Course correction needed for New Mexico universal childcare fund, legislative economist says

The New Mexico Legislature’s chief economist told lawmakers this week that without adjustments, New Mexico’s early childhood trust fund will be unable to support the state’s new universal childcare program by 2048.

The state created the Early Childhood Education and Care Fund in 2020 with an appropriation of approximately $300 million in order to fund the newly formed Early Childhood Education and Care Department. Since then, the fund has ballooned to $11 billion from deposits of surplus oil and gas tax revenues. 

But two large withdrawals have threatened the fund’s long-term health, Ismael Torres, chief New Mexico legislative finance economist, told lawmakers on the interim Economic and Rural Development and Policy Committee on Wednesday.

During the 2025 legislative session, lawmakers diverted $1.9 billion of deposits meant for the fund in order to support the Medicaid Trust Fund and the Behavioral Health Trust Fund.

Then, earlier this year, Gov. Michelle Lujan Grisham signed the state’s universal child care program into law, which included up to $700 million from the fund. That pushed the fund’s payouts above its returns, Torres said, and threatened its long-term sustainability.

By 2031, he added, the fund’s balance will shrink at an “exponential rate” and will be empty — and therefore unable to support the universal childcare program — by 2048.

State Rep. Doreen Gallegos (D-Las Cruces), who co-sponsored the creation of the early childhood trust fund, said that lawmakers “are busy patting ourselves on the back” about being the first state in the nation to offer universal childcare, but “for us to be sitting here…looking for solutions for solvency is not good.”

​Torres said the way to “course correct” is to “find other sources of revenue than the trust fund” to fund universal childcare — such as recurring dollars from the state’s general fund — and to “slow down the withdrawals, which is the primary method by which you can bring the fund back into solvency.” 

The Early Childhood Education and Care Department is “very focused on ensuring the sustainability” of the universal childcare program, Hailey Heinz, ECECD director of policy, research and quality initiatives, told lawmakers. The program, she added, is showing positive results for families in New Mexico.

ECECD’s 2026 Family Engagement and Satisfaction survey shows that 93% of families utilizing New Mexico’s universal childcare policy report a positive impact on their well-being. When asked to describe early child programs’ impact on their families’ lives, survey respondents named direct-cost relief more than any other theme.

Rep. Patricia Roybal Caballero (D-Albuquerque) praised the universal childcare program as a way to “uplift the working poor” and urged lawmakers to be “careful, intentional and implicit” as they approach the next legislative session and work to solve the issue of early childhood fund solvency.

​“The rest of the nation is looking to us for all of our successes and our pitfalls and how we’re addressing them,” Roybal Caballero said.