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 Roybal Caballero
LAST UPDATED
ORIGINAL DATE 2
/11/2025
SHORT TITLE Increase Minimum Wage
BILL
NUMBER House Bill 246
ANALYST Garcia
REVENUE*
(dollars in thousands)
Type FY25 FY26 FY27 FY28 FY29
Recurring or
Nonrecurring
Fund
Affected
Indeterminate
but minimal
gain
Indeterminate
but minimal
gain
Indeterminate
but minimal
gain
Indeterminate
but minimal
gain
Recurring
Personal
Income Tax
Indeterminate
but minimal
gain
Indeterminate
but minimal
gain
Indeterminate
but minimal
gain
Indeterminate
but minimal
gain
Recurring
Corporate
Income Tax
Indeterminate
but minimal
gain
Indeterminate
but minimal
gain
Indeterminate
but minimal
gain
Indeterminate
but minimal
gain
Recurring
Gross
Receipts Tax
Parentheses ( ) indicate revenue decreases.
*Amounts reflect most recent analysis of this legislation.
ESTIMATED ADDITIONAL OPERATING BUDGET IMPACT*
(dollars in thousands)
Agency/Program
FY25 FY26 FY27
3 Year
Total Cost
Recurring or
Nonrecurring
Fund
Affected
HCA Medicaid
Service
Providers **
(Contracts)
No fiscal impact At least $6,000 At least $18,000
At least
$24,000
Recurring **
HCA Capitation
Savings**
No fiscal impact
At least
($88,000)
At least
($191,000)
At least
($279,000)
Recurring **
ALTSD Senior
Employment
Program
No fiscal impact $122 $244 $366 Recurring General Fund
State Employees No fiscal impact $674.5 $1,663 $2,337 Recurring General Fund
ECECD
(Contracts)
No fiscal impact At least $37,500 At least $76,632
At least
$114,132
Recurring General Fund
Public Schools No fiscal impact $22,089 $45,061 $67,150 Recurring General Fund
Courts
(juror costs)
No fiscal impact $550 $1,122 $1,672 Recurring General Fund
Total No fiscal impact ($21,064) ($48,278) ($69,342) Recurring **
Parentheses ( ) indicate expenditure decreases.
*Amounts reflect most recent analysis of this legislation.
**Includes both state and federal share. See fiscal implications.
Relates to House Bill 305
Relates to House Bill 119
Conflicts with House Bill 22
Sources of Information
House Bill 246 – Page 2
LFC Files
Agency Analysis Received From
Workforce Solutions Department (WSD) Economic Development Department (EDD) State Personnel Office (SPO) Aging and Long-Term Services Department (ALTSD)
Health Care Authority (HCA)
Early Childhood Care and Education Department (ECECD)
Administration Office of the Courts (AOC)
Agency Analysis was Solicited but Not Received From
Public Education Department (PED) Department of Health (DOH) Because of the short timeframe between the introduction of this bill and its first hearing, LFC has yet to receive all requested analysis. This analysis could be updated if that analysis is received.
SUMMARY
Synopsis of House Bill 246
House Bill 246 (HB246) would make changes to the state’s Minimum Wage Act (citation),
including:
Increasing the state’s minimum wage for employees to $17 per hour, beginning January
1, 2026;
Eliminating the tipped minimum wage and tip credits, requiring employers instead to pay
tipped employees at least the new minimum wage, with no reliance on tipped credits;
Annually adjusting the state’s minimum wage, using the consumer price index;
Repealing certain exemptions from the state’s definition of “employees,” including those
related to federal and state government employees; employees of educational, charitable,
and religious organizations; registered apprentices; seasonal employees; and certain
agricultural workers;
Eliminating the authority of the Workforce Solutions Department to issue special
exemption certificates permitting employers to pay workers with disabilities less than the
minimum wage, subject to certain program requirements.
This bill does not contain an effective date and, as a result, would go into effect 90 days after the
Legislature adjourns if enacted, or June 20, 2025.
FISCAL IMPLICATIONS
The bill would establish the minimum state minimum wage at $17 per hour and adjust the wage
annually according to the consumer price index. Using the projected CPI, projected wages
through 2030 are as follows:
House Bill 246 – Page 3
Projected Annual
Minimum Wage Rate
Using CPI-U
Year
Projected
Wage Rate
2026 $ 17.00
2027 $ 17.37
2028 $ 17.69
2029 $ 18.08
2030 $ 18.49
State Employees
The State Personnel Office (SPO) reports the state of New Mexico currently has 130 state
employees who would need to have their salaries raised to $17/hour. However, LFC analysis of
SPO data found the number of state employees requiring a pay increase may be closer to 400.
As the rate increases over time, additional employees would require a pay increase. LFC
estimates the cost to raise state employee wages to the minimums projected to be $674 thousand
in FY26 and $1.7 million in FY27.
SPO also reports that raising the minimum wage for state employees to $17/hour would likely
create salary compaction for employees whose current salaries are at or near $17/hour but who
have more job responsibilities or are in a higher classification than employees whose salaries
would be increased. To address this, SPO reports agencies would likely seek to internally align
personnel classifications, potentially resulting in additional costs to avoid pay inequities.
Aging and Long-Term Services
The Aging and Long-Term Services Department (ALTSD) operates the New Mexico Senior
Employment Program, which provides on-the-job and other vocational training to low-income
New Mexicans aged 55 and older. On-the-job assignments pay minimum wage, and the program
requires 75 percent of expenditures be for participant wages and fringe benefits. In FY25,
ALTSD received $294 thousand from the general fund to operate the program. ALTSD is
required to spend at least 75 percent of the program budget on participant wages and fringe
benefits, and thus, ALTSD suggests the program budget would need to proportionally increase to
fund a wage increase, should the bill pass. ALTSD estimated a cost of $122 thousand in the first
year of the increase to the minimum wage.
Health Care Authority
The Health Care Authority reports no fiscal impact to the agency because all employees will be
making $17 per hour prior to the date outlined in the bill (January 1, 2026). However, the
department could likely experience significant fiscal impacts to programs operated by the
department, including the Temporary Assistance for Needy Families and Medicaid programs.
In 2023 analysis submitted for a minimum wage increase bill, the then-Human Services
Department (HSD) noted changes to the state’s minimum wage could potentially impact program
eligibility and enrollment in the Medicaid program if they result in financial ineligibility for
coverage. These “cliff effects” could occur if the increase in the minimum wage in a given year
is larger than the rate of inflation, as applied by the U.S. Health and Human Services (HHS) House Bill 246 – Page 4
when setting poverty thresholds. HHS updates poverty thresholds annually, based on the
consumer price index (CPI). Should the minimum wage increases proposed in the bill result in
individuals currently enrolled in Medicaid and other income support programs, such as the
Supplemental Nutrition Assistance Program, TANF, or LIHEAP, the Health Care Authority
would experience cost savings in these programs, with some savings to the general fund.
For example, for the 2023 bill that would have raised the state minimum wage to $15.5 in 2025,
HCA estimated 45 thousand New Mexicans could lose eligibility for the Medicaid program with
the proposed minimum wage increase, resulting in a total savings of $191 million to the
Medicaid program, including a savings of $52 million to the general fund.
Without updated analysis from the Health Care Authority, it is difficult to estimate the potential
fiscal implications to the Medicaid program. However, because the proposed minimum wage
increase to go into effect in 2026 is even greater, the state could similarly expect significant cost
savings. The estimates in the fiscal impact tables are based on the amounts HCA reported in
2023 and are likely conservative.
Within the Medicaid program, roughly 75 percent of costs are reimbursed by federal funds.
Thus, the net savings the state may experience in the Medicaid program will largely be realized
in federal funds.
Workforce Solutions Department
WSD estimates potential minimal operating cost increases to the Labor Relations Division
related to printing materials with updated pay rates.
WSD reports the Labor Relations Division Wage and Hour Bureau, which enforces wage
requirements, tends to see increased claims with new Minimum Wage Act requirements. WSD
notes the changes in the bill would also likely require significant outreach and education for
employers. The department notes it is unclear in the bill if WSD would be expected to perform
this function, and the agency would likely require additional funding to perform this function.
Public Schools
A variety of positions with public schools may have wages below the minimum $17/hour wage
that would take effect on January 1. These include bus drivers, security guards, custodians, food
service workers, instructional assistants, and substitute teachers. LFC estimates costs to bring the
minimum wage of these works to $17/hour to be at least $44.2 million in FY26. The Legislature
does not directly make appropriations to public schools but instead makes appropriations through
the state equalization guarantee. Should this bill pass, the Legislature would need to appropriate
additional funding to the SEG, and then PED would need to adjust the unit value accordingly to
pass funding on to schools districts to meet increased minimum wage requirements. Otherwise,
school districts would need to absorb the increased personnel costs within their operating
budgets.
House Bill 246 – Page 5
Early Childhood Education
ECECD contracts with service providers to deliver home visiting and early intervention services
that factor into wages for early childhood educators. ECECD notes if House Bill 246 were to
pass and the minimum wage raised, ECECD contractors would face costs increases:
Though the exact fiscal impacts are difficult to estimate, an increase in the minimum
wage will have significant fiscal impacts across all of ECECD’s programs. … ECECD’s
FY26 budget request include $74 million to increase baseline pay for employees working
in child care programs from $15 per hour to $18 per hour. If HB246 were to pass, similar
increased labor costs could be assumed for PreK, early intervention, and home visiting
providers.
In addition to the potential cost increases to contractual services the ECECD noted, other state
agencies could also experience contractual services cost increases and private employers work to
comply with new minimum wage standards.
Courts
By law, the Administrative Office of the Courts is required to pay jurors the minimum wage.
AOC notes an increase to the minimum wage would have an impact on the cost of jurors, which
will no longer be supported by post-adjudication fees in FY26. In FY25, AOC reported $3.7
million in anticipated juror payments at the state’s current minimum wage. AOC projects the
total will increase to $4.8 million if this bill is enacted and the minimum wage increases to
$17/hour. The courts would also experience increased costs in subsequent years as the minimum
wage is adjusted and note the agency would need additional general fund revenue to support
juror costs.
Overall, the state could experience net savings primarily because of the savings in the Medicaid
program, with most savings to federal funds. In addition to the examples noted among, the state
would also likely experience increased appropriation requests for contractual services costs
increases across state agencies. The state could experience significant costs to the general fund
totaling at least $122 million in FY27, excluding Medicaid.
SIGNIFICANT ISSUES
WSD estimates 32 thousand workers in New Mexico currently earn the state’s minimum wage of
$12 an hour. The median hourly wage in New Mexico is $20.97. Within the time allotted for bill
analysis, WSD was unable to estimate the number of individuals receiving the tipped minimum
wage, the local minimum wage, or a wage subject to exemptions that this bill would remove.
However, it is likely the cost to employers across the state to meet the new minimum wage
requirement could be significant.
EDD shared concerns with the timeline for implementation of the bill, which would move the
state’s minimum wage from $12 per hour to $17 per hour, roughly 36 percent, within nine
months. EDD notes prior increases to the state’s minimum wage were phased in at a slower rate
with no increase in the last decade requiring more than $1.50 an hour or 20 percent within one
year. In addition, EDD notes the long-term impacts of tying state minimum wages to the
consumer price index are unknown, though Colorado and Arizona have both implemented this House Bill 246 – Page 6
requirement.
ADMINISTRATIVE IMPLICATIONS
The bill would require WSD to calculate and publish the annual inflation-adjusted minimum
wage. Beginning in 2027, WSD would be required to determine the new minimum wage using
the CPI and notify employers by November 1 of the updated wage rate for the following year.
SPO reports using CPI as a component of pay for state employees beginning on January 1, 2026
may be “technically and administratively challenging, based on the current fiscal year calendar.”
CONFLICT, DUPLICATION, COMPANIONSHIP, RELATIONSHIP
HB246 relates to House Bill 305 and House Bill 119, both of which would require the state to
increase contracts to private businesses if statute requires a minimum wage increase or if
businesses are required to provide a specific benefit to employees.
The bill conflicts with House Bill 22, which prohibits employers of tipped employees from
deducting credit card processing fees from the amount of tips paid to the tipped employee.
OTHER SUBSTANT IVE ISSUES
WSD notes:
Any increase in the minimum wage would have a ripple effect on other statutes that relate
to the minimum wage. For example, an increase in the minimum wage will increase the
taxable wage base, thus increasing the amount employers pay in unemployment insurance
tax rates. Because wages are higher, unemployment benefits will also increase. If Paid
Family Medical Leave were to pass in the introduced version of House Bill 11, the
minimum benefit would also increase. Other statutes may have a similar relationship.
ALTERNATIVES
EDD recommend if the state wishes to move to a CPI-based wage adjustment model, the state
could start with a lower first year minimum wage increase.
RMG/rl/hg