House panel advances $11.1 billion budget bill that includes co-pays for universal child care plan

SANTA FE — After several weeks of Roundhouse budget hearings, a House committee approved a $11.1 billion spending plan Monday that could pave the way for a high-profile New Mexico universal child care initiative to receive a funding infusion for the coming year. 

The budget bill, House Bill 2, was approved on a bipartisan 15-3 vote — three Republicans cast dissenting votes — and could be voted on by the full House later this week.

Specifically, it would increase year-over-year state spending by about $294.5 million — or 2.7 % — over current levels. That would represent a smaller increase than in recent years, as state spending has increased by more than 70% since 2019.

However, much of the debate over this year's budget bill has been focused not solely on spending growth, but rather on Gov. Michelle Lujan Grisham's initiative to provide state-subsidized child care to all working New Mexico families, regardless of income levels.

The child care expansion, which made New Mexico the first state with universal child care when it took effect in November, has drawn national attention but also criticism from some legislators.

Rep. Nathan Small, D-Las Cruces, the chairman of the House Appropriations and Finance Committee, said Monday the committee-approved budget plan gets legislators "halfway there" to the governor's request of an additional $160 million to pay for the initiative.

"We're meeting the moment to have universal affordable child care," Small told reporters after Monday's vote.

But he said the spending plan approved by the House committee would involve required child care co-pays for higher-income families — or those making more than $132,000 per year for a family of four. Under the bill, the exact dollar amount of those co-pays would be tiered depending on a family's gross income.

In addition, the plan would also rely on an additional $55 million distribution from an early childhood trust fund established in 2020 that has seen its value skyrocket from $300 million to a projected amount of $9.8 billion at the end of the current budget year. That growth has been fueled by a surge in oil production in southeast New Mexico.

Separate legislation would have to be passed authorizing the increased distribution from the early childhood fund during this year's 30-day session, which reaches its halfway point on Wednesday.

In response to the budget bill's approval, a Lujan Grisham spokesman said Monday the Democratic governor does not support the idea of charging co-pays for child care.

"The governor appreciates the effort to help pay for the universal child care initiative but she does not support co-pays when we have enough money to fund the initiative this year," said the governor's spokesman Michael Coleman.

He also said the governor would continue to push for full funding of the universal child care plan in order to give New Mexico children a "solid foundation" for learning and increase economic opportunities for families.

Modest pay raises, uncertain future

The spending plan approved Monday also includes roughly $63 million to provide salary increases of 1% to all state employees and teachers, starting in July.

The pay raises would be smaller than in past years, and several labor union officials expressed frustration that they would not keep up with the cost of inflation, especially for lower-paid state workers.

"It feels like money out of our pockets to fund other projects," said Megan Green, the president of the Communications Workers of America Local 7076 union.

But architects of the House spending plan said more fiscal restraint is necessary this year, given a projected cooling off of the state's breakneck revenue growth and the uncertainty surrounding federal funding levels.

"There seems to be a little more fiscal restraint this year than we've seen in past years," said Rep. Cathrynn Brown, R-Carlsbad, during Monday's committee hearing.

She ultimately voted against the budget bill — joining fellow Republican Reps. Randall Pettigrew of Lovington and Rebecca Dow of Truth or Consequences — due to what she described as an underfunding of state judicial branch agencies.

For his part, Small pointed out the spending plan would leave budget reserves at about 30% of total spending — or roughly $3.3 billion — in case projected revenue levels do not materialize.

State lawmakers tapped those reserves during a special session last fall to ensure more than 460,000 state residents did not lose food assistance during a federal government shutdown.

"I think this is looking toward what is an uncertain future, while making sure we continue to invest in New Mexicans," said Small.

What happens next 

If it wins approval in the full House, the budget bill would then advance to the Senate for additional consideration.

Charles Sallee, the director of the Legislative Finance Committee, indicated Monday the Senate could move to increase funding for child care assistance once it receives the bill.

Other changes could also be made to the bill, including possible revisions to the $2.6 billion in proposed one-time state spending on water projects, economic development initiatives and other programs.

Meanwhile, the budget bill also contains language prohibiting the Lujan Grisham administration from spending more than half of the funds appropriated for state agencies before the governor leaves office at the end of this year.

A new governor, who will be elected in November, would then inherit the remaining budget amounts after taking office in January.

Dan Boyd covers state government and politics for the Journal in Santa Fe. Follow him on X at @DanBoydNM or reach him via email at dboyd@abqjournal.com.