New Mexico

State Budget Practice Report Cards and Budget Resource Guide

New Mexico received an average grade of C in budget maneuvers for fiscal 2017 through 2019, but that low grade fails to fully reflect the state’s decreased dependence on one-time measures to balance budgets toward the end of the evaluation period. In fiscal 2019, New Mexico stopped using debt to pay for recurring expenditures. It also halted the use of nonrecurring revenue and fund sweeps to help achieve balance. As a result, its annual grade in budget maneuvers rose to a B from a D for the previous two years.

The state scored a B average in reserve funds and set the stage for possible improvement. In 2019, it began tying Tax Stabilization Reserve deposits to historical revenue volatility, a best practice cited in the recent Volcker Alliance working paper, Rainy Day Fund Strategies: A Call to Action

To help protect itself against swings in petroleum levies, New Mexico will now divert to the reserve a portion of general fund revenues generated by the Oil and Gas Emergency School Tax when its receipts exceed their five-year average. 

New Mexico received a C average in legacy costs, which cover public worker pensions and other postemployment benefits (OPEB), principally health care. In fiscal 2018 and 2019, it began funding its annual OPEB contributions in line with actuarial calculations, as it did in 2017 through 2019 for pensions. Pension liabilities were 61 percent funded in 2018, 9 percentage points less than the total for all states. 

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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 2020 Volcker Alliance report, Truth and Integrity in State Budgeting: The Balancing Act, 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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