Kids are always high on the state’s priority list, but in the coming legislative session they’ll dominate the discussions.
The Early Childhood Education and Care Department (ECECD) is asking for a whopping $1.2 billion. The Children, Youth and Families Department (CYFD), now under new management, seeks $422.3 million. That doesn’t include asks from the education departments.
Budget increases face new economic realities.
State economists recently told the Legislative Finance Committee that New Mexico is “treading water” but not at risk of a recession, reported SourceNM. New money (expected revenue minus current spending) has grown just 1%, falling short of earlier projections. Budget cutting may not be necessary, but budget growth isn’t possible either.
Because I’ve been watching for signs of recession, I found some comfort in the economists’ statements, but then I looked at the reports. Nobody should get too comfortable.
Here are just a few comments from the General Fund Consensus Revenue Estimate:
• “Inflation poses serious challenges to the economy.”
• “Expected to be a close call as recession probabilities grow. Minor shocks could trigger a downturn.”
• “Federal policies could have worse impacts than expected in multiple revenues.”
(The report also complains about the president’s war on numbers: “A soft landing is difficult to achieve while flying blind. Data scarcity is also challenging revenue estimates, although New Mexico economists are innovating to provide insight.” That raises a tree-falling-in-the-woods question: If we can’t see the numbers, will we know if we’re in a recession?)
State revenues are down significantly from last year because oil prices dropped and corporate tax revenues plunged, the latter caused by the so-called big beautiful bill, according to the Albuquerque Journal. Add to that the impact of tariffs and federal layoffs. And Permian Basin oil production, which has bankrolled increased state spending, could peak this year.
The news would have been even worse if not for robust sales and leases by the State Land Office. That alone kept New Mexico out of the red.
There are bright spots. State economists expect revenues to improve in the future. And lawmakers wisely tucked away money in special trust funds for future use.
Rep. Nathan Small, chair of the Legislative Finance Committee, said, “This is not a doom forecast, but it is a very sobering forecast.”
Reading between the lines, I would say lawmakers and the governor have no room for error.
As lawmakers were digesting new economic data, ECECD Secretary Elizabeth Groginsky asked for $1.2 billion to expand her department’s activities, including universal child care, universal preschool for 3-year-olds, home visits and early intervention. Sen. George Muñoz, chairman of the Senate Finance Committee, and other legislators have previously complained about the governor blindsiding legislators with universal child care in November.
Remember that ECECD has its own trust fund, created with the department in 2020. The fund balance will be nearly $10.5 billion this budget year, according to the Journal, but its income won’t cover universal child care. And yet state spending on child care has ballooned until even the proposed increase won’t cover costs. Finally, by covering people who can well afford their childcare, ECECD has unnecessarily raised its costs.
Groginsky stood up the department and grew it during a time the oil industry bestowed ever increasing revenues, and got comfortable with those big numbers. Now she needs to recalculate. Muñoz recently told Groginsky to come back with a more realistic request after the holidays.
Now comes CYFD, asking for a 4.7% increase to $422.3 million to hire more child welfare workers, expand programs, and meet court-ordered case-load standards. Nobody needs convincing of the agency’s need, but the increase is nearly half of the Legislature’s new money.
Finally, there are the governor’s executive orders, which a report warned “could eliminate all new money.” For disasters and other emergencies (like SNAP funding), the governor has discretionary use of the Appropriation Contingency Fund, but it’s run out of money repeatedly. She’s tapped it for $380 million since July 2024, according to SourceNM. She’s also pulled money from the state’s Operating Reserve, a kind of savings account, without legislative approval. Lawmakers have begun to question her legal authority to spend that money.
I’ve covered the Legislature in years when the two finance committees had to make big, painful cuts and look for cash sitting in any neglected account. Thankfully, we’re not there, but the governor and her cabinet need to come down to Earth.