As U.S. Senate weighs reconciliation bill, NM lawmakers dig into funding implications

SANTA FE — New Mexico lawmakers on Wednesday began digging into how state agencies handle more than $14 billion in federal funds, as the prospect of congressional budget cuts comes into clearer focus.

Less than one week after the U.S. House narrowly approved a megabill overhauling federal food and medical assistance programs, among other provisions, a legislative subcommittee held its first meeting to discuss the impact of such changes.

The Federal Funding Stabilization Subcommittee was formed this month by top-ranking lawmakers and is expected to present its findings to other legislative committees by the end of this year.

During Wednesday’s hearing at the Roundhouse, some lawmakers pointed out a sustained state revenue surge in recent years has New Mexico well positioned to absorb some federal funding reductions — with more than $3 billion currently in cash reserves.

“I’m glad we’re going through this now instead of in 2017 when we didn’t have anything to go back to,” said Sen. James Townsend, R-Artesia.

But some legislators cautioned about depleting state reserves or pulling large amounts of funding from trust funds to keep current services intact in case the federal cuts materialize.

“We’ve grown really rapidly over the past six or seven years, and now we need to slow down and figure out how we’re going to balance that,” said Sen. George Muñoz, D-Gallup.

Several state agencies currently get more than 70% of their overall budgets from federal dollars, according to New Mexico Department of Finance and Administration data. That includes the Department of Workforce Solutions, which oversees the state’s unemployment system, and the Health Care Authority that manages the state Medicaid program.

In addition, 2,015 state employees have their salaries completely funded by federal dollars, while an additional 3,830 employees’ salaries are partially paid for by federal funds, according to DFA data.

New Mexico has the nation’s highest rate of Medicaid enrollment, and federal dollars make up about 80% of total New Mexico Medicaid spending, said Eric Chenier, an analyst with the Legislative Finance Committee.

As of last month, more than 824,000 New Mexicans were covered by the joint-state health care program — or nearly 40% of the state’s population.

The bill approved by the U.S. House would impose new work requirements for Medicaid recipients, along with increased administrative guidelines for determining eligibility and new co-pays for some adults.

Those changes could lead to more than 90,000 New Mexico residents losing health care coverage, according to a recent HCA analysis, along with an estimated $478 million budget hit to the state.

Overall, the state is set to receive $8.8 billion in federal funding during the upcoming budget year for Medicaid services, or more than half of the $14.4 billion in federal dollars flowing to state agencies.

Meanwhile, a separate cost-sharing proposal in the bill could put New Mexico on the hook for an estimated $259 million per year to pay for food assistance benefits under the Supplemental Nutrition Assistance Program, or SNAP.

That’s largely because the state has a 14.4% error rate in determining food assistance eligibility, according to the U.S. Department of Agriculture. That’s well above the 10% cost-sharing threshold in the House-approved bill.

The elevated error rate sparked debate during Wednesday’s hearing at the state Capitol, with Sen. Bill Soules, D-Las Cruces, calling it “way too high.”

“We ought to be doing this regardless of any federal changes,” Soules said, referring to efforts to lower the rate.

Of the overall 14.4% error rate, overpayments made up the bulk of the errors. Underpayments represented 0.95% of the total number, according to federal data.

Lawmakers also voiced concern about federal cuts to school meals programs, including a grant program providing federal funds for schools to buy locally produced food.

Rep. Raymundo Lara, D-Chamberino, said that could lead to more unhealthy eating habits, including increased fast food consumption.

Looking ahead, it’s expected the U.S. Senate will consider changes to the bill approved by the House, as several Republican senators have voiced misgivings with current provisions.

Depending on the final version of the legislation that makes it to President Donald Trump’s desk, New Mexico lawmakers could be summoned back to Santa Fe for a special session later this year to make necessary budget adjustments.