New Mexico uses long-term budget assessments and budget stress tests for sustainable budget practices.
These practices were recognized in the Pew Charitable Trust report Tools for Sustainable State Budgeting: A 50-State Report released Wednesday.
New Mexico is one of eight states that use both long-term assessments and that conducts budget stress tests.
Budget stress tests are used to estimate budget shortfalls resulting from economic events such as recessions and to gauge whether New Mexico is prepared in the event of a recession or other economic event.
Long-term budget assessments are used to determine if New Mexico is likely to have chronic budget deficits by using multi-year revenue projections.
The Pew report noted the New Mexico Legislative Finance Committee’s work on the consensus revenue forecast, the most recent of which was presented in August. The consensus revenue forecast was prepared by the Consensus Revenue Estimating Group, or CREG, which is made up of LFC members and economists from the Department of Finance and Administration, New Mexico Taxation and Revenue Department and New Mexico Department of Transportation.
“New Mexico’s heavy reliance on the oil and gas industry means we need the best tools for projecting our revenues,” LFC Chairman Sen. George Muñoz, D-Gallup, said in a press release about the report. “The LFC economists do an excellent (job) of predicting not only what is going to happen next week but what might happen down the road.”
For the good the stress tests do, they can be better, according to the Pew report.
The CREG stress tests focus only on revenue and not on spending, the report states.
“To avoid underestimating the state’s risk in a recession, New Mexico could add analysis of how much such events would increase the costs of means-tested programs such as Medicaid,” the report states. “Given the success of the LFC’s multi-decade structural balance projections in informing policy decisions, the state should repeat this analysis regularly to track progress on addressing structural deficits. The LFC is already moving in this direction; it presented a second edition of the analysis to legislators in July 2023.”
The Pew Charitable Trust is an independent, nonpartisan, non-governmental agency that works to improve public policy through “rigorous analysis, linking diverse interests to pursue common cause, and insisting on tangible results,” informing the public by providing data about issues and trends worldwide and to “invigorate civic life by encouraging democratic participation and strong communities,” according to the Pew mission and values statement.