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 Muñoz/Hamblen
LAST UPDATED
ORIGINAL DATE 2/13/2025
SHORT TITLE Higher Ed. Agreement Approval & Review
BILL
NUMBER Senate Bill 266
ANALYST Jorgensen
ESTIMATED ADDITIONAL OPERATING BUDGET IMPACT*
(dollars in thousands)
Agency/Program
FY25 FY26 FY27
3 Year
Total Cost
Recurring or
Nonrecurring
Fund
Affected
BOF No fiscal impact
$116.7 to
$182.2
$116.7 to
$182.2
$233.4 to
$364.4
Recurring General Fund
Total No fiscal impact
$116.7 to
$182.2
$116.7 to
$182.2
$233.4 to
$364.4
Recurring General Fund
Parentheses ( ) indicate expenditure decreases.
*Amounts reflect most recent analysis of this legislation.
Relates to House Joint Resolution 12 and Senate Bill 19
Sources of Information
LFC Files
Agency Analysis Received From
Council of University Presidents (CUP) Higher Education Department (HED) New Mexico Independent Community Colleges (NMICC) Office of the Attorney General (NMAG) State Board of Finance (BOF) University of New Mexico (UNM)
SUMMARY
Synopsis of Senate Bill 266
Senate Bill 266 (SB266) requires the boards of regents of higher education institutions (HEI) to
submit certain employment contracts to the State Board of Finance (BOF) for review and
approval. Additionally, the bill would require any contracts that limit liability or indemnify HEI
administrators to be reviewed and approved by the Attorney General (NMAG). Finally, the bill
allows NMAG to bring a civil cause of action against a member of the board of regents of a
higher education administrator for breach of fiduciary duty.
Section 3 of the act requires the state Board of Finance (BOF) to review any employment
agreement (“qualified agreement”) for an administrator defined in the bill as a president,
chancellor, vice president, vice chancellor, provost or vice provost, an athletic director and “any
other person that is performing a similar executive function.” SB266 does not apply to any Senate Bill 266- Page 2
executive of the University of New Mexico Health Sciences Center. BOF review applies to
employment contracts exceeding five years and that have a total value of 10 times the total
compensation of the HEI’s lowest-paid, full-time employee.
BOF review shall:
Ensure that any significant expenditures in the qualifying agreement do not impair the
financial standing of the [HEI];
Ensure that the qualifying agreement does not contain unwarranted terms, including
excessive severance compensation or other financial benefits;
Identify fiscally imprudent terms deemed anomalous as compared to like or similar
agreements at peer institutions.
SB266 requires BOF to complete the review within 30 days and either approve, modify, or reject
the agreement. Approval will allow the HEI to execute the contract with the administrator. If the
BOF recommends modification, SB266 states the HEI “shall modify the qualifying agreement as
provided for by [BOF].” Should BOF reject an agreement, SB266 requires BOF to clearly state
the reason for the rejection and allows the HEI to submit a revised agreement.
Section 4 of SB266 requires that any employment agreement that includes a release from liability
or indemnification should be referred to NMAG to complete a review within 30 days. NMAG
review can accept, modify, or reject an agreement that includes a release from liability or
indemnification. Approval allows the HEI to execute the contract and a rejection would require
the HEI to revise and resubmit the contract. A modification of the contract would require the
HEI to modify the agreement as provided by the AG.
Section 5 requires BOF to produce an annual report to NMAG and the Higher Education
Department that includes details of the qualifying agreements reviewed. The report is not
required to be provided to the Legislature.
Section 6 allows NMAG to bring a civil cause of action against a member of a board or regents
or an administrator for breach of fiduciary duty. The bill states the HEI shall not serve as counsel
for an administrator or regent named in an action brought by NMAG but that the HEI will
immediately submit a plan to NMAG for providing independent counsel to named parties. If the
court determines a member of the board of regents or administrator “may breach or has breached
fiduciary duty,” the court may order an administrator or regent to reimburse the state for the cost
of defending the action or impound public funds related to the breach until resolution of the
action. Finally, SB266 states that the civil actions and remedies provided “are not exclusive and
are in addition to any other actions or remedies in law or equity otherwise available.”
The effective date of this bill is July 1, 2025.
FISCAL IMPLICATIONS
SB266 requires BOF and NMAG to review pe rsonnel contracts for executive level
administrators. The additional duties will require additional staff as well as specialized contract
services. BOF reports that “given the additional oversight and reporting requirements imposed
on the Board of Finance by SB266, the Board of Finance staff estimate the need for additional
legal support and FTE.” BOF estimates cost for administration to be approximately $47.3 Senate Bill 266- Page 3
thousand and between $69.4 thousand and $134.9 thousand for outside legal counsel, for a total
cost between $116.7 thousand and $182.2 thousand as reflected in the estimated additional
operating budget table.
SB266 would require NMAG to perform review of certain contracts, but the agency did not
estimate an operating budget impact.
BOF notes the provisions of SB266 could create cost savings to the state should the process
“prevent financial losses, waste, or abuse.” These potential savings cannot be estimated and
therefore are not included in the “Estimated Additional Operating Budget Impact” table.
SIGNIFICANT ISSUES
HED and BOF note the additional review process for executive-level contracts will likely slow
the hiring process and possibly result in top candidates accepting positions elsewhere.
The University of New Mexico states:
The bill creates the right of [NMAG] to pursue civil action against regents and
community college board members (in the jurisdiction of the state education institution or
in 1st Judicial District) despite the fact regents of state educational institutions may not be
held personally liable in any actions arising based upon a claim for damages arising out
of an act or failure to act of that board of regents. 21-1-18 NMSA 1978.
The language in SB266 states that an HEI “shall modify the qualifying agreement as provided for
by the state board of finance.” This provision seems to give BOF the ability to set the terms of
the employment contract through the modification process.
Under the provisions of SB266, BOF and NMAG would take a more active role in approval of
executive level contracts, a departure from current practice of leaving this responsibility solely in
the control of the board or regents. The constitution of New Mexico states, “The legislature shall
provide for the control and management of each of the institutions … by a board of regents for
each institution.”
ADMINISTRATIVE IMPLICATIONS
BOF states training will need to be held for the board so it can best consider qualifying
agreements.
Section 3(B)(3) of SB266 requires BOF to “identify fiscally imprudent terms deemed anomalous
as compared to like or similar agreements at peer institutions.” However, there is no definition of
a peer institution. Fulfilling this requirement will likely require BOF to compare contracts with a
nationwide set of institutions, as well as determine what set of these institutions qualify as peer
institutions.
CONFLICT, DUPLICATION, COMPANIONSHIP, RELATIONSHIP
SB266 is related to House Joint Resolution 12, which proposes amending the constitution to add
an explicit fiduciary duty of regents to the institution and states the Legislature may provide for
additional duties and may define the scope of boards of regents and alter the process for regent
removal. Senate Bill 266- Page 4
SB266 also relates to Senate Bill 19, which provides for additional training for members of
boards of regents.
TECHNICAL ISSUES
The New Mexico Independent Community Colleges (NMICC) notes, “It appears SB266 removes
authority from both appointed boards and elected boards as both are given the statutory authority
to employ and set compensation for the institutional president.” This could be in conflict with
21-3-7 NMSA 1978 and 21-13-10 NMSA 1978 which both deal with board of regent authority.
HED notes several technical issues, including:
The provisions in SB266 that create oversight of institutions by the Board of Finance and
the Attorney General would also require a change to other existing statute, including 21-
3-7 NMSA 1978. [Powers of boards of regents; employment of superintendent or
principal and teachers; courses of study; admission; nonresident tuition.] Said boards of
regents shall have full and complete power and control over their respective normal
schools. [universities] With respect to the institutions named in the Constitution of New
Mexico, those provisions in SB266 may also be in conflict with the provision in Article
XII, Section 13 of the Constitution of New Mexico that states that the legislature shall
provide for the control and management of each of the institutions by a board of regents
for each institution.
There is also a conflict with 21-1-18 NMSA 1978. [No personal liability for official
actions.] Members of the boards of regents of the educational institutions of the state
shall not be held personally liable in any action at law based upon a claim for damages
arising out of any act or failure to act of that board of regents.
The language in SB266 that refers to "state educational institutions or community
colleges” would be simpler if "public postsecondary educational institutions” was used to
refer to all the schools this bill tries to cover. This could also help to clarify the status of
branch campuses. Branch campuses have a community college role and mission, but are
under the governance of the board of regents of their parent university. They also have
separate statutory authorization. It would be clearer to use the term public postsecondary
educational institutions that would encompass the constitutional institutions, the branch
campuses, and the independent community colleges. “Special schools” would also need
to be included for the New Mexico School for the Blind and Visually Impaired and the
New Mexico School for the Deaf.
OTHER SUBSTANT IVE ISSUES
NMICC reports:
Postsecondary institutions must have institutional accreditation awarded by a recognized
regional accrediting body in order to receive federal funds. New Mexico’s public post-
secondary institutions are accredited by the Higher Learning Commission (HLC). To be
eligible for accreditation, each institution must demonstrate it meets all 19 HLC
eligibility requirements. SB266 may be perceived as imposing an external influence on
the institution and eliminating the board’s authority to engage and dismiss the chief
executive officer. If it is determined the boards do have an undue external influence Senate Bill 266- Page 5
placed upon them, the post-secondary institution’s institutional accreditation is at risk. If
an institution does not have regional accreditation – they cannot receive any federal
funding, including student financial aid.
The Council of University Presidents states:
SB266 presents a clear violation of the New Mexico constitutional delegation of authority
to state educational institutions to manage and control their own affairs. The Legislature
lacks authority to appropriate nonstate funds to institutions of higher learning or to
control the use thereof through the power of appropriation.
BOF reports:
SB266 does not prohibit the Attorney General from taking action for breach of fiduciary
duties after the State Board of Finance has approved an agreement. To the extent the
Attorney General’s office takes action against based on an agreement approved by the
Board of Finance, other regents, Board of Finance Staff, and Attorney General staff may
become open to third-party (i.e., students and/or professors) aiding and abetting claims.
BOF further states: “As written, SB266 may require universities and community colleges to pay
for the costs of defending regents, members, and/or administrators against any suits instituted for
breach of fiduciary duties and pay any settlements or final judgments resulting therefrom.”
CJ/hj/hg