Governor says special session could be necessary to deal with federal budget cuts

Gov. Michelle Lujan Grisham suggested Wednesday that proposed federal budget cuts to Medicaid and other programs could prompt her to call lawmakers back to Santa Fe later this year for a special session.

Federal cuts could have an outsized impact in New Mexico, as more than 840,000 state residents were enrolled in Medicaid as of December — about 40% of the state’s population.

During a Wednesday speech to business leaders in Albuquerque, Lujan Grisham said when there are such “wild swings” at the federal level, states need to be ready to respond.

“I am predicting right now that when the federal budget, whatever that is, occurs, we’re going to need a special session by October, just to deal with health care and to keep our rural hospitals open,” she said.

New Mexico’s all-Democratic federal delegation has been critical of the Republican-proposed cuts, and all three representatives joined Democrats in voting against the package in the House on Tuesday.

The House resolution calls for at least $1.5 trillion in spending cuts and a $4 trillion debt limit increase. The Senate passed a budget resolution last week, and the two bodies will have to reconcile.

“Republicans’ intent to slash Medicaid will have drastic and disastrous effects on New Mexico. ... New Mexico law requires that it respond to those cuts. Holding a special session in the fall is prudent,” U.S. Rep. Teresa Leger Fernández, D-N.M., said in a statement to the Journal.

But the leader of New Mexico’s Republican Party criticized members of the state’s delegation for opposing the budget plan, saying it would actually help New Mexicans by eliminating a tax on tips and Social Security benefits.

“President Trump and Republicans are fighting for you with this budget and the president’s worker-first executive orders,” state GOP chairwoman Amy Barela said in a statement. “While Democrats continue to keep New Mexicans last, Republicans are fighting every day to put you first.”

Recent special sessions a mixed bag

Since taking office in 2019, Lujan Grisham has called six special sessions, including one on redistricting in 2021 and several related to the COVID-19 pandemic.

She also called a special session focused on crime-related issues last summer, but that session lasted just a matter of hours and ended with legislators largely rejecting her public safety agenda.

“I made everybody very nervous when I called the (crime) special session. I have, in fact, called many special sessions,” Lujan Grisham said during the Wednesday luncheon hosted by the Greater Albuquerque Chamber of Commerce. “And I’m going to submit to you, in the two years that are left, we’re going to have more.”

After her speech, the governor told the Journal she calls special sessions only when she deems it necessary.

In this instance, she said, if the U.S. Senate passes the budget with its proposed Medicaid cuts, “it would require us talking about where we want to maybe redirect some of our spending.”

She also described the proposed cuts as a domestic tariff that would make everything more expensive, from hospital visits to premiums to medication co-pays.

“I’ll have courage,” Lujan Grisham said. “More often than not, the Legislature wants to come to a special session so that they can solve a problem.”

State’s reliance on federal programs

New Mexico could be in an enviable position to absorb federal budget cuts — at least for the short term.

Rep. Nathan Small, D-Las Cruces, chair of the House Appropriations and Finance Committee, said recently a $10.8 billion state budget plan leaves more than $3 billion in revenue unspent. Those cash reserves could be used to temporarily offset federal budget cuts, he said.

But cuts to federal programs like Medicaid and the Supplemental Nutrition Assistance Program, or SNAP, could have daunting long-term implications.

New Mexico currently receives a roughly 3-to-1 match for each dollar it spends on Medicaid, and a reduction in that matching rate would leave the state on the hook for higher costs.

In addition, about 22% of New Mexico residents received SNAP, or food stamp, benefits as of December, according to state Health Care Authority data.

Charles Sallee, director of the Legislative Finance Committee, said Wednesday that federal Medicaid cuts of 12-13% would require New Mexico lawmakers to come up with more than $1.1 billion in state dollars to avoid a disruption in health care coverage.

“That’s looming out there very significant,” Sallee said during an appearance on the Journal’s Rounding up the Roundhouse podcast.

Rep. Sarah Silva, D-Las Cruces, also referenced the state’s vulnerability on the House floor Wednesday.

“People are going to lose their health care coverage and they’re going to be hungrier, just so we can give $1.2 trillion in tax cuts to the very wealthy,” Silva said.

The governor said some legislators are advocating to redirect money in some of the state’s large investment funds, like its early childhood fund, temporarily to Medicaid. Lujan Grisham said she normally doesn’t want to touch any of the state’s trust funds for that use but she’ll look at proposals “openly and objectively.”

“I’m prepared for the worst of it. New Mexicans should be too,” she said. “But I tend to fight to make sure that first, New Mexicans are protected, and second, we hold the federal government accountable. And I’m going to try to do those at the same time.”

Journal staff writer Cathy Cook contributed to this report. Megan Gleason is a business editor for the Albuquerque Journal. She also covers energy, utilities and government. You can reach her at mgleason@abqjournal.com.