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 Woods
LAST UPDATED
ORIGINAL DATE 02
/01/25
SHORT TITLE GSD Insurance Coverage Limits
BILL
NUMBER Senate Bill 182
ANALYST Fischer/Simon
ESTIMATED ADDITIONAL OPERATING BUDGET IMPACT*
(dollars in thousands)
Agency/Program
FY25 FY26 FY27
3 Year
Total Cost
Recurring or
Nonrecurring
Fund
Affected
Risk
Management
Funds
$0 $0 $0
Net $0 fiscal
impact (See
Fiscal
Implications)
Recurring
General Fund,
Other State
Funds, Local
Government
Funds
Total $0 $0 $0
Net $0 fiscal
impact (See
Fiscal
Implications)
Recurring
General Fund,
Other State
Funds, Local
Government
Funds
Parentheses ( ) indicate expenditure decreases. *Amounts reflect most recent analysis of this legislation.
Sources of Information
LFC Files
Agency Analysis Received From
General Services Department (GSD)
SUMMARY
Synopsis of Senate Bill 182
Senate Bill 182 creates a new subsection of statute under Section 15-7-3 NMSA 1978 defining
the limits of risks to be covered by the public liability fund, the workers’ compensation retention
fund, and the public property reserve fund. The limits are $500 thousand for property damages,
$1.05 million for general liability, and the limit defined in the New Mexico Civil Rights Act
(currently over $2.3 million and increasing each year with inflation) for civil rights liability. The
changes in SB182 were recommendations of a 2023 LFC program evaluation, “Major Funds of
the Risk Management Division.” This bill does not contain an effective date and, as a result,
would go into effect 90 days after the Legislature adjourns, or June 20th, 2025, if enacted.
FISCAL IMPLICATIONS
The bill would increase transparency of payouts for large claims from the state’s risk
management funds by requiring agencies with large claims to request additional appropriations Senate Bill 182 – Page 2
directly from the Legislature, rather than relying on the risk management funds to pay these
claims. Requiring agencies to directly request these funds serves an important accountability and
loss prevention function, allowing the Legislature to exercise its oversight authority to determine
if the agency has adopted sufficient policy changes or reforms designed to prevent future claims.
However, agencies would need to request additional general fund appropriations to cover
settlements above the risk limits, shifting some settlement payments from risk management
funds to the general fund. This would reduce risk management rates for state agencies,
decreasing the need for general fund appropriations in agency operating budgets. Overall, the
shift in funds would be expected to even out, with the rise in direct appropriations for settlements
offset by the reduction in RMD rates, resulting in a net $0 fiscal impact.
Settlements over the caps outlined in SB182 are rare but impactful. In FY23, RMD settled two
civil rights claims against New Mexico State University for $4.1 million and $3.9 million and
another against the Children, Youth and Families Department for $3.7 million. In FY24, RMD
settled two civil rights claims against the Children, Youth and Families Department above the
amount defined in the New Mexico Civil Rights Act ($2.29 million for FY24)—one for $5.5
million and another for $4.9 million. Implementing the risk limits defined in SB182 would not
require significant staff time and resources outside of normal Risk Management Division (RMD)
staff duties.
RMD did note that the only material impact Senate Bill 182 would have is to limit its ability to
provide reinsurance for catastrophic losses of property in excess of $500 thousand. Currently,
RMD procures property reinsurance for state-owned real estate (i.e., office buildings) and some
highly specialized, high-value items (i.e., certain scientific and medical equipment) for losses
over $500 thousand. This includes insurance up to the federal liability tort caps of over $322.9
million for rail passenger liability for the Rail Runner. As with the caps for general liability and
civil rights liability, if a state agency experienced a loss of property in excess of $500 under
SB182, it would need to absorb the loss and request appropriations from the Legislature if it
wished to replace or repair that property.
SIGNIFICANT ISSUES
State law limits lawsuits and claims against New Mexico’s state agencies in both scope and
amount of damages that any plaintiff may be awarded. However, the details of each are
determined by the specifics of the claim and under what part of state statute or U.S. law they fall.
The two primary pieces of New Mexico statute related to claims against the government are the
New Mexico Tort Claims Act and the New Mexico Civil Rights Act.
In addition to state law, individuals can bring cases against the state claiming deprivation of
federal civil rights as granted under the Bill of Rights of the U.S. Constitution, which contains
many of the same provisions as the New Mexico Bill of Rights. In this case, the federal law
governing violations of U.S. Constitutional rights by state governments (42 U.S.C. § 1983) does
not cap the amount of damages a plaintiff might be awarded, nor does it limit the use of punitive
damages.
Unlike most private insurance, the Risk Management Division (RMD) of the General Services
Department provides unlimited coverage for state agencies against liability claims. This provides
comprehensive coverage for state agencies and other entities, even in the face of “nuclear” civil
rights payouts stemming from federal civil rights violations. However, providing unlimited Senate Bill 182 – Page 3
coverage also has several downsides for the state’s risk funds. For one, the absence of coverage
limits can introduce a level of moral hazard, encouraging less careful behavior by the insured
agency, which feels little to no penalty for its risky actions. Additionally, where there is no
coverage limit, plaintiffs suing the state might be less willing to settle for reasonable amounts
when they know RMD will cover any judgment quickly, potentially leading to higher settlement
demands and even more protracted and expensive litigation.
Establishing insurance limits would not eliminate the risk of judgments or settlements at prices
beyond the limit, but it would require an additional appropriation by the Legislature to the
agency to cover the difference. This requirement would, at a minimum, slow the availability of
damages payments to the plaintiffs and their attorneys, reducing the attractiveness of these
payments. Some other states, including Washington, Ohio, Maine, and Oklahoma, have taken
this approach, providing liability coverage for settlements only up to a certain limit, such as
those delineated in New Mexico’s Tort Claims Act.
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