SANTA FE – New Mexico budget cuts for higher education and K-12 public schools have caught the eye of a national credit rating agency, which has described the cuts as potentially negative for school and community college bond ratings.
Moody’s Investor Service already downgraded the state’s rating for general obligation bonds – from AAA to AA1 – last week and suggested further hits could be forthcoming due to plummeting New Mexico revenue and cash reserve levels.
In the latest development, Moody’s warned in its weekly credit outlook for investors that a budget-cutting bill signed into law Monday by Gov. Susana Martinez could put school districts in a financial bind and possibly lead to cuts in administrative expenses, since mid-year staffing cuts for public schools are generally prohibited by union contracts.
“The state’s willingness to target educational funding to close budgetary gaps is credit negative for all institutions of learning, but particularly school districts, which tend to operate within narrow margins,” the credit outlook states.