New Mexico governor seeks funding to recycle fracking water, expand preschool, treat mental health

SANTA FE, N.M. — New Mexico would make major new investments in early childhood education, industrial water recycling, and drug addiction and mental health programs linked to concerns about crime under an annual spending proposal from Democratic Gov. Michelle Lujan Grisham.

Released Thursday, the budget blueprint would increase general fund spending by about $720 million to $10.9 billion, a roughly 7% increase for the fiscal year running from July 2025 through June 2026.

The proposal would slow the pace of state spending increases as crucial income from local oil production begins to level off. New Mexico is the nation's No. 2 producer of petroleum behind Texas and ahead of North Dakota.

The Legislature drafts its own, competing spending plan before convening on Jan. 21 for a 60-day session to negotiate the state's budget. The governor can veto any and all portions of the spending plan.

Aides to the governor said they are watching warily for any possible funding disruptions as President-elect Donald Trump prepares to take office on Jan. 20. New Mexico depends heavily on the federal government to support Medicaid and nutritional subsidies for households living in poverty or on the cusp, as well as for education funding, environmental regulation and an array of other programs.

“It’s not lost on us that President Trump will be inaugurated the day before the (legislative) session starts,” said Daniel Schlegel, chief of staff to the governor.

Under the governor's plan, general fund spending on K-12 public education would increase 3% to $4.6 billion. Public schools are confronting new financial demands as they extend school calendars in efforts to improve academic performance, even as enrollment drops. The budget plan would shore up funding for free school meals and literacy initiatives including tutoring and summer reading programs.

A proposed $206 million spending increase on early childhood education aims to expand participation in preschool and childcare at little or no cost to most families — especially those with children ages 3 and under. The increased spending comes not only from the state general fund but also a recently established, multibillion-dollar trust for early education and increased distributions from the Land Grant Permanent Fund — endowments built on oil industry income.

The governor's budget proposes $2.3 billion in one-time spending initiatives — including $200 million to address water scarcity. Additionally, Lujan Grisham is seeking $75 million to underwrite ventures aimed at purifying and recycling enormous volumes of salty, polluted water from oil and natural gas production. A companion legislative proposal would levy a per-barrel fee on polluted water.

Cabinet secretaries say the future of the state's economy is at stake in searching for water-treatment solutions, while environmentalists have been wary or critical.

Pay increases totaling $172 million for state government and public school employees are built into the budget proposal — a roughly 3% overall increase.

Leading Democratic legislators are proposing the creation of a $1 billion trust to underwrite future spending on addiction and mental health treatment in efforts to rein in crime and homelessness. Companion legislation might compel some people to receive treatment.

The governor's spending plan also would funnel more than $90 million to Native American communities to shore up autonomous educational programs that can include indigenous language preservation.

Lujan Grisham is requesting $70 million to quickly connect households and businesses in remote rural areas to the internet by satellite service, given a gradual build-out of the state's fiberoptic lines for high speed internet. The program would rely on Elon Musk’s satellite-based internet service provider Starlink.