A top financial rating firm downgraded the status of New Mexico’s general obligation bonds, citing large pension obligations and Medicaid costs. A rating downgrade means it will be more expensive for the state to borrow money. General obligation bonds, or GO bonds, are used to finance capital improvement projects, like building state buildings. Moody’s Investors Service announced the downgrade from Aa1 to Aa2 Tuesday. Aa2 is the third-highest rating at Moody’s, below AAA and Aa1, but is still considered an investment grade rating.
A high poverty rate, dire budget situation and high unemployment led to New Mexico once again being named the worst-run state in the nation, according to a list compiled by 24/7 Wall St. This is the second year in a row that the publication ranked New Mexico as the worst-run state in the country. The site ranks the states based on “measures of financial health and fiscal responsibility, as well as socioeconomic outcomes such as unemployment, poverty, and crime — conditions state governments are tasked with managing and improving.”
In addition to other economic factors, 24/7 Wall St. cited Moody’s Investor Services downgrading the state’s credit rating which came because of a general lack of general fund reserves. New Mexico is also seeing stagnant population growth, another indicator the New York-based publication looks at.
The state’s budget situation and the fix to solve a budget deficit mean that it will cost more to borrow money. That’s the news from Moody’s Investor Service. The bond-rating agency dropped New Mexico from the top rating of AAA to the next level of AA1, still a very high bond rating. According to Jeff Mitchell, the director of the Bureau of Business and Economic Research at the University of New Mexico, the downgrade itself will not be very impactful or have any significant effect on the state. “It’s not, however, a good sign,” Mitchell said.
Economic headlines for New Mexico have rarely been good in recent months. In November and December, the state led the nation in highest unemployment rate. In January, New Mexico improved, but only to 49th. Stories abound of people moving out of the state to states with better economic climate. Which brings to mind the “r” word that everyone dreads when it comes to the economy: Recession.