Concerns about New Mexico's pension liabilities and general financial health have prompted a downgrade in the state's credit rating by a major ratings agency

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SANTA FE, N.M. (AP) — Concerns about New Mexico’s pension liabilities and general financial health have prompted a downgrade in the state’s credit rating by a major ratings agency.

Moody’s Investors Services on Monday reduced the state’s bond rating in move likely to lead to higher borrowing costs.

It cited extremely large liabilities at two major state pension funds for public employees and teachers.

A Moody’s analyst says New Mexico’s pension pressures are compounded spending demands linked to the state’s large enrollment in Medicaid, a lagging state economy and volatile sources of state government income. The state’s financial reporting practices are unusually weak.

At the same time, New Mexico state government is experiencing a surge in tax revenue and royalties linked a rebound in the oil and natural gas sectors.