State needs millions to pay legal settlements

The state of New Mexico may not be able to pay its legal settlements, including those pertaining to wrongful death cases involving children, without an infusion of nearly $25 million, legislators learned Wednesday.

The state General Services Department is seeking the special funding to shore up its public liability fund and avoid having to delay paying financial settlements until the next fiscal year begins in July.

That’s when the state Risk Management Division collects its yearly assessments to the fund from state agencies.

The GSD request is in addition to another $20 million requested in special funding to pay lawsuits brought against the state Children, Youth and Families Department, which is facing several big claims alleging the agency failed to protect children by either leaving them in abusive situations or by placing them with unfit parents.

“I think we’re seeing some very big estimated risks out there,” said Nathan Small, D-Las Cruces, who chairs the House Appropriations and Finance Committee.

An evaluation by the Legislative Finance Committee in September found projected long-term liabilities against the fund were $105 million on projected assets of $44 million, as of the fourth quarter of fiscal year 2023.

GSD Secretary Robert Doucette Jr. told committee members at the hearing Wednesday that over the past five years, six government agencies insured by the state Risk Management Division “have made up 86% of what we’ve paid out — University of New Mexico Hospital, the Department of Corrections, CYFD, Department of Public Safety, the New Mexico Department of Transportation, and New Mexico State University ... roughly $88.5 million.”

Topping the list over the past year was the $8 million in settlements to two former NMSU men’s basketball players, and one player’s father, who sued NMSU related to sexual assault and hazing claims.

Doucette said state Risk Management, which GSD oversees, usually has been able to pay civil rights and other claims settled out of court from its public liability fund.

But he added, “Based on internal legal reviews of cases pending, currently we are seeing approximately an additional $18 to $20 million over current budget needs over obligation.”

Doucette said his agency is projecting to spend about $12.1 million for CYFD “that we know about — some of those have been settled, some have not. Currently we do have the money. The concern is we still have five or six months. What else is out there?”

He said he would like to impose a special assessment on the agencies with the biggest claims.

“Currently, if we don’t have the money this fiscal year and we settle something, that settlement will not be paid until July 1, when we do our assessment collection,” Doucette said.

“I honestly think this is going to be the new norm of what we’re paying out,” he said, noting that GSD has hired a new risk management director who will focus on loss prevention and other ways to save money on claims.

“Maybe we are fortunate in an unfortunate way that there’s been a lot of lawsuits this fiscal year that we’re paying a lot of money on and next year that’s not going to be the case.”