On March 11, Gov. Michelle Lujan Grisham signed in into law Senate Bill 241 which is the $11.1 billion dollar budget and tax package enacted by the 2026 New Mexico legislature which was convened on January 20, 2026 and adjourned on February 19, 2026. The $11.1 billion state budget for fiscal year 2027 that will begins on July 1 funds higher education, universal child care, road improvements, economic development initiatives and more.
The governor also signed Senate Bill 240, the capital outlay bill, and House Bill 248, the general obligation bonds bill, providing more than $1.5 billion for schools, roads, housing, community centers and water conservation. The spending plan and a tax package includes hefty incentives for New Mexico physicians.
Governor Lujan Grisham used her line-item veto authority to eliminate budget provisions, including language that child care assistance be prioritized for low-income families. Lujan Grisham vetoed two bills, including a measure changing the process for how the state responds to wildfires, floods and other natural disasters and “pocket vetoed” a bill that would have modified the space commission working group.
$11.1 BILLION DOLLAR BUDGET
The $11.1 billion general fund budget marks an increase of $339.5 million, or 3.1%, compared to the FY 2026 budget, while leaving reserves at 26.4%. The state budget contains funding for a number of high-profile state programs, including $300 million for higher education projects, $160 million for the nation’s first statewide universal child care program and $110 million for statewide housing initiatives.
Notable major items in the budget include the following:
- $300 million for major higher education projects.
- $255 million for water and natural resource initiatives.
- $210 million for transportation programs and projects.
- $175 million for statewide housing and homelessness initiatives.
- $160 million for year one of universal child care.
- $150 million for quantum initiative.
- $35 million for career technical education.
- $29 million for reading and math intervention programs.
- $20 million for education fellows programs.
The $160 million for year one of universal child care was initially opposed by the legislature. An initial proposal from the House of Representatives called for New Mexican families with a household income of 400% or more of the federal poverty level to pay mandatory co-pays. Governor Lujan Grisham argued that such a funding mechanism was, by definition, not universal. Funding for the initiative ultimately came in a different bill, which only subjects higher-earning families to co-pays under certain signs of economic decline, including inflation and declining oil prices.
CAPITAL OUTLAY
The governor signed Senate Bill 240, the capital outlay bill, and House Bill 248, the general obligation bonds bill, providing more than $1.5 billion for schools, roads, housing, community centers and water conservation, among others. The state’s capacity for non-recurring spending, which includes one-time expenditures like large construction projects, is strong. The $1.25 billion in capital outlay projects includes nearly $550 million for a new University of New Mexico School of Medicine, $75 million for the Las Vegas behavioral health institute and $20 million for state parks.
Highlighted projects include the following:
- $546 million for the UNM School of Medicine.
- $75 million for the behavioral health institute in Las Vegas, New Mexico.
- $20 million for state parks.
- $20 million for public safety.
- $17.6 million for a reforestation center in Mora County.
- $10 million for the homeland security emergency operation center.
- $10 million for the child care facility revolving loan fund.
- $10 million for early child care facilities at higher education institutions.
TAX PACKAGE
The governor also signed Senate Bill 151, the omnibus tax package. Senate Bill 151 does not raise any taxes on New Mexico families. Lujan Grisham signed off on this year’s bill that includes a grab bag of tax breaks and policy changes. Specifically Senate Bill 151 includes a $10,000 personal income tax credit for physicians who practice full-time in the state and a $4 million annual tax credit for local news organizations.
The Omnibus Tax Package bill includes the following provisions:
- Physician income tax credits to boost healthcare recruitment and retention.
- Extension of the high wage jobs tax credit, a recruitment tool for companies bringing high-paying jobs to New Mexico.
- A new gross receipts tax deduction for affordable multifamily housing construction.
- Income tax credits for local news publications and employers of local journalists
- Decouples components of New Mexico’s corporate income tax from certain new federal deductions.
1% SALARY INCREASE FOR STATE WORKERS INCLUDED IN TAX PACKAGE
The Omnibous Tax Bill includes a 1% salary increase for state workers and teachers, which was added to the bill by the state House after being removed in a Senate committee. In her executive message to lawmakers, Lujan Grisham said she supports the pay raise for state employees, which will take effect on July 1, but described it as an “odd” decision to include it in tax legislation. The governor said this in a statement:
“While I assume the Legislature did not want to create a logjam in the waning days of the 30-day session, rolling this provision into the tax bill created more confusion than necessary.”
Lujan Grisham also expressed concern that a provision in the tax package to decouple parts of the state’s corporate income tax system from the federal tax code could lead to “double taxation” on some businesses. Notwithstanding, she did not strike out the provision from the tax bill, instead leaving it in place to take effect in January.
BILLS VETOED
The New Mexico Legislature enacted 74 bills during the 30-day session that ended February 19. In all, Governor Lujan Grisham signed 71 of the 74 bills approved by lawmakers during the 30-day session that ended Feb. 19. The Postscript to this article contains a complete listing of all 71 Bills signed into law by the Governor.
The Governor vetoed 3 bills with one of those being a “pocket veto”. The three vetoed bills are:
- House Bill 180: Creates a new process for funding natural disaster response efforts. The Governor said House Bill 180, would have made responding to natural disasters more difficult by imposing a cap on such spending without legislative approval. The governor authorized nearly $257 million in emergency spending in the last budget year. Harlan Vincent, R-Glencoe, one of the sponsors of Bill 180, said he was disappointed by the governor’s veto, but expressed gratitude that $21 million in state matching funds for parts of New Mexico covered by federal disaster declarations was left in place in the budget bill. Rep. Vincent said the funding could be used to help relocate houses in the Ruidoso area after wildfires and subsequent flooding in the area over the last two years.
- House Bill 153: Establishes financial incentives for using low-carbon construction materials.
- House Bill 96: Modifies existing space commission working group. This bill was a “pocket veto” meaning the Governor simply decided not to sign it with no explanation given and not to veto it.
The governor vetoed upwards of $21 million in proposed spending from the budget bill, including $1 million for a proposed sports hall of fame and an additional $500,000 from a proposed lowrider museum in Española.
As she has done in previous years, the governor also vetoed some budgetary language that sought to impose strict timelines and other restrictions on certain legislative appropriations.
The governor’s use of her veto pen was significantly less than in previous years. Last year, Lujan Grisham vetoed 35 bills passed by lawmakers. The ability for governors to pocket veto bills could be eliminated starting next year, if state voters pass a proposed constitutional amendment on the issue in November.
GOVERNOR’S STATEMENT
Lujan Grisham, who is set to step down from office at the end of this year, specifically cited investments in universal child care, public safety and health care as hallmarks of her administration. Gov. Michelle Lujan Grisham said this in a statement:
“I’m signing this budget today as a commitment to New Mexico’s long-term success and a promise to keep moving our state upward. … Over the last seven years, we have fundamentally redefined New Mexico’s future by prioritizing historic investments in universal child care, health care, public safety and more while achieving record job growth and the nation’s largest drop in child poverty. … We’ve built a strong foundation of opportunity for New Mexico families, and while this budget marks a massive leap forward, our work is far from finished.”
TWO BALLOT INITIATIVES
In November’s general election, voters will decide on important ballot questions, including whether to eliminate the pocket veto, which allows a governor to ignore a bill without signing or formally vetoing it, and whether legislators should receive a salary of around $68,000 a year, as New Mexico is currently the only state that does not pay its lawmakers.
LEGISLATOR’S REACTION
State Representative Nathan Small, D-Las Cruces, Chairman of the influential House Appropriations and Finance Committee, said the Legislature will work with the governor’s administration on implementing appropriations. He also said the budget bill would set up New Mexico’s next governor for success, despite uncertainty over oil prices and state revenue levels. Small said this
“I think that’s an issue we’re going to dig deeply into. … The new governor will come into office and will have the opportunity — and the responsibility — to hit the ground running.”
“Budgets reflect priorities. This one reflects our commitment to New Mexico families. The budget we passed and the Governor signed into law invests in key areas that make a real difference in people’s lives.
- In healthcare, the budget delivers $11.1 billion in state and federal funding for Medicaid and dedicates $254 million to lower out of pocket healthcare costs, helping families afford coverage and supporting hospitals and providers across our state.
- In education and childcare, we are investing $4.7 billion in public education and directing nearly $80 million to build a sustainable universal childcare system, including funding to ensure early childhood educators are paid a living wage.
- The budget also includes major investments in housing, dedicating $100 million to address housing shortages and homelessness while continuing funding for programs that help families find stable housing.
- We also made important investments in community safety, public lands, water infrastructure, economic development, and clean energy to support long term growth and stability for New Mexico communities.”
Delivering budgets like this requires strong … leadership in the Legislature.”
COMMENTARY AND ANALYSIS
Governor Michelle Lujan largely left intact the $11.1 billion budget bill that will increase state spending by about $339.5 million, or 3.1%. Additionally, the Governor already signed into law the Medical Malpractice Reform Bill and the Universal Child Care Bill. What this means is there will be no need for a special session will likely be required before a new state fiscal year begins in July.
Thirty day legislative sessions are commonly referred to as the “short session”. Thirty day sessions are supposed to be reserved for fiscal matters with the Governor setting the agenda. However, for the 2026 Legislative Session, Governor Lujan Grisham authorized a number of non-budgetary matters in her final regular session as governor.
The priorities the Governor allowed to be included in during the 2026 legislative session and which were enacted and which she signed into law included medical malpractice reform bill, the education and literacy bills and free, universal child care.
In a very real sense her legacy has been solidified with enactment of universal childcare and changes to the medical malpractice laws both being the most contentious issues. Both measures have now been signed into law and will be the final defining and enduring legacy of Governor Michell Lujan Grisham. She has made it clear that there should be no need for a special session.
There is no doubt that Governor Michelle Lujan Grisham can be proud of the budget passed and what was accomplished during her last legislative session as well as her two terms in office. She has left the state in better condition than her predecessor.
Best wishes as Governor Lujan Grisham prepares to leave office on January 1, 2027 when a new Governor will be sworn in.
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POSTCRIPT
The list of the 71 bills signed into law by Governor Michelle Lujan Grisahm is as follows:
- House bill 1: Feed bill
- Senate bill 19: School finance unit value reset
- Senate bill 1: Enacting the Interstate Medical Licensure Compact
- Senate bill 2: Financing of highway projects
- House bill 9: Enacting Immigrant Safety Act
- House bill 50: Enacting the Social Work Licensure Interstate Compact
- Senate bill 104: Removal of Wildlife Commission members
- House bill 253: Public education changes
- House bill 285: Disabled veteran property tax changes
- Senate bill 21: Medicare supplement open enrollment
- Senate bill 111: Motor vehicle code “personal info”
- Senate bill 132: Doit software replacement plan & funding
- Senate bill 143: Update certain agricultural fees
- House bill 43: Disability & survivor pensions changes
- House bill 61: Aggravated battery on police officer
- House bill 64: Public project revolving fund appropriations
- House bill 154: Advanced energy product definition
- House bill 165: Payment of certain IRB special assessments
- House bill 255: Public safety workforce building program
- Senate bill 40: Driver privacy and safety act
- Senate bill 41: Statute of limitations for certain sex crimes
- Senate bill 43: Parole requirement changes
- Senate bill 58: Extend property tax exemption period
- House bill 7: Apprenticeship assistance act transfers
- House bill 95: Additional second judicial district judgeship
- House bill 108: Watershed district taxes and directors
- House bill 109: Water project fund changes
- House bill 111: Water law violation maximum penalty
- House bill 158: Plans on use of certain funds
- House bill 270: Contributions to apprentice & training PGMS.
- House bill 291: Tax changes
- Senate bill 38: Fees on registered pet food
- Senate bill 48: State fairgrounds district bonds
- Senate bill 152: Low-income telecomm. assistance program
- House bill 63: NMFA water project fund projects
- House bill 128: Firefighter occupational disease disablement
- House bill 184: Investment of conservation & legacy funds
- House bill 200: New homes for New Mexico program
- House bill 4: Health care affordability fund distributions
- House bill 34: School nurse licensure provisions
- House bill 38: Wheelchair insurance coverage
- House bill 156: Repeal special session vaccination laws
- House bill 306: Prohibit certain health care facility fees
- House bill 99: Medical malpractice changes
- House bill 66: Health care professional loan fund changes
- Senate bill 3: Commitment procedure changes & definitions
- Senate bill 20: Prior authorization & prescription drugs
- Senate bill 30: Reporting of induced abortions
- Senate bill 101: Health care delivery & access act repeal
- House bill 8: Higher education major projects fund
- House bill 30: Teacher residency act changes
- House bill 47: School employee insurance programs
- Senate bill 29: Math requirements for teaching license
- Senate bill 34: High quality literacy instruction act
- Senate bill 64: Create Office Of Special Education
- Senate bill 193: Acequia & ditch infrastructure fund transfer
- Senate bill 73: Driver’s ed requirements
- Senate bill 264: Public peace, health, safety & welfare election rights & troops at elections
- House bill 247: Capital outlay changes
- House bill 80: Oil & gas conservation tax act changes
- House bill 124: New Americans division in WSD
- Senate bill 96: Regulated child care zoning requirements
- Senate bill 241: Child care assistance program act
- House bill 70: PRC support agency
- House bill 248: General obligation bonds
- House bill 256: Defibrillators at school athletic events
- House bill 23: General appropriation act of 2026 / Dept. Of Transportation Act of 2026
- House bill 332: Capital outlay reauthorizations
- Senate bill 151: Corporate income tax changes
- Senate bill 273: Public peace, health, safety & welfare correction facility loss of revenue
- Senate bill 240: Capital outlay projects
Links to quoted or relied upon news sources are here:
https://www.krqe.com/news/politics-government/legislature/governor-signs-states-11-1b-budget/
https://sourcenm.com/2026/03/11/new-mexico-gov-lujan-grisham-signs-11-1b-state-budget/
LINKS TO RELATED NEWS AND COMMENTARY ARTICLES ARE HERE: