July 11, 2017

#41 | Ranking the States by Fiscal Condition: New Mexico

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Summary

On the basis of its fiscal solvency in five separate categories, New Mexico is ranked 41st among the US states for its fiscal health. On a short-run basis, New Mexico has between 1.46 and 2.41 times the cash needed to cover short-term obligations. Revenues exceed expenses by 4 percent, and net position improved by $383 per capita in FY 2015. On a long-run basis, net assets are 53 percent of total assets after debts have been paid. Long-term liabilities are 20 percent of total assets, which is better than the US average. Total primary government debt is $2.9 billion, or 3.6 percent of state personal income, close to the average across the states. New Mexico’s strong position in long-term liabilities is offset by its trust fund solvency, which ranks 49th. Unfunded pension liabilities, on a guaranteed-to-be-paid basis, are $51.62 billion, or 64 percent of state personal income. OPEB is 4 percent of state personal income.

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Key Terms

  • Cash solvency measures whether a state has enough cash to cover its short-term bills, which include accounts payable, vouchers, warrants, and short-term debt. (New Mexico ranks 30th.)
  • Budget solvency measures whether a state can cover its fiscal year spending using current revenues. Did it run a shortfall during the year? (New Mexico ranks 19th.)
  • Long-run solvency measures whether a state has a hedge against large long-term liabilities. Are enough assets available to cushion the state from potential shocks or long-term fiscal risks? (New Mexico ranks 11th.)
  • Service-level solvency measures how high taxes, revenues, and spending are when compared to state personal income. Do states have enough “fiscal slack”? If spending commitments demand more revenues, are states in a good position to increase taxes without harming the economy? Is spending high or low relative to the tax base? (New Mexico ranks 49th.)
  • Trust fund solvency measures how much debt a state has. How large are unfunded pension liabilities and OPEB liabilities compared to the state personal income? (New Mexico ranks 49th.)

For a complete explanation of the methodology used to calculate New Mexico's fiscal health rankings, download the full paper and the dataset at mercatus.org/statefiscalrankings

To read all our work on New Mexico, go to mercatus.org/states/newmexico.