New Mexico appears to be on the way to a new and upgraded bond rating as evaluated by the all-important New York-based Moody’s Ratings.
According to a report by the bond research firm, New Mexico, with a current Aa2 positive rating, already enjoys strong credit metrics which are “likely to improve as the state continues to maintain healthy operating reserves and forecasts further growth in its sizable fund balances.”
The Moody’s upgrade for the state comes despite “some risks inherent in its economy, which is concentrated in oil and gas and government employment.”
But Moody’s generally positive view of New Mexico’s fortunes is not without potential problem areas. The state economy, says the company’s report, “will continue to lag the nation in a number of areas, including labor force participation, real personal income, and poverty rates.”
Moreover, despite the presence of a strong oil and gas industry in the state, there is evidence that these sectors are seeing a growth that has “already begun to stabilize due to softening energy prices and higher input costs.”
A positive Moody’s rating is important to a state for the simple reason that it is indicative of overall financial heath and credit worthiness. To that end, the rating also impacts interest rates a state will pay when it issues bonds for any number of building projects.
New Mexico experienced a Moody’s downgrade in 2018 primarily owing to a massive state employee pension shortfall of around $12.5 billion. The rating service also pointed to a large Medicaid caseload, as well as an economy that was lagging behind the rest of the nation for that downgrade.
The new upgraded rating, said Wayne Propst, is partly the result of New Mexico’s efforts to reduce long-term debt, while also stabilizing long-term pension liabilities.
In a statement Propst, the Secretary of New Mexico’s Department of Finance and Administration, added that the state’s upgraded rating reflected an “overall commitment to responsible debt management, while increasing permanent fund balances to secure the state’s future.”
The Moody’s report additionally noted that New Mexico’s personal income growth has outpaced the nation’s in recent quarters and that marginally more people are moving into the state today than leaving, reversing a decades-long trend.
October 25, 2024
By Garry Boulard