New Mexico

State Budget Practice Report Cards and Budget Resource Guide

Although New Mexico received a C average in budget maneuvers for fiscal 2016 through 2018, the grade masks a decline to D, the second-lowest mark possible, in 2017 and 2018 from a B in 2016.

The budget maneuvers category tracks one-time actions a state may use to pay for recurring expenditures. In 2017 and 2018, New Mexico made many such moves to keep its budget in balance. These included using debt for operating costs and sweeping special fund money into the general fund. In 2017, for example, the state used about $82 million in nonrecurring revenues to bolster the budget, including transferring of cash balances from special funds and replacing cash allocated to capital spending with proceeds from severance tax bonds. New Mexico took similar actions involving severance tax bond proceeds and other transfers in fiscal 2018, increasing general fund assets by about $90 million in nonrecurring funds.

The state also averaged a D in legacy costs. Although it made its actuarially determined contributions for public worker pensions in all three years studied, New Mexico faces a large liability for other postemployment benefits (OPEB), chiefly health care. In recent years, the state has contributed about half of what actuaries determine is needed to achieve full OPEB funding.

New Mexico posted a B average in reserve funds. While policies are in place that govern the state’s deposits into its general operating and tax stabilization reserves, reserve funds are not tied to revenue volatility—a critical flaw for a state that depends on revenue from oil and other natural resources.

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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 presented here are taken from the 2018 Volcker Alliance report, Truth and Integrity in State Budgeting: Preventing the Next Fiscal Crisis which proposes a set of best practices for policymakers. For those wishing to gain greater insight into state fiscal issues, the accompanying budget resource guide is derived from the Alliance publication State Budget Sources: An Annotated Guide to State Budgets, Financial Reports, and Fiscal Analyses (2016). 

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