S&P Affirms State’s AA-Plus

Standard & Poor’s last week affirmed the AA-plus rating with a stable outlook on New Mexico’s $362.7 million of general obligation debt. Credit analyst Sussan Corson said the rating is based on the state’s sustained good financial performance, stable and gradually diversifying economic base, and moderate total tax-supported debt. “We believe New Mexico’s continued employment and personal income growth and high oil and gas prices for the near future should support income tax and energy-related taxes and fee revenues for the general fund,” Corson said. At the end of fiscal 2006, total tax-supported debt was $1,133 per capita. New Mexico’s GO and severance tax issues are retired over a very rapid 10 years. The state, with a population of almost two million, has a large public sector and an expanding service industry that limits its exposure to national economic cycles. New Mexico’s dependence on national defense spending has diminished over the past 15 years, but defense-related employment remains significant. Employment growth averaged 1.9% annually between 2001 and 2006, Standard & Poor’s said, as unemployment dropped to 4.3% in fiscal 2006 from 5.3% in fiscal 2005. As of June 30, 2006, state coffers included $359.5 million in the operating reserve, $254.4 million in the tax stabilization reserve, $99.7 million in the appropriation contingency fund, and $84.6 million in the tobacco settlement permanent fund reserve. General fund recurring receipts increased by 13.7% in fiscal 2006, contributing to an ending fund balance of $798 million. The state estimates the fund balance at the end of fiscal 2007 at $605 million.