Top New Mexico lawmakers say they'll take deliberate approach to federal budget bill

As top New Mexico lawmakers digest the implications of a federal budget bill signed this month by President Donald Trump, they’re urging rural hospitals and public schools not to make rash decisions.

Many provisions in the Big Beautiful Bill dealing with Medicaid don’t take effect until 2027 or later, giving legislators and state officials time to prepare.

But that “proceed with caution” approach should not be confused with procrastination, said Rep. Nathan Small, D-Las Cruces, who said key legislative committees will likely spend the rest of this year studying the federal bill and planning a response.

“When we begin to fill gaps and holes that have been created by Republicans in Washington, D.C., cutting federal funding, we need to be very confident,” Small said during a break of the Legislative Finance Committee’s meeting on Tuesday in Albuquerque.

“The big picture with the federal budget and spending bill is it’s bad for New Mexico, and it gets much worse with time,” added Small, who is the LFC’s chairman.

Gov. Michelle Lujan Grisham’s administration has warned that six to eight rural hospitals could close over the next several years due to the federal bill’s Medicaid changes. State health officials have also predicted nearly 90,000 state residents could lose health care coverage, while more than 250,000 state residents could face new co-pays and increased administrative hurdles to remain enrolled. New Mexico has the highest percentage of Medicaid enrollees in the country, with nearly 40% of the population getting their healthcare from the program, a federal/state partnership.

LFC Director Charles Sallee told legislators Tuesday that staffers are still reviewing which spending reductions in the federal bill could be “backfilled” with state dollars.

A $10.8 billion state budget bill that took effect July 1 leaves about $3.5 billion in unspent cash reserves, which could be used to help soften the impact of the federal budget bill.

However, New Mexico could benefit from some provisions in the bill that were approved without a single Democrat in the U.S. Congress voting in support, Sallee said.

That includes additional funding for rural health care providers that could represent a “windfall” for the state, even though legislative officials are not yet sure exactly how much money New Mexico might receive, he said.

Sallee also pointed out some of the bill’s provisions could ultimately be nullified, saying, “Congress can undo what it just did.”

Lujan Grisham has raised the possibility of calling legislators back to Santa Fe this year for a special session focused on the federal budget bill and possibly other issues.

The governor’s spokeswoman, Jodi McGinnis Porter, said Tuesday a special session was “still on the table” but said an exact date has not been set.

House Speaker Javier Martínez, D-Albuquerque, said in a recent interview a special session might not be urgently needed, saying, “A lot of these cuts are phased in over several years, so we have time to prepare.”

Meanwhile, some Republican lawmakers have disputed Democrats’ claims about the federal bill’s impact in New Mexico.

In a recent letter, Reps. Mark Duncan, R-Kirtland, and Cathrynn Brown, R-Carlsbad, said the bill will provide tax relief to many New Mexicans by providing a tax exemption for Social Security benefits and expanding an existing child tax credit — from $2,000 to $2,200.

New Mexico also provides its own child tax credit and a tax exemption for Social Security income, though that exemption is only available to taxpayers who make under a certain annual amount.

The GOP representatives also took issue with the description of Medicaid funding changes as “cuts,” saying they would instead target waste, fraud and mismanagement in the joint federal-state health care program.

New Mexico has the nation’s highest rate of residents enrolled in Medicaid, with roughly 810,000 individuals signed up as of this month — or about 38.3% of the state’s population. Increased administrative hurdles and work requirements — at least 80 hours per month — for certain adult Medicaid recipients will likely prompt that figure to drop in the coming years, according to state officials.

While urging hospitals and schools not to make hasty decisions, Small said federal funding freezes targeting certain programs pose a more immediate threat to the state.

At least some of that funding — including for after-school and adult education programs — can be backfilled by state agencies without legislative approval using already appropriated state funds, Small said.