bregman, one of two Democratic candidates for New Mexico governor, campaigns at Quezada's Comedy Club at Santa Ana Pueblo, N.M. on April 28, 2026, ahead of a June 2 primary election. (AP Photo/Morgan Lee)

Former U.S. Interior Secretary Deb Haaland, a Democratic candidate for governor of New Mexico, greets people outside a candidate forum in Rio Rancho, N.M., on April 28, 2026, ahead of a June 2 primary election. (AP Photo/Morgan Lee)

COVINGTON, Ky. (AP) — Rep. Thomas Massie was stuck in Washington for a vote on Capitol Hill, so one of his supporters made the pitch for his campaign in a banquet hall packed with Republicans in northern Kentucky.

The audience had just heard Ed Gallrein, who was drafted by President Donald Trump to run against Massie in next Tuesday's primary, describe the congressman as suffering from “a severe case of Trump derangement syndrome.”

Then Gex Williams, a state senator backing Massie, told the audience at the Lincoln Day Dinner not to worry about all that.

“If you are thinking that you can’t be for President Trump and for Thomas Massie, you certainly can be,” Williams said.

Whether voters agree will determine if Massie's political career survives Trump's most aggressive attempt to purge the Republican Party of dissenters. The president already succeeded last week in dislodging several Indiana state senators who opposed his redistricting plan, and he's supporting a primary challenge against U.S. Sen. Bill Cassidy in Louisiana on Saturday.

But nothing compares to the vitriol against Massie, who Trump has called a “moron” and a “nut job” who “will go down as the WORST Republican Congressman." Trump made an unusual trip to Kentucky to campaign against Massie, and some of the president's top advisers are working to help Gallrein, a former Navy SEAL.

Massie angered Trump by voting against his signature tax legislation over concerns of adding to the national debt, pushing for the release of the Jeffrey Epstein files and opposing his decision to go to war with Iran. His positions, Massie insists, reflect the America First promises Trump initially made on the campaign trail.

In a Kentucky district where the president won by 35 points two years ago, Massie told The Associated Press that the upcoming primary is “by far the most challenging reelection I’ve ever faced.”

The race is playing out across Kentucky’s 4th Congressional District, which sweeps northeast from the outskirts of Louisville along the Ohio River, through the suburbs south of Cincinnati and over to the lush foothills and old coal towns of Appalachia.

Voters here have sent Massie back to Congress ever since his first election in 2012, embracing his stalwart independence and jaunty personality. Back in 2020, they brushed off Trump's social media demand to “throw Massie out of Republican Party” because he was a “third rate Grandstander.”

Now, Republican voters are debating whether they will do the same thing again.

“If all we’re doing is pulling in yes men, then how do you grow from that? How do you have the best end product if everyone just says, ‘Oh yeah, that’s a great idea,'” said Tonya Young, an attendee of the Lincoln Day Dinner who is leaning toward Massie but still undecided.

“However, I do feel like it’s important to stay loyal. That’s where, I’m like, I’m a hot mess,” said the 57-year-old special education teacher. “Sometimes you have to just bite the bullet and compromise on things.”

Young said she will plumb through the Republican-backed bills that Massie voted against before she makes up her mind. What isn't a major part of her calculation is Trump's endorsement of Gallrein or his epithets against Massie.

Young still supports Trump, rating his second term at a "B to a C+" relative to his campaign promises. During Trump's first term, Young said, she'd “probably put more stock in" his endorsement.

At the Lincoln Day Dinner in Covington, well-dressed Republicans sat at circular tables, ate dinner and listened attentively as candidates gave speeches.

Steve Jarvis, a 77-year-old retired law enforcement officer, who stood near the late night coffee station, has decided to vote against Massie for the very first time.

“Made me sad, truly it does," said Jarvis, wearing a bespoke American flag bow tie made of feathers, "I like Massie.”

When Massie first ran for Congress, Jarvis bought a Massie campaign sign, sized for a freeway overpass, and planted it outside his home, a few doors down from which lived Massie’s opponent.

But some of Massie's departures from the party, he said, "made me nuts. I can't do it anymore.”

One was Trump’s flagship Big Beautiful Bill, which Massie voted against citing the consequent budget deficit and increased inflation.

“I understand voting your principle once or twice," said Jarvis, “but at some point in time when it becomes crucial, I think they have to get in line.”

Gallrein, he said, would get in line.

Jana Kathman came to a different conclusion.

“I’m going to vote for Massie even though he makes me mad," she said while shopping for bagels at a local farmers market outside Covington.

The 56-year-old registered nurse said, “I just like him as a person, I like how he lives his life, and I know he stands very strong with his convictions."

Though she still likes Trump, his endorsement and attacks don't impress her.

“I don’t like when Trump plays the little games as soon as someone opposes him, but we know that’s how Trump lashes out," Kathman said.

Gallrein mounted the stage at the Lincoln Day Dinner with a prepared speech. He grew up on a family farm, was inspired by President Ronald Reagan to join the Navy SEALs and was recently asked by Trump to serve his country again in Congress.

He hyped up Trump — “Do you know he doesn't take a salary?” — and launched into a list of Trump-backed policies Massie had voted against, lumping him in with the “radical Democrats.”

Gallrein declined an interview request, and he's declined to attend candidate forums and debates with Massie.

Several voters said they were grateful for Gallrein's service, but still don't have a grasp of his platform, aside from his fidelity to Trump.

Massie argues that's why Kentucky should stick with him, using what has become a go-to refrain.

“Politicians promise during the campaign, and then they go to D.C. to go along to get along,” he said. “My opponent is promising to go along to get along.”

Massie is hopeful that Trump's anger will blow over once he wins the primary.

“Once this race is over, I don’t think there’s any benefit to him attacking me, I’ll have the antibodies from a natural infection,” Massie said chuckling.

After years of being considered a conservative gadfly in Congress, he said, maybe he has some of those antibodies already.

“This will be the booster shot,” he said.

Rep. Thomas Massie, R-KY, exits the studio after a Kentucky Educational Television (KET) debate, Monday, May 4, 2026, in Lexington, Ky. (AP Photo/Jon Cherry)

Guests look on as candidates speak on stage during the Kenton County Republican Party Lincoln Day Dinner, Thursday, April 30, 2026, in Covington, Ky. (AP Photo/Jon Cherry)

Republican congressional candidate for Kentucky, Ed Gallrein, addresses the audience after giving on stage remarks during the Kenton County Republican Party Lincoln Day Dinner, Thursday, April 30, 2026, in Covington, Ky. (AP Photo/Jon Cherry)

Republican congressional candidate for Kentucky, Ed Gallrein, participates in an interview during the Kenton County Republican Party Lincoln Day Dinner, Thursday, April 30, 2026, in Covington, Ky. (AP Photo/Jon Cherry)

Rep. Thomas Massie, R-KY, speaks to reporters after a Kentucky Educational Television (KET) debate, Monday, May 4, 2026, in Lexington, Ky. (AP Photo/Jon Cherry)