The New Mexico Health Care Authority is looking for a boost in state funding for fiscal year 2027, as the agency continues to grapple with the anticipated effects of a federal reconciliation bill signed into law in July.
Health Care Authority Secretary Kari Armijo appeared before the powerful Legislative Finance Committee on Monday to request a 5.6% increase — or about $116 million more — in state funding for fiscal year 2027.
The enormous state agency, which administers both Medicaid and the Supplemental Nutrition Assistance Program in New Mexico, operates with more than 2,000 employees and a total annual budget of nearly $15 billioncq — 85% of which comes from the federal government.
Armijo’s requested increase in funding is largely driven by expected costs to implement the multitrillion-dollar budget reconciliation law, which is slated to slash discretionary spending through 2034, with cuts to Medicaid and SNAP among its cost-saving efforts.
“Whether you agree or disagree with the changes that are happening with Medicaid and SNAP, they are going to change the health care landscape in New Mexico one way or another,” Armijo told lawmakers.
The Health Care Authority’s presentation Monday was part of the Legislature’s annual budgeting process. Though state agencies typically present budget requests in the fall to the Legislative Finance Committee — which effectively holds the state’s purse strings — their final budgets for fiscal year 2027 will be hashed out during the 2026 legislative session.
While the federal reconciliation law affects policy through 2034, some of the law’s changes to SNAP are quickly approaching. For instance, the state will start paying a greater share of administrative expenses to manage the program beginning in October 2026, according to an analysis by the Legislative Finance Committee.
There are three major changes coming for the Health Care Authority’s Income Support Division, Armijo told lawmakers.
First, she said the agency will need about 260 new caseworkers to accomplish the work associated with the reconciliation law. The federal law imposed new work requirements for Medicaid recipients and mandates the Health Care Authority redetermine Medicaid eligibility twice a year, rather than once annually.
“Even though the caseloads will go down, our workload is going to increase,” Armijo said.
The Health Care Authority also has to upgrade its eligibility and enrollment systems to comply with new federal rules.
And finally, the reconciliation law requires states to pay back a share of extra costs if they issue SNAP benefits incorrectly — a new requirement Armijo said could cost New Mexico up to $150 million.
This calculation is based on the state’s payment error rate, which reflects accidental mistakes made while calculating federal benefits rather than intentional fraud. Currently, New Mexico has a payment error rate of 14.4%, above the national average of 11.7%.
Armijo said her department is hard at work trying to decrease the state’s error rate. But the Health Care Authority can’t decrease the rate too fast, either, because New Mexico’s high rate ensures it gets extra time to adjust to the new requirement.
Rep. Mark Duncan,cq R-Kirtland, argued the state can’t afford to maintain its high payment error rate.
“What can this committee do with software that would help your department out?” Duncan said. “Because when you come to us in two or three more years, I’m going to ask you the same question — who’s responsible — and no, the answer will be, ‘No, you take it out of your budget.’ ”
Even without factoring in penalty costs for a high payment error rate, the Health Care Authority’s overall request of $116 million more in funding induced some sticker shock.
Rough math by Rep. Nathan Small,cq D-Las Cruces, revealed the increase is equivalent to about 34% of the state’s surplus of “recurring new money” — currently projected around $340 million.
“We want to acknowledge the success and rapid pace of change that you and the department have responded to — and that will and should inform how we work,” Small said. “This is just sort of the overall note that kind of acknowledges our recurring challenges.”