New Mexico Legislative Finance Committee Recommends $10.8 Billion Budget for FY 26
(The following is a press release from the New Mexico Legislative Finance Committee.)
On Wednesday, the Legislative Finance Committee released a budget recommendation for the 2025-2026 fiscal year that calls for spending $10.8 billion from the state’s general fund, a 5.7 percent, or $577 million, increase over FY25 planned spending.
“Fiscal restraint has been critical to our successful efforts to transform the revenue boom of the last few years into long-term support for state services,” said Senator George Muñoz, LFC chairman and chair of the Senate Finance Committee.
“The committee’s recommendation supports the committee’s interim focus on improving earned per capita income, healthcare access, and quality of life at the same time it continues the approaches we have pursued over the last few years to extend the life of these fiscally strong years.”
The committee is also recommending $3 billion in nonrecurring appropriations, including $50 million for regional recreation centers and quality of life grants, $350 million for transportation projects, $855 million for special projects, and $1.7 billion in transfers to endowments and other funds. The transfers include $600 million for the government results and opportunity—GRO—fund that pays for three-year demonstration projects, $150 million for a new fund for public education reform pilot projects, and $222 million for the water project fund.
“As lawmakers, it is our responsibility to use today’s revenues to improve peoples’ lives now, while also ensuring we have the financial security we need to continue meeting the needs of New Mexicans for generations to come,” said Representative Nathan Small, vice chair of LFC and chair of the House Appropriations and Finance Committee.
“Our recommendation reflects the input of experts and stakeholders from across the state who spoke to the committee throughout the interim and provides the framework to develop our budget in the upcoming session.”
Under the committee’s spending plan, reserves would be 33 percent of planned spending, a level that will ensure the state is protected in case of an economic downturn.
About 45 percent of the $577 million increase in recurring general fund spending, $263 million, would go to public education with most of that designated for the formula-based state equalization guarantee distribution to school districts and charter schools.
The 6 percent increase in the appropriation to the state equalization guarantee is primarily due to a 4 percent increase in school personnel salaries and a $56 million appropriation to more equitably allocate formula funds to schools serving lower-income students.
The recommendation also includes the one-time $150 million transfer to a proposed public education reform fund to evaluate promising education initiatives over three years and an additional $193 million for other nonrecurring education-related appropriations.
The Higher Education Department and the state’s colleges and universities would get $36 million more in FY26 over FY25, or almost 3 percent. The increase includes an additional $21 million for funding distributed to schools through a formula, $3 million for mental health and other student support services, and $2 million for pay raises at the Health Sciences Center.
Another $79 million of the recurring general fund increase is designated for the Health Care Authority, mostly for the Medicaid program.
The total budget for the Health Care Authority, substantially supported with federal Medicaid funds, would increase by 23.3 percent from $12.2 billion to $15 billion, in large part through the creation of a hospital surcharge fund that pools payments from hospitals, matches them with federal dollars, and redistributes them to the hospitals through a formula.
The proposal also continues increases in rates to Medicaid providers of physical healthcare and maternal and child healthcare. The committee also included significant amounts in nonrecurring funding to help ease the transition from prison for inmates and provide medical respite for unhoused people.
The Medicaid budget doubled between FY19 and FY25, and the committee recommendation emphasizes improving performance with language to strengthen hospital and behavioral health oversight.
The committee recommends a small increase in general fund spending in the Early Childhood Education and Care Department, but with revenue from the early childhood trust fund, total funding for the department is a 5.4 percent increase over FY25.
The total recommendation includes funding for rate increases for providers in the Home Visiting family supports program and the Family, Infants, Toddlers program; childcare and prekindergarten quality improvements and expansion; and a new doula certification program.
The committee recommendation also includes an additional $134 million in general fund revenue for compensation increases for state and higher education employees. Under the plan, state employees would get an average 4 percent increase.
The 60-day legislative session starts January 21.