State treasurer 'bracing for worst' in debt ceiling talks

July 25, 2011

We wanted to know how New Mexico is preparing for the United States to default on its loans, and what we could expect to see happen in our state. New Mexico is one of five states that relies the most on federal assistance. In fact, for every dollar we give the feds, we get three dollars back, and we use that money for things like healthcare, schools, and paying government employees. If the United States defaults, we could lost out on that money, and more. State Treasurer James B. Lewis says the doomsday scenarios and scares of what could happen if the United States defaults on its loan obligations are real. "I'm preparing for the worst," says Lewis. "I'm a little intimidated, I'm a little frightened about where we are and I'm just hoping our congressional folks get their act together and see if they can get a bill passed." Lewis says New Mexico gets about $500 million in federal assistance every month, or about $5.4 billion every year. Without it, healthcare, schools, and thousands of jobs with government entities like Sandia Labs, Kirtland Air Force Base, and the U.S. Forest Service, would be at risk. "If those folks don't get paid, it would have a tremendous impact on our state," said Lewis. That's why Lewis recently got authorization from the state department of finance to move up to $500 million a month in state GRT money to make up for the potential federal void. It's called a TRANS, or 'tax and revenue anticipation notes'. But that amount of funding is not guaranteed since it is based on tax revenues, which have been struggling because of the economy. At the same time, if the U.S. loses its esteemed AAA rating, it could cost New Mexico more to issue bonds. "So you may not get that three dollars back for every dollar you give?" Lewis was asked. "That's basically one of the concerns that we have," he answered. "As you look at our dependency on federal dollars, it's tremendous." Lewis says he and other state officials knew this debt crisis was coming. They've been meeting regularly about how to brace New Mexico for the past six months.