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 Campos
LAST UPDATED
ORIGINAL DATE 2/19/2024
SHORT TITLE Study Deficiency Appropriation Requests
BILL
NUMBER Senate Memorial 8
ANALYST Ortega
ESTIMATED ADDITIONAL OPERATING BUDGET IMPACT*
(dollars in thousands)
Agency/Program
FY25 FY26 FY27
3 Year
Total Cost
Recurring or
Nonrecurring
Fund
Affected
DFA
No fiscal
impact
Indeterminate
but minimal
No fiscal
impact
Nonrecurring
Parentheses ( ) indicate expenditure decreases.
*Amounts reflect most recent analysis of this legislation.
Sources of Information
LFC Files
Agency Analysis Received From
State Auditor (OSA) Department of Finance and Administration (DFA)
Agency Analysis was Solicited but Not Received From
State Treasurer (STO)
SUMMARY
Synopsis of Senate Memorial 8
Senate Memorial 8 (SM8) asks the Office of the State Auditor (OSA) to convene a work group—
including representatives from the Legislative Finance Committee (LFC), the Department of
Finance and Administration (DFA), the Office of the State Treasurer (STO), and other executive
branch members—to draft legislation aimed at improving financial oversight and addressing
state agency deficiency appropriation requests.
SM8 calls for:
A comprehensive study to analyze the factors driving deficiency requests.
Increased transparency in budget hearings and financial reporting.
Stronger compliance and enforcement mechanisms to prevent overspending.
A more centralized oversight role for DFA in budget management.
Legislative recommendations to improve fiscal accountability across state agencies.
This memorial 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. Senate Memorial 8 – Page 2
FISCAL IMPLICATIONS
Convening a work group to implement SM8 and study financial oversight and deficiency
appropriation requests may require OSA, LFC, DFA, STO, and other participating agencies to
dedicate staff time and resources to research, data collection, and legislative drafting. While
these efforts may be absorbed within existing agency budgets, additional costs could arise if
external consultants, expanded audit procedures, or technology updates are needed to implement
recommendations. If future legislation results from the work group’s findings, there may be
long-term fiscal impacts associated with enforcing stricter financial oversight, compliance
measures, or potential system upgrades such as improvements to the state’s financial
management system (SHARE).
DFA states that implementing SM8’s recommendations may create upfront administrative costs
but could result in long-term fiscal benefits for the state. Additionally, DFA notes enhancing
compliance and enforcement mechanisms may increase costs for state agencies to meet new
financial oversight requirements and for oversight entities to monitor compliance effectively.
The department anticipates that participation in the work group would require staff time from the
State Budget Division Director, State Controller, and senior staff from key divisions.
SIGNIFICANT ISSUES
OSA states it identified several issues related to state agency deficiency appropriation requests in
its August 2024 transparency report. The report, developed at the request of the Senate Finance
Committee (SFC) and in collaboration with LFC and DFA, found that deficiency requests had
increased by approximately $137.5 million from 2014 to 2024. However, justifications for these
requests were not always available, and when they were, they often cited overspending, failure to
adhere to budget authority, and unpaid prior-year expenditures. In October 2024, LFC asked
OSA to expand its review of budgetary control statutes, leading to a comparative analysis of
New Mexico’s statutes and budgetary controls in neighboring states. According to OSA, this
analysis, published in January 2025, formed the basis for Senate Memorial 8.
DFA provided additional context regarding the deficiency appropriations process, noting that the
OSA’s findings failed to distinguish between deficiency requests and supplemental appropriation
requests. According to DFA, while deficiency requests had increased, much of the total was due
to a single issue—the solvency of the employee health benefits fund—rather than a systemic
trend of financial mismanagement. Additionally, DFA states that many of SM8’s
recommendations are already part of the existing budgetary process. For example, deficiency
requests are discussed in legislative budget hearings, agencies are required to provide written
justification and supporting documents, and both the State Budget Division and the Financial
Control Division work together to provide oversight.
DFA also notes that any new penalties for overspending should be considered alongside potential
solutions for agencies to address deficiencies before legislative action, emphasizing that while
financial accountability is critical, imposing stricter penalties without providing agencies with
viable mechanisms to resolve budget shortfalls could lead to unintended consequences, such as
operational disruptions or the inability to meet essential service obligations. Additionally, DFA
highlights that a statewide committee in 2024 conducted a comprehensive review of the SHARE
financial system, evaluating its capabilities, limitations, and potential alternatives. The Senate Memorial 8 – Page 3
committee ultimately determined that while system improvements and updates may be
beneficial, a full replacement of SHARE was unnecessary and would require significant financial
investment without clear long-term benefits.
ADMINISTRATIVE IMPLICATIONS
OSA notes its role in implementing SM8 will be limited to providing recommendations rather
than directing financial operations, as direct involvement in designing state financial systems
could compromise its independence as an auditor. Instead, OSA states it will focus on offering
guidance and analysis to help build consensus among stakeholders for any proposed changes to
budgetary controls and financial oversight.
DFA anticipates that SM8 will increase administrative responsibilities across multiple agencies
by requiring the formation of a work group, enhanced audit procedures, and extensive legislative
drafting. Additionally, DFA notes that OSA may need to expand its audit procedures and internal
reviews, increasing workload demands on both OSA and agencies being audited.
AO/hj/SL2