Moody’s downgrades NM bond ratings

June 20, 2018 4:44 pm

NEW YORK CITY  — Moody’s Investors Service has downgraded the credit rating on the State of New Mexico’s general obligation bonds from Aa1 to Aa2, and revised the outlook from negative to stable. This action affects approximately $260 million outstanding general obligation bonds.

Moody’s have also downgraded from Aa2 to Aa3 the programmatic rating on the New Mexico School District Intercept Program. The rating on the state’s only outstanding series of lease appropriation bonds saw the only upgrade, from Aa2 to Aa3.

Moody’s said the change “is primarily attributable to the state’s extremely large pension liabilities, including both its direct obligation to the Public Employees’ Retirement System (PERA) and its indirect obligation to the Educational Employees’ Retirement System (EERS).”

The rating service also notes that New Mexico has a high Medicaid caseload, a volatile source of income from oil-and-gas severance taxes and weak, though improved, financial reporting practices.

New Mexico continues to have an unemployment rate higher than the national average and among the highest rates of poverty in the nation, both contributors to more residents using Medicaid for health insurance.

Since New Mexico opted to take advantage of expanded Medicaid as part of the Affordable Care Act, the federal government covers most of the costs of the expanded Medicaid. Increases have been cut slightly each year. In addition, national efforts to dismantle this program have failed.

Moody’s said to improve the rating again, the state must have sustained economic growth and diversify the economy, as well as make “significant progress” in reducing pension liabilities.

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Sources: https://www.moodys.com/research/Moodys-downgrades-New-Mexico-GOs-to-Aa2-from-Aa1-revises–PR_904631486, NM Political Report