New Mexico is one of eight states held up as models for sustainable budget practices in the Pew Charitable Trusts report, Tools for Sustainable State Budgeting: A 50State Report, released by the public policy research organization today.
The report highlights those states that use longterm budget assessments and budget stress tests, two analytical tools key to long-term budget sustainability for states. Since 2018, 15 states have produced a long-term budget stress test and 13 have conducted budget stress tests, but just eight, including New Mexico, use both.
The New Mexico Legislative Finance Committee staff was recognized for its work on balancing mid- and longterm revenue and the stress testing used in the development of the consensus revenue forecast.
“New Mexico’s heavy reliance on the oil and gas industry means we need the best tools for projecting our revenues. The LFC economists do an excellent of predicting not only what is going to happen next week but what might happen down the road,” said LFC Chairman George Muñoz.
Vice Chairman Nathan Small echoed his comments: “Right now, New Mexico has a oncein- a-generation opportunity to set our state up for lasting success. As we endeavor to invest wisely in key impact areas that chart a brighter future, while also putting these dollars to work for New Mexicans in meaningful ways today, New Mexico lawmakers are fortunate to have the support and guidance of the dedicated staff of the LFC.”
In the new report, researchers with the Pew Charitable Trusts examine states’ use of long-term budget assessment and budget stress tests to help measure risks, anticipate potential shortfalls, and recognize ways to address impending budget challenges. Pew authors also identify practices for implementing these tools to ensure they are reliable, comprehensive, and relevant to policy.
“For state policymakers, the need for a longterm perspective on state finances has never been greater. After record budget surpluses empowered states to adopt historically large tax cuts and spending increases over the last three years, leaders must act with care to ensure that their budgets remain on a sustainable path as fiscal conditions weaken. Long-term budget assessments and budget stress tests provide the data and analysis policymakers need,” Pew said in its announcement.
Long-term budget assessments determine whether states are likely to face chronic budget deficits. Using multiyear projections, these studies explore whether revenue will be sufficient to support spending in future years and why or why not. Budget stress tests analyze the fiscal risk posed by recessions and other shorter-term events. They estimate the size of temporary budget shortfalls that would result from these events and gauge how prepared states are to weather those downturns.