State Budget Practice Report Cards and Budget Resource Guide
New Mexico’s lagging performance in legacy costs from fiscal 2015 through 2019 left it with a category average of D-minus, putting the state with Hawaii, Illinois, Massachusetts, New Jersey, Texas, and Wyoming as those receiving the lowest possible score.
Contributing to New Mexico’s grade was its failure to make annual public employee pension contributions recommended by actuaries in any of the fiscal years studied. At the end of the period, its pension funding ratio was 67 percent, 4 percentage points below the total for all states. New Mexico also chronically failed to provide annual actuarial funding for other postemployment benefits (OPEB), primarily health care, except for fiscal 2018, when its contribution came close.
New Mexico scored almost as badly in budget maneuvers, averaging a C even though it largely avoided one-time balancing measures in 2015–16. As oil prices dropped dramatically in the later part of the study period, however, the state relied more on maneuvers to cover shortfalls, including using proceeds from severance tax bonds.
While New Mexico averaged a B in budget forecasting, it was held back by a lack of long-term expenditure forecasts, a significant flaw in a state with volatile revenues. It also averaged a B in reserve funds, helped by a 2019 policy that links some deposits made to the Tax Stabilization Reserve to revenue volatility. In the transparency category, New Mexico received another B average, with its only weakness an absence of reporting on deferred infrastructure maintenance costs—a shortcoming shared by forty-four other states in 2019.
To emphasize the need for clear and comprehensible budgets to inform citizens, promote responsible policymaking, and improve fiscal stability, the Volcker Alliance in 2016 began a study of budgetary and financial reporting practices of all fifty states. The Volcker Alliance’s mission is to improve the effectiveness of the administration of government at all levels. Making state budgeting more transparent and accountable is an important part of that goal.
The report cards found here contain grades of the state's budgetary practices during the fiscal years of 2015 through 2019. Each state received marks in five critical categories, based on their adherence to best practices in several key budgeting indicators. The five categories covered methods used to achieve budgetary balance as well as how budgets and other financial information are disclosed to the public.
States received grades of A to D-minus (there are no “failed states”) for their procedures in estimating revenues and expenditures; their use of one-time actions to balance budgets; how they oversee and use rainy day funds and other fiscal reserves; the adequacy of their funding of public worker retirement and other postemployment benefits; and the quality of transparency of budget and related financial information. The grades are based on research conducted by public finance and budgeting professors and students at eight US schools of public administration or policy. The universities’ research efforts were augmented by Volcker Alliance staff, data consultants at Municipal Market Analytics, and special project consultants Katherine Barrett and Richard Greene.
State Budget Sources
State Budget Sources: An Annotated Guide to State Budgets, Financial Reports, and Fiscal Analyses is a resource published by the Volcker Alliance designed to help public officials, policy advocates, journalists, academics, and concerned citizens fully understand the critical fiscal decisions that governors and legislators must make. The guide includes the links below to budgets for this state as well as legislative analyses of budget bills and treasurers’ or comptrollers’ monthly state cash-flow statements; capital spending plans; reports on public-worker pension funding and returns; and reports by local and national fiscal research organizations, bond rating firms, and associations of state fiscal and finance officials.