New Mexico

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.

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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 2021 Volcker Alliance report, Truth and Integrity in State Budgeting: Preparing for the Storm, 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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