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 Lente
LAST UPDATED
ORIGINAL DATE 2/22/2025
SHORT TITLE Higher Education Major Projects Fund
BILL
NUMBER House Bill 449
ANALYST Jorgensen/Carswell
ESTIMATED ADDITIONAL OPERATING BUDGET IMPACT*
(dollars in thousands)
Agency/Program
FY25 FY26 FY27
3 Year
Total Cost
Recurring or
Nonrecurring
Fund
Affected
HED No fiscal impact $250.0
Indeterminate
but minimal
$250.0 Recurring General Fund
Total No fiscal impact $250.0
Indeterminate
but minimal
$250.0 Recurring General Fund
Parentheses ( ) indicate expenditure decreases.
*Amounts reflect most recent analysis of this legislation.
Sources of Information
LFC Files
Agency Analysis Received From
Higher Education Department (HED) New Mexico Independent Community Colleges (ICC)
SUMMARY
Synopsis of House Bill 449
House Bill 449 (HB449) creates the higher education major projects fund to be administered by
HED to support instruction and general operations (I&G), as well as student housing and student
life projects. The bill requires institutions to provide matching funds from non-state sources for
design and construction.
Eligible projects to be funded are construction and design for I&G and research projects at four-
year institutions costing over $50 million and student housing and student life projects at four-
year, two-year, and tribal colleges with no minimum cost. HB449 requires a 25 percent
institutional match for project design for I&G projects at four-year institutions and 10 percent for
construction for I&G projects. For student housing and student life projects, the bill requires both
four-year and two-year institutions to provide a 50 percent match for project design and requires
two-year institutions to provide a 50 percent match and four-year institutions to provide a 20
percent match for construction. HED may recommend the Legislature waive matching
requirements should the department find the institution does not have sufficient funds available.
HB449 requires an institution to complete 50 percent of design prior to receiving funding for
construction and further requires student housing and student life projects to adhere to space and House Bill 449 – Page 2
design standards to be developed by HED.
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
HB449 creates a statutory framework for a fund to support major capital projects at higher
education institutions as well as student housing and student life projects, which are not currently
eligible for funding through the statewide higher education capital outlay process. HB449 does
not contain an appropriation and there is no appropriation to the fund in the 2025 General
Appropriation Act. Capitalization of the fund would, thus, depend on future legislative
appropriations.
Under the provisions of HB449, HED would be required to develop space and design standards
for student housing and student life projects. HED notes, “For the department to fulfill the
requirements of the act, [HED] would need to secure funding to hire a consultant group in order
to assist with the development of space standards.” The statewide capital outlay package includes
a $250 thousand appropriation to the department for this purpose. The appropriation is
contingent on passage of HB449. After HED creates the space and design standards, the
department will have to amend its process to reflect the newly eligible projects. This cost is
likely to be indeterminate but minimal as shown in the estimated additional operating budget
impact table for FY27.
SIGNIFICANT ISSUES
I&G projects for higher education institutions are currently funded through the statewide capital
outlay process. Historically, funding for major new construction has been appropriated every
other year, when voter-approved general obligation bonds (GOB) are available. General
obligation bonds are the only dedicated source of state funding for higher education capital
projects. While institutions receive capital outlay in non-GOB years, they must compete for
those funds with state agencies and typically receive smaller appropriations. Additionally,
auxiliary projects, including student housing and amenities, are not eligible for statewide capital
outlay.
+[]
+[]
0%
10%
20%
30%
40%
50%
60%
70%
80%
90%
Increase in Costruction Costs v. GOB Capacity, 2022-2024
Increase in Higher Ed New Construction Per Sq Ft Costs (based on requests)
Increase in GOB Capacity
Source: LFC f iles House Bill 449 – Page 3
General obligation bond capacity is insufficient to meet demand to replace and repair higher
education facilities. Construction costs have risen steeply over the last several years and have far
outpaced modest annual increases to general obligation bond capacity. From 2022 to 2024,
requests for new construction projects from higher education institutions increased by 81 percent
on a per square foot basis. General obligation bond capacity rose only 12 percent over the same
period. This has made it increasingly difficult to fully fund new construction in any single year.
When the state’s larger institutions pursue major projects, which may now surpass $100 million
in costs, it strains the state’s ability to not only fund those projects but to fund smaller
renovations, new construction, and systems replacement projects at other institutions.
In the 2024 general obligation bond cycle, for instance, the University of New Mexico made a
$110 million request for a single project, which if fully funded that year would have consumed
roughly half the dollars appropriated to all institutions in the GOB bill. Instead, the project was
only partially funded and the institution is seeking additional funds this session, when dollars for
higher education are more limited because GOB funds are not available. The problem is likely to
become more acute in the 2026 GOB cycle because construction costs have continued to rise.
Though two-year institutions would not be eligible to pursue I&G projects through the new fund,
this new funding source for major projects would relieve pressure on GOB funds, providing
additional capacity for renovations and more minor new construction at all institutions.
Additionally, the bill’s framework for phasing design and construction funding would ensure
projects are more fully developed and shovel-ready when institutions request construction
funding. This would provide the Legislature with more transparency on cost drivers and reduce
the need for supplemental appropriations over multiple years to complete projects.
Student life and housing projects have typically been funded through student fees, but growth in
construction costs has reduced fees as an effective revenue source. Expansion of the opportunity
scholarship has compounded the problem by creating pressure on institutions to not raise tuition
and fees. Additionally, higher education institutions have lost 26 percent of total enrollment
since 2011, when enrollment peaked. Reduced student populations have limited higher education
institutions’ ability to raise funding necessary to maintain and improve on-campus facilities,
which makes it more difficult to recruit and maintain an on-campus population. HB449 would
provide an opportunity to address these challenges. The design and space standards the bill
directs the Higher Education Department to develop would provide a safeguard against
overbuilding, given enrollment trends, and provide a consistent standard for project costs the
state will participate in. State-funded public school construction adheres to such standards in
New Mexico but no similar system currently exists for higher education projects.
HED reports, “Because the department does not currently support student housing and student
life projects through our current capital outlay funding recommendation process, the deferred
maintenance backlog on these facilities may be significant.”
The varying matching requirements in HB449 reflect the different revenue sources available to
four-year and two-year institutions. Four-year institutions do not receive funding through local
property taxes. Four-year institutions receive 55 percent of their revenue from state
appropriations and 34 percent through tuition and fees. Two-year institutions receive the largest
portion of their revenue, 46 percent, through local property taxes, 39 percent through state
appropriations, and 12 percent through tuition and fees. The ability of the Legislature to waive
match requirements provides flexibility but requires substantial due diligence by the Higher House Bill 449 – Page 4
Education Department and the Legislature to determine an institution cannot afford its match.
ADMINISTRATIVE IMPLICATIONS
HED would need to promulgate new rules or amend existing rules as a result of enactment of
HB449. Additionally, HED “would need to re-assess our existing [capital outlay review] process
to see how to best incorporate the requirements of HB449 to ensure construction phase funding
for major instructional and general and research purposes and student housing and student life
projects are considered.”
CONFLICT, DUPLICATION, COMPANIONSHIP, RELATIONSHIP
Relates to Senate Bill 280, which would allow the New Mexico Military Institute to receive
public school capital outlay funding.
TECHNICAL ISSUES
The New Mexico Independent Community Colleges (NMICC) notes the definition of “two-year
institution” is sufficiently broad it could include private institutions. The section of New Mexico
statutes that authorize community colleges, both independents and branches, should be cited.
OTHER SUBSTANT IVE ISSUES
NMICC states HB449 excludes two-year institutions from the instruction and general and
research funding. While most capital projects at New Mexico’s public community colleges are
under the $50 million threshold, a few projects do exceed $50 million. However, those projects
could still seek funding through the existing capital outlay process.
CC/hj/hg