Think the special session, and the governor’s signing of its budget-cutting bills, have resolved New Mexico’s deficit woes? Think again. Yesterday brought two pieces of bad news on the fiscal front.
First, Moody’s Investors Service “downgraded the State of New Mexico’s general obligation bonds to Aa1 from Aaa, affecting $327 million of outstanding debt.” In addition, the firm “downgraded to Aa2 from Aa1 the state’s Lease Appropriation Bonds (Fort Bayard Project) Series 2008, issued through Grant County, affecting $53 million of outstanding debt; and downgraded to Aa2 from Aa1 the ratings of the New Mexico School District Enhancement Program (post March 30, 2007) and the New Mexico School District Enhancement Program (pre March 30, 2007), affecting approximately $2.1 billion in enhanced school district debt.”
Moody’s action on the GO bonds was “driven by the depletion of general fund reserves following a very large and unanticipated shortfall in tax revenues for fiscal 2016 and 2017. Reserves are expected to equal only 1% of recurring revenues at the end of fiscal 2017, even after significant budget balancing actions taken by the legislature in a recent special session.”
Second, the Legislative Finance Committee released a revenue report for accruals through July. Total recurring revenue for the first month of the new fiscal year “was $384.3 million, down 10.7 percent from the same month a year ago.” GRT for July “represented the lowest July number recorded since July 2010.” Revenue from the personal-income tax was down, too. See the graph above for a breakdown by source.
One month isn’t a trend, of course — perhaps things will improve. But New Mexico’s unemployment rate is now the highest in the contiguous states. The LFC report noted that only three industries in the private sector gained jobs year-over-year. Mining employment, battered by the decline in oil-and-gas production, fell by 27 percent. Manufacturing dipped by 6 percent, and retail trade shrank by 1.7 percent.
There’s every reason to believe that we haven’t seen the last of the Land of Enchantment’s river of red ink. Get ready for an exciting 2017 legislative session.