Yes, N.M.’s budget woes are bad. But pain is relative.

Throngs of students in California protested hikes to fees they must pay. Photo by James Buck, Creative Commons

LAS VEGAS, Nev. — With impending service cuts, taxes sure to increase and a cash-short state road fund, life in New Mexico might seem, well, not so enchanting.

But it turns out pain is relative.

You’re lucky you don’t live in Arizona, Nevada or California.

Each state recently made the top 10 list of states in peril, according to a report from the Pew Center on the States. Colorado just missed by a whisker.

Yes, New Mexico might face a $1 billion shortfall next year, meaning pain will spread far and wide in the form of service cuts to program and tax increases. But New Mexico looks downright healthy compared to the walking dead among its neighbors.

California has grabbed many of the national headlines for the epic challenges it confronts, with a budgetary shortfall that is 20 times the size of New Mexico’s projected shortfall for next year.

But in Nevada, apocalyptic might describe its budgetary outlook, where the state’s projected shortfall is equal to more than a third of its $6.8 billion state budget.

Nevada and historic challenges

“We are expecting another $2.5 billion deficit in a budget that has already been pared down to everything but the essentials,” Nevada Senate Majority Leader Steven Horsford recently told a roomful of journalists in Las Vegas.

That means Nevada must find a way to close a budgetary shortfall that represents nearly $2 out of every $5 Nevada spends. In comparison, New Mexico’s projected $1 billion shortfall represents nearly $1 out of every $5 spent.

The twin mainstays of Nevada’s economy — tourism and construction — have been especially hard hit by this recession, said the Democratic lawmaker. According to the Pew report, the last time Nevada’s economy was this bad was back in 1931, “when a first-year legislator-cowboy led a push to legalize gambling in what was then the nation’s most sparsely settled state.”

“A number of people have pointed out that Nevada was first in and may be last out of this recession,” Horsford said.

As an example, Horsford said he had received information that the state’s budget for Medicaid, the government’s low-income health insurance program, is already over budget by $148 million even though the state’s budget year has not reached the halfway point. Like most states, Nevada’s fiscal year runs from July 1 to June 30.

Part of the shortfall is due to the growth in the number of families and individuals enrolling in Nevada’s Medicaid program. Still, the shortfall surprised Horsford.

“We budgeted a huge caseload growth,” Horsford said.

Arizona contemplates historic firsts

The pain of the recession doesn’t know borders, evidenced by Arizona’s travails.

New Mexico’s next-door neighbor is hurting, big-time, as leaders grapple with how to address a $2 billion budgetary shortfall.

So far, Arizona has decided to sell public buildings and generated national attention for contemplating handing over its prisons to a private operator. Now state officials are saying it may have to do something it’s never done before: turn to outside lenders to help the state make ends meet.

This is a bit of comeuppance for a state that earlier this decade reaped the benefits from the housing bubble and its own reputation as a destination for cold-weather refugees searching for warmer climes.

In 2007, Arizona was the second fastest-growing state, according to the Pew report, which pointed out that since 2000, Arizona’s population jumped by more than 25 percent, with similar growth in housing units.

But the good times weren’t going to last forever, and the state’s gilded economy collapsed into shambles as the nation’s recession deepened.

The report says:

Since the recession hit and money dried up for housing and travel, the state in September 2009 became the first to lose 10 percent of its workforce, even surpassing Michigan. As of the first quarter of 2009, Arizona’s foreclosure rate was the third-highest in the country, behind only Nevada’s and Florida’s.

As a result, collections from Arizona’s top three revenue generating taxes — corporate income, personal income and sales — dropped more than 21 percent in fiscal year 2009, the Pew Center reports.

It’s difficult to predict how the loss of jobs and budget crisis will affect Arizona, a state whose median household income roughly tracked the national average in 2008 at $50,958, coming in 23rd among states and the District of Columbia. But it seems safe to say that Arizona’s household income may drop in 2009, although not as far as to match New Mexico’s level.

New Mexico’s median household income in 2008 was $41,509, or 45th among the states and the nation’s capital, according to the U.S. Census Bureau.

Median household income is a midway point, meaning that half the households in New Mexico earned less than that amount in 2008, while half earned more.

California does everything big

California has captured the media’s imagination thanks to the sheer size of its budgetary shortfall. Even the Pew Center of the States paid tribute to the Golden State’s challenges, naming the recent report showcasing Arizona’s and Nevada’s troubles “Beyond California: States in Fiscal Peril.”

California is staring at a possible $21 billion shortfall over this year and next. And that’s after state lawmakers in the Golden State already have “cut billions from education, healthcare and social services while temporarily hiking income, sales and vehicle taxes,” according to the Los Angeles Times.

Signs of California’s ongoing budget catastrophe came last week as a 32 percent hike to student fees was approved for the University of California system, which encompasses several campuses across the state. The move incited student protests on UC’s Berkeley campus reminiscent of the Free Speech movement and anti-war protests.

This all comes after California, the world’s eighth-largest economy, issued IOUs when it ran out of money this past summer and after the federal government turned it down for a $7 billion loan. The state started shutting state offices several Fridays a month to close the largest state budget.

The Pew report, in fact, used California’s travails to rank other states’ financial troubles in descending order.

Where New Mexico stands

California was given a score of 30, and those states whose scores came nearest to that point based on several factors were judged as the worst off.

Arizona scored 28, and Nevada 26, earning them a place in the Top Ten states in peril.

Colorado, by comparison, scored a 21, narrowly missing the worst-off list thanks to New Jersey (23), Wisconsin (22) and Illinois (22).

Like many other national rankings, New Mexico brought up the rear, scoring a 12, although this time a low ranking was a positive. New Mexico earned a spot among the states least like California, joining Iowa, Montana, North Dakota, Pennsylvania, Texas, Utah and Wyoming.

That says something about the financial struggles states are confronting during the deep recession.

The question now, as New Mexico state lawmakers head into the January regular session, is whether it will hold that spot or move up the rankings to join states sinking under historic financial challenges.