Study finds New Mexico not prepared for another recession
SANTA FE, N.M. (AP) — New Mexico is not prepared to withstand another recession — should it come — given its depleted financial reserves, according to the findings in a new study.
A “stress test” by Moody’s Analytics that looked at New Mexico’s current state of finances was published earlier this month, the Santa Fe New Mexican reported .
The state needs to have 10 percent of its budget in reserve in order to make it through a moderate recession without resorting to many significant tax hikes or cutting back services, according to the analysis.
The study also determined the state would need 17.1 percent in reserves to stay afloat in a severe recession.
With budget shortfalls pushing lawmakers to move money from the reserves to cover various areas of need, New Mexico currently doesn’t come close to the bar set by the analysis.
New Mexico is set to finish 2017 with 5.5 percent of its budget in reserves and have 3.4 percent by the end of June 2018, state officials said.
The analysis found that 14 other states are in a similar situation as New Mexico.
Although the analysis does not predict another recession is imminent in the coming months, it determines that with the current cycle of economy, it is inevitable.
Earlier this year, lawmakers passed a bill that would put away portions of oil and gas tax revenue during boom years into a special fund that would be saved for years of economic downturns.
Julia Ruetten, a spokeswoman for the Department of Finance and Administration, believes that the fund will help the state better prepare itself.
“The state has many of the tools available that the report cites as necessary to weather a future recession; and with the creation of a true ‘rainy day’ fund that the governor signed in to law this spring, the state will be better equipped to address periods of revenue volatility in the future,” Ruetten said in an email.
Information from: The Santa Fe New Mexican, http://www.sfnewmexican.com