Fiscal impact reports (FIRs) are prepared by the Legislative Finance Committee (LFC) for standing finance
committees of the Legislature. LFC does not assume responsibility for the accuracy of these reports if they
are used for other purposes.
F I S C A L I M P A C T R E P O R T
SPONSOR Small/Dixon
LAST UPDATED 2/21/25
ORIGINAL DATE 2/20/25
SHORT TITLE General Appropriation Act of 2025
BILL
NUMBER
CS/House Bills 2
and 3/HAFCS
ANALYST Courtney
APPROPRIATIONS
(dollars in thousands)
FY25 FY26
Recurring or
Nonrecurring
Fund
Affected
$10,635,751.6 Recurring Section 4 General Fund
$136,241.8 Recurring Section 8 General Fund
$6,086,928.9 Recurring Va rious Other State Funds
$1,870,039.5 Recurring Internal Service Funds/Transfers
$14,413,884.4 Recurring Federal Funds
$983,862.0 $2,121,336 Nonr ecurring General Fund
$124,122.0 $267,386.0 Nonrecurri ng Various Other State Funds
$40,345.3 Nonrecurring Internal Service Funds/Transfers
$105,713.6 $159,003.2 Nonrecurring Federal Funds
Note some nonrecurring appropriations including the government results and opportunity fund and the public education reform
fund appropriations to be distributed from FY26 through FY28 as indicated in House Bill 2.
Sources of Information
LFC Files
SUMMARY
Synopsis of the HAFC Substitute for House Bills 2 & 3
The HAFC substitute for House Bills 2 and 3 (HB2) appropriates money from the general fund,
other revenues, internal services funds/interagency transfers, and federal funds for the operation
of state agencies, higher education, and public schools.
Section 1, Short Title
Section 2, Definitions
Section 3, General Provisions
Section 4, Fiscal Year 2026 Appropriations
Section 5, Special Appropriations
Section 6, Supplemental and Deficiency Appropriations
Section 7, Information Technology Appropriations CS/House Bills 2 and 3/HAFCS – Page 2
Section 8, Compensation Appropriations
Section 9, Government Results and Opportunity Expendable Trust
Section 10, Fund Transfers
Section 11, Special Transportation Appropriations
Section 12, FY25 Additional BAR Authority
Section 13, FY26 BAR Authority
Section 14, Transfer Authority
Section 15, Severability
There is no effective date of this bill; however, a general appropriation act goes into effect on the
signature of the governor.
FISCAL IMPLICATIONS
The appropriations contained in HB2 are summarized as follows:
*Note non-recurring grand totals in the above table do not include Section 8 (Compensation Appropriations) as these
appropriations are categorized as recurring. Appropriations from the general fund revert to the general fund at the end of FY26,
unless otherwise indicated in HB2 or provided by law.
CS/House Bills 2 and 3/HAFCS – Page 3
SIGNIFICANT ISSUES
Recurring Appropriations. Appropriations for recurring expenses include Section 4 fiscal year
2026 appropriations and Section 8 compensation appropriations. Recurring appropriations in
Section 4 include funding for agency operating budgets with revenue sources including the
general fund, other state funds, internal service funds or interagency transfers, and federal funds.
Expenditure categories for agencies include personal services and employee benefits, contractual
services, other, and other financing uses, terms that are defined in Section 2 of HB2. Each fiscal
year agencies typically have statutory budget adjustment authority authorized in Sections 12 and
13 to transfer money between categories and increase revenues, except for the general fund,
within limits set by the Legislature.
For FY26, overall recurring appropriations represented in HB2 in Section 4 and Section 8 total
just over $33.1 billion in all revenue sources including recurring funding of $10.8 billion in
Sections 4 and 8 from the general fund, representing a 5.8 percent increase over FY25 operating
budgets. Appropriations in Section 8 would provide employees of state agencies and higher
education with an average salary increase of 4 percent. Notably, there is also an average 4
percent salary increase for public school employees; however, that funding is built into the
public school support budget of Section 4. Section 8 also includes $1.5 million for the Office of
the State Engineer for the personal services and employee benefits category and $741.5 thousand
to the judiciary to provide an additional 2 percent increase to the court employees in lower pay
bands. Additionally, Section 8 provides $17 million for risk premiums and another $17 million to
implement a new single pay plan for classified employees in the executive branch.
Nonrecurring Appropriations. House Bill 2 also appropriates a total of $3.8 billion in
nonrecurring appropriations and fund transfers in Sections 5, 6, 7, 9, 10, and 11. Of this amount
$3.1 billion is from the general fund. Nonrecurring appropriations include $1.37 billion from the
general fund for special appropriations (Section 5), $115 million from the general fund for
supplemental and deficiency appropriations (Section 6), $1.46 billion from the general fund for
fund transfers (Section 10), and $167 million from the general fund for transportation (Section
11). In Section 9, House Bill 2 appropriates $433 million for three-year pilot projects (FY26
through FY28) with funding from the Government and Results Opportunity Program (GRO)
fund, the public education reform fund, and federal funds. Section 9 appropriations relate to
House Bill 181 and Senate Bill 201, both endorsed by the Legislative Finance Committee, that
would provide LFC, in partnership with other agencies, to better set expectations and examine
implementation, accountability and evaluation for three-year pilot projects.
Education. HB2 includes $4.7 billion in recurring general fund appropriations for public
education, a 6 percent increase over the FY25 operating budget. Recurring Section 4
appropriations for public schools include funding for a 4 percent average salary increase for
school personnel and increases in annual salary minimums for teachers of $5,000 per license
level. The student equalization guarantee, the pool of funds distributed to schools through a
funding formula, increases to just over $4.4 billion from the general fund. Nonrecurring
appropriations for public education include nearly half a billion dollars, including $343 million
from the general fund, $89 million in public education reform funds, and $68 million in other
state funds and inter-agency transfers. Significant initiatives include $40 million for career and
technical education and innovation zones, $30 million for secondary education reforms, $20 CS/House Bills 2 and 3/HAFCS – Page 4
million for educator fellows initiatives, $3 million for STEAM initiatives, $4 million for special
education initiatives, and $30 million for Indian education initiatives, along with $500 thousand
each for the Black Education Act, the Bilingual Multicultural Education Act, and the Hispanic
Education Act. Nonrecurring appropriations also include $6.3 million to support unhoused
students, $1 million for wellness rooms, and $1.5 million for school panic buttons.
Higher education recurring spending grows by almost 3 percent, or $36 million, including
increases for a 2.5 percent increase in the base funding formula, $3 million for mental health and
student supports, and an increase for raises for graduate student workers. Additionally, HB2 has
nonrecurring investments for higher education that include $40 million for building renewal and
replacement, $20 million to the technology enhancement fund, $20 million for the health
professional loan repayment program, and $5 million for the teacher loan repayment program.
Early Childhood and Child Welfare. The HB2 recurring appropriations for the Early Childhood
Education and Care Department (ECECD) for FY26 increase revenue by $170 million, or 21.6
percent. The overall increase supports a home visiting rate increase, prekindergarten, childcare
assistance and tribal language supports. HB2 increases distributions to the department from the
early childhood trust fund to $400 million contingent on legislation.
The HB2 appropriations for the Children, Youth and Families Department (CYFD) budget
includes continued targeted investments to address system issues through special appropriations
(Section 5) and GRO multi-year pilot funding (Section 9) to address Child Protective Services
caseloads, pilot a child welfare training academy, and fund liability insurance premium increases
in a way that heightens oversight and accountability. Appropriations include over $41 million in
recurring appropriations to address systemic challenges, including $29.4 million from the GRO
fund (Section 9), and an additional $7.9 million in matching federal funds for the three-year
pilots funded by GRO. In addition, HB2 includes a multiyear, nonrecurring appropriation to
recruit, train, and support treatment foster care providers and to establish a child welfare training
academy. HB2 also includes nonrecurring appropriations to seek technical assistance related to
the recent decline in federal revenue to potentially recover and maximize federal dollars.
Health. HB2 appropriates a total of $15 billion to the Health Care Authority (HCA), representing
an additional $2.8 billion over FY25, a 23.3 percent increase. The appropriations include almost
$2.1 billion in recurring general fund revenues for FY26. The HCA budget supports a range of
health and human services programs, including Medicaid. For Medicaid, behavioral health, and
developmental disability supports (DD waiver), HB2 increases general fund spending by $75.4
million, or about 4 percent. HB2 increases for the agency include continuing provider rate
adjustments enacted in FY25 for the full fiscal year in FY26, healthcare inflation, enrollment
considerations, accommodation of federal Medicaid matching reductions, and new payment rate
adjustments for all-inclusive care for the elderly and assisted living facilities. Appropriations for
changes in the federal Medicaid matching rate (the federal medical assistance percentage or
FMAP) and healthcare inflation for FY26, estimated at about $40.9 million, are also included.
For FY26, HB2 increases the Department of Health (DOH) general fund revenue by $9.9
million, or 4.9 percent, including a significant increase for state facilities operations and funding
for mobile health unit staffing. HB2 increases the Aging and Long-Term Services Department
(ALTSD) general fund revenue by almost $3 million, or 4 percent.
HB2 also includes a number of nonrecurring appropriations to support increased access to
behavioral health services, including $1.7 million from the general fund to the Administrative CS/House Bills 2 and 3/HAFCS – Page 5
Office of the Courts for regional behavioral health planning and sequential intercept mapping of
individuals with mental health and substance use disorder movement through the criminal justice
system. The nonrecurring appropriations also include $11.5 million from the general fund to
HCA for 24 regional mobile crisis response, $7.5 million for 24-hour crisis response facilities
and associated services, $28 million from the general fund to HCA for grants to local
governments for regional transitional acute care facilities and certified community behavioral
health clinics, $10 million from the general fund to HCA for grants to local and tribal
governments for assisted outpatient treatment, medication-assisted treatment, assertive
community treatment or other evidence-informed services, and $11.5 million to HCA for grants
to local and tribal governments for mobile crisis and recovery response and intervention and
outreach teams. HB2 also includes a number of appropriations to support housing stability,
including $110 million to the Department of Finance and Administration (DFA) for transitional
housing and behavioral health supports, $8.1 million to HCA for start-up costs to build capacity
for housing providers, $5 million to DFA for local governments to support housing encampment
response, and $2 million to DFA for housing projects for senior citizens, $2 million to the
Corrections Department (NMCD) to expand reentry services, including housing opportunities.
Natural Resources. HB2 appropriates $227 million to the Energy, Minerals and Natural
Resources Department (EMNRD), reflecting a 19.5 percent, or $37 million, overall increase. The
EMNRD budget includes $1.24 million for Hot Shot firefighting crews, watershed management,
and forest restoration. HB2 recurring appropriations to the Office of the State Engineer (OSE)
include an additional $1.1 million from the general fund, or 3.4 percent over FY25, with an
additional $1.5 million included in Section 8 for salaries and benefits. Appropriations to OSE
include funding for the Water Resource Allocation Program’s district office lease increase,
contract work for implementation of the 50-year water plan, and higher field work costs. HB2
also reflects a reorganization of the Environment Department (NMED), including the creation of
a Compliance Enforcement Division, keeping the agency’s general fund budget flat at NMED’s
request. NMED is also appropriated $50 million for the investigation and remediation of
neglected contaminated sites. Nonrecurring appropriations for natural resources in HB2 include
multiple investments, many of which support water projects, including $25 million to OSE for
Indian water rights settlement agreements, $40 million to NMED for the strategic water supply
program, and a $200 million transfer to the water project fund in Section 10 (fund transfers).
Judiciary and Public Safety. The Administrative Office of the Courts budget reflects a 5.2
percent overall increase and a 17.6 percent, or $8.8 million, general fund increase that includes
consolidating statewide pretrial services to a single program in AOC’s budget. AOC’s budget
also includes funding for increased interpreter pay and increased personnel funding for pretrial
services. District attorney budgets reflect an overall $4.1 million, or 3.8 percent general fund
increase, and the Public Defender Department budget reflects a $3.2 million, or 4.1 percent
general fund increase. There are also nonrecurring appropriations for the judiciary, including $3
million to the 2nd Judicial District Attorney for the organized crime commission. The Office of
the Attorney General budget reflects an overall increase of $3.7 million or 7.1 percent over
FY25, including funding for a pilot project that funds five positions in the Consumer and Civil
Rights Division.
The Department of Public Safety’s (DPS) budget is $225.7 million across all funding sources,
with an $8.2 million, or 4.4 percent, increase from the general fund. The DPS budget includes
$5.3 million for fleet improvements, $1.6 million for step pay increases to prevent salary
compaction for New Mexico State Police, $700 thousand for contractual services and a new CS/House Bills 2 and 3/HAFCS – Page 6
position, and $500 thousand for recruitment and grant support. The Corrections Department
(NMCD) reflects a $10 million, or 3 percent, increase that includes funding for private prison
per-diem rate increases, personnel, and enhanced evidence-based reentry initiatives.
Nonrecurring appropriations for justice and public safety include a number of items to improve
behavioral health programming in state and community providers, $5.7 million for state crime
laboratories to address backlogged DNA cases, and continued support for information
technology projects, including the Intelligence Led Policing project at DPS (Section 7). Section 9
also contains multiyear funding to support those reentering the community from incarceration
and for medication-assisted treatment. Additionally, CVRC receives an additional $500 thousand
in recurring funding and $2 million in non-recuring funding for victims of sexual assault and
domestic violence.
Commerce and Industry. The Economic Development Department (EDD) recurring budget
would grow by over $1.7 million, or 6.5 percent, compared to FY25, including funding for
personnel costs for the Office of Strategy, Science, and Technology. Additionally, HB2
nonrecurring funding to EDD includes multiple appropriations to support entrepreneurship,
infrastructure, and site readiness, including $24 million for site readiness, $15 million for
business accelerators and other entrepreneurship incubators and venture studies, $10.8 million
for talent recruitment and retention in emerging high-tech fields, $8 million for proposals in
advanced energy innovation and commercialization, $4 million for science and technology
business start-up grants, and $7 million for Local Economic Development Act investments.
HB2 also contains a number of additional nonrecurring appropriations related to improving
quality of life and economic development, including $75 million to DFA for the New Mexico
match fund, which provides agencies with the state dollars they need to attract federal and other
matching funds. The appropriation also includes $2 million for capacity building grants, $50
million to DFA for regional recreation centers and quality of life grants, $10 million to EDD for
the Trails+ program, $16 million to the Tourism Department for national and international
marketing, $90 million to EDD for trade port grants, and $50 million to EDD to establish a
research, development, and deployment fund.
Compensation. Section 8 includes $100 million for a 4 percent average pay increase for all state
and higher education employees, which is categorized as recurring spending. Section 8 also
includes $1.5 million for the Office of the State Engineer for personnel and $741.5 thousand to
the judiciary to provide an additional 2 percent increase to the court employees in lower pay
bands. Section 8 appropriations include $17 million for the General Services Department risk
fund and $17 million to implement recommendations of a statewide staffing study contracted by
DFA, LFC, and the State Personnel Office. Additionally, the Section 4 public school support
appropriation includes $135.1 million for a 4 percent average salary increase for school
personnel, $4.4 million to increase the minimum salary of each tier of the teach pay schedule by
$5,000 (Level 1=$55 thousand, Level 2=$65 thousand, Level 3=$75 thousand), and $2.3 million
for a 4 percent average salary increase for school transportation employees.
General Fund Reserves. HB2 would leave FY26 general fund reserves at 31.2 percent of
recurring appropriations.
PERFORMANCE IMPLICATIONS
CS/House Bills 2 and 3/HAFCS – Page 7
HB2 includes multiple performance measures and performance targets for most agencies as part
of the Accountability in Government Act, which is a statutory basis to use performance
information to inform budget development and monitor results of spending by agencies on
outcomes important to agencies, the executive, the Legislature, and the public.
WHAT WILL BE THE CONSEQUENCES OF NOT ENACTING THIS BILL
State agencies, higher education and public schools will not have the authority to budget or
expend money necessary for the operation of government.