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New Mexico’s chief legislative finance economist told lawmakers that the state’s early childhood fund could be depleted by 2048 if its current funding path continues. He said payouts now exceed returns and urged lawmakers to use other recurring revenue and slow withdrawals; state officials say they are focused on sustaining the universal childcare program.
New Mexico’s chief legislative finance economist told lawmakers this week that the state’s Early Childhood Education and Care Fund could be depleted by 2048 if its current funding path continues, putting long-term support for the state’s universal childcare program at risk. Ismael Torres said payouts have exceeded investment returns and urged the state to find other recurring revenue and slow withdrawals.
Torres made the warning to the Legislature’s interim Economic and Rural Development and Policy Committee. He said the fund’s balance is expected to begin shrinking at an “exponential rate” by 2031 and, under the projection he presented, would be empty by 2048. The forecast describes a potential outcome if the current pattern continues, not a confirmed date when the fund will run out.
New Mexico established the fund in 2020 with an appropriation of about $300 million to support the newly created Early Childhood Education and Care Department. Deposits of surplus oil and gas revenues later grew the fund to about $11 billion, according to the source report. But two major funding decisions have affected its outlook. In the 2025 legislative session, lawmakers diverted $1.9 billion in deposits intended for the fund to the Medicaid Trust Fund and Behavioral Health Trust Fund. Earlier this year, Gov. Michelle Lujan Grisham signed the universal childcare program into law, with up to $700 million from the early childhood fund designated to support it.
Torres said those changes pushed the fund’s payouts above its returns and threatened its long-term sustainability. He recommended relying on revenue beyond the trust fund, including recurring dollars from the state general fund, and slowing withdrawals. The source report does not provide the full underlying projection assumptions or a schedule showing how different funding changes would alter the forecast.
Funding Universal Childcare Over Time
The warning concerns whether New Mexico can keep financing a new statewide childcare benefit without drawing down the fund that was created to support early childhood services. If the projection holds and lawmakers do not change the funding approach, the fund may no longer be available to support the program in the longer term. That makes the debate about more than the program’s launch: lawmakers must weigh immediate costs against the fund’s future capacity.
The program has reported favorable feedback from families. Hailey Heinz, the Early Childhood Education and Care Department’s director of policy, research and quality initiatives, told lawmakers that the department is focused on the program’s sustainability. She cited the department’s 2026 Family Engagement and Satisfaction survey, in which 93% of families using the policy reported a positive effect on their well-being. Respondents most often described direct relief from costs when asked about the impact of early childhood programs. The survey findings speak to reported family experience; they do not resolve the fund’s long-term financial outlook.
Lawmakers also face competing demands on state resources. Redirecting recurring general-fund money to childcare could reduce pressure on the trust fund, but the source report does not identify a specific revenue plan or explain what other budget priorities might be affected. The choices made in the next legislative session could shape both the program’s financing and the fund’s projected lifespan.
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How the Fund Reached This Point
The fund was created in 2020 to provide support for early childhood education and care in New Mexico. Its balance grew substantially after the state deposited surplus revenue from oil and gas taxes. The state later enacted universal childcare, creating a new commitment that can draw on the fund. The source report says the law authorized up to $700 million from the fund, but does not specify in the material provided whether that amount is an annual allocation, a one-time contribution, or the timing of all planned payments.
In 2025, lawmakers also moved $1.9 billion in deposits intended for the early childhood fund to two other trust funds. Those actions form the backdrop to Torres’ warning that current payouts exceed returns. The committee discussion brings the sustainability issue into view as lawmakers consider how to maintain the childcare program while managing a fund whose resources have supported multiple state priorities.
Representatives expressed support for the program alongside concern about its financing. Rep. Doreen Gallegos, a Las Cruces Democrat who co-sponsored the fund’s creation, said lawmakers should not celebrate the state’s childcare policy while leaving solvency questions unresolved. Rep. Patricia Roybal Caballero, an Albuquerque Democrat, praised the program as a way to support low-income working families and called for a careful approach in the next session.
““For us to be sitting here…looking for solutions for solvency is not good.””
— Doreen Gallegos, New Mexico state representative
Projection Assumptions and Funding Plan
The source report does not include the detailed assumptions behind Torres’ forecast, such as the return rates, expected deposits, or projected annual costs used to estimate depletion by 2048. It also does not say how much of the authorized $700 million for universal childcare has been or will be withdrawn, or clarify the payment schedule. Those details matter when evaluating how sensitive the projection is to changes in revenue and spending.
No replacement funding plan has been identified in the report. Torres described recurring general-fund dollars as one possible alternative, but lawmakers have not been reported as adopting that proposal. It is also unclear whether lawmakers will change the pace of withdrawals, restore or replace diverted deposits, revise the program’s financing, or combine several approaches. The 2048 date should be understood as an economist’s projection under the current path, not a settled outcome.
Lawmakers Face a Budget Choice
Lawmakers are expected to continue examining fund solvency and childcare financing as they prepare for the next legislative session. Torres’ proposals point to two central questions: whether the state can commit another recurring revenue source and whether withdrawals from the fund can be reduced. The source report does not give a timetable for a specific bill or a decision by the committee.
The Early Childhood Education and Care Department has said it is focused on sustainability and has presented survey results about families’ reported experiences. Further projections, funding proposals and legislative decisions will help clarify whether the state can maintain universal childcare while preserving the fund’s longer-term capacity. Until those details are available, the depletion estimate remains a warning based on the current funding path rather than a final determination.
Key Questions
What did New Mexico’s legislative economist warn?
Ismael Torres told lawmakers the Early Childhood Education and Care Fund could be depleted by 2048 if the current funding path continues. He said the fund’s payouts exceed its returns and projected a steep decline beginning by 2031.
Why is the fund under pressure?
The source report points to two major decisions: lawmakers diverted $1.9 billion in deposits intended for the fund in 2025, and the universal childcare law authorized up to $700 million from it. Torres said payouts have risen above returns.
Has New Mexico changed the childcare program’s funding?
The report does not describe an adopted replacement plan. Torres recommended using other recurring revenue, such as state general-fund dollars, and slowing withdrawals from the trust fund.
What evidence has the state cited about the program’s effects?
The department’s 2026 Family Engagement and Satisfaction survey found that 93% of families using the policy reported a positive effect on their well-being. That is a report of survey responses and does not settle the separate question of long-term fund solvency.
When will lawmakers decide what to do?
The source report says lawmakers urged care as they approach the next legislative session, but it gives no date for a funding decision, specific bill, or committee action.
Source: the74million.org
