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 Brand
t/Townsend/Sharer/Scott/Lanier
LAST UPDATED
ORIGINAL DATE 2/17/25
SHORT TITLE Education Freedom Account Act
BILL
NUMBER Senate Bill 286
ANALYST Liu/Mabe
APPROPRIATION*
(dollars in thousands)
FY25 FY26
Recurring or
Nonrecurring
Fund
Affected $100,580.0 Recurring General Fund
Parentheses ( ) indicate expenditure 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
$115,721.9 $115,721.9 $231,44 3.9 Recurring General Fund
Parentheses ( ) indicate expenditure decreases.
*Amounts reflect most recent analysis of this legislation.
Relates to House Bill 387, House Bill 388
Sources of Information
LFC Files
Legislative Education Study Committee (LESC) Files
National Conference of State Legislatures (NCSL)
Economic Policy Institute (EPI)
Agency Analysis Received From
New Mexico Attorney General (NMAG)
Office of State Auditor (OSA)
Education Trust Board (ETB)
School for the Blind and Visually Impaired (NMSBVI)
Agency Analysis was Solicited but Not Received From
Public Education Department (PED)
Regional Education Cooperative (REC)
Taxation and Revenue Department (TRD)
Senate Bill 286 – Page 2
SUMMARY
Synopsis of Senate Bill 286
Senate Bill 286 (SB286) appropriates $100 million from the general fund for an education
freedom account program and further appropriates $580 thousand from the general fund to the
Public Education Department (PED) to administer the program.
The education freedom account program will provide state funding for private school and other
qualifying expenses for eligible students. 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 appropriation of $100.6 million contained in this bill is a recurring expense to the general
fund. Any unexpended or unencumbered balance remaining at the end of the fiscal year shall not
revert to the general fund.
Provisions of the bill authorize PED to determine how much each eligible student can receive,
which is equal to the average amount spent by school districts and charter schools on public
school students in the same grade, weighted by special education and at-risk program units, if
applicable. On average, each public school student generates about 1.8 program units for basic
membership, at-risk status, and special education, which could make the cap for education
freedom accounts effectively $11.8 thousand based on the current unit value.
In FY25, approximately 23.8 thousand students attended a nonpublic New Mexico school
accredited by a PED-recognized agency. According to Private School Review, an online
directory of private schools, the average private school tuition in New Mexico in FY25 was
$8,961 per year, ranging from $2,690 at Grace Baptist Academy to $28.1 thousand at
Albuquerque Academy. LFC staff estimate the costs to provide education freedom accounts for
all nonpublic students (accounting for a cap of $11.8 thousand and average costs) could be as
high as $215.7 million.
PED may realize some cost savings from variations in tuition rates across private schools;
however, these savings could potentially be lost if private schools increase tuition rates to match
the maximum state rate. It is likely the demand for education freedom accounts will exceed the
available funds appropriated within this bill, which may force PED to reduce allocations for each
account.
SIGNIFICANT ISSUES
The bill creates a new section of the Public School Code titled the Education Freedom Account
Act, which includes the following provisions:
Student Eligibility: A student qualifies for an education freedom account if they:
Are a school-age resident of New Mexico,
Have not received a high school diploma or equivalent,
Are eligible for enrollment in a public school, Senate Bill 286 – Page 3
Have a family income at or below 200 percent of the federal poverty level.
Public Education Department Duties and Authority: As the program administrator, PED
must:
Approve applications year-round,
Establish an accessible application process,
Determine per-student funding based on school spending data,
Make monthly deposits into student accounts and renew annually if funds are available,
Maintain a list of approved education service providers with ratings by parents,
Provide program rules, guidance, and an annual contract for families,
Audit accounts, investigate misuse, and report fraud,
Create a payment system,
Prepare an annual report on the program for the governor, and
Create an Education Freedom Review Commission to assess qualifying expenses and
appeals.
PED has the authority to:
Contract with private entities to administer the Education Freedom Account program,
Withhold as much as 5 percent for the first two years and 3 percent after to cover
administrative costs,
Bar noncompliant education service providers,
Accept donations to cover administrative costs and fund additional student accounts, and
Establish rules for fraud reporting and provider accountability.
Parental Responsibilities: Parents must:
Apply for an Education Freedom Account,
Not enroll their child in public school,
Ensure instruction in core subjects,
Pay additional costs beyond what the state provides,
Not receive refunds from the account,
Not make payments to the account.
Education Service Provider Requirements: Providers must:
Comply with New Mexico’s Attendance for Success Act,
Be physically located in New Mexico,
Not be an online school,
Not refund, rebate, or share money with parents or students,
Provide the agreed-upon education services.
Education Freedom Account and Fund Details
Education Freedom Accounts:
Accounts cannot exceed the total cost of a student’s education for that year.
Balances revert every two years, except in special cases.
Accounts close when a student graduates, enrolls in public school, or misuses funds.
Remaining balances return to the general fund.
Education Freedom Account Fund:
Created in the state treasury.
Funded through legislative appropriations, federal grants, and investment income. Senate Bill 286 – Page 4
Does not revert to other funds at the end of the fiscal year.
Qualifying educational expenses include:
Tuition and fees at eligible private schools
Textbooks, instructional materials, and technology.
Fees for standardized testing and AP exams.
Summer and after-school programs
Public transportation to and from school.
According to the National Conference of State Legislatures (NCSL), 32 states as well as
Washington D.C. and Puerto Rico had some form of school choice legislation in 2023. Thirteen
of those states offer education savings accounts (ESA) like the ones proposed in Senate Bill 286.
Before 2021, most ESA programs were for low-income students or students with disabilities, but
many are now open to all students. The amount given to families through an ESA program is
usually tied to state per-student funding and ranges from 27 to 100 percent of the state’s per-
student spending.
Interest in school choice increased during the Covid-19 pandemic and has grown since. On
January 29, 2025, President Trump signed an executive order directing the U.S. Education
Department to issue guidance on how states can expand school choice initiatives with federal
formula and grant funds. The same day, U.S. Senate Republicans reintroduced a bill to expand
school choice with $10 billion annually for tax credits.
A report by the Economic Policy Institute (EPI) examines the fiscal impact of funding leaving
public schools through school choice programs. It highlights an issue New Mexico schools are
already facing—costs do not necessarily drop at the same rate as enrollment.
NMAG notes SB286 potentially conflicts with both the New Mexico Constitution and the U.S.
Constitution in the following instances:
New Mexico Constitution (Article XII, Section 3): The provision prohibits public funds
from supporting private schools. SB286 may conflict by directly funding private
institutions.
Moses v. Ruszkowski (2019): The New Mexico Supreme Court changed its interpretation
of Article XII, Section 3, and allowed public funds for secular textbooks but did not set a
precedent for direct tuition payments.
Article IV, Section 31: This provision prohibits state appropriations for education outside
state control. SB286 may violate this by transferring funds to private schools.
Anti-Donation Clause (Article IX, Section 14): The clause forbids state donations to
private entities. The question here is whether the bill’s direct payments could be seen as
donations.
Article XII, Section 12: This section requires a "uniform system" of public schools.
Diverting funds to private schools could challenge this mandate.
Establishment Clause (federal and state): Direct funding of religious schools may raise
constitutional concerns under the U.S. Supreme Court's precedents.
Senate Bill 286 – Page 5
ADMINISTRATIVE IMPLICATIONS
Provisions of the bill require PED to create a new grant process and determine awards for
eligible students that participate in the program. For new initiatives, PED staff have a short
timeline after legislative sessions to create grant program requirements, ready application
documents, and eventually review applications and make awards. Provisions of this bill allow
PED to contract with an organization to operate the education freedom accounts, which the
department will likely leverage given limited capacity within the agency.
The bill requires PED or a contracted organization to administer the program, create and oversee
a commission, send an annual evaluation to the governor, and audit accounts, among other
things.
CONFLICT, DUPLICATION, COMPANIONSHIP, RELATIONSHIP
SB286 relates to House Bill 387, which establishes universal education opportunity accounts,
and House Bill 388, which establishes low-income education opportunity at 200 percent the
federal poverty level.
TECNICAL ISSUES
SB286 says that appropriations will not revert to the general fund at the end of the fiscal year.
However, in Section 3, subsection G, it states that any balances in an education freedom account
shall revert to the general fund when closed.
RM/sl/hg/sgs