New Mexico special session called in wake of federal tax and spending act

Bloomberg News

The New Mexico Legislature will be back at work next month after Gov. Michelle Lujan Grisham ordered a special session to address fallout from the federal One Big Beautiful Bill Act.

H.R. 1, the massive tax and spending bill signed into law by President Donald Trump on July 4, will reduce the state's revenue, while spending will increase due to federal cost shifts, according to the Democratic governor's announcement last week of a 30-day special session starting Oct. 1.  

New Mexico should act to protect hospitals, Medicaid recipients, and food benefits "to whatever degree we can afford," Lujan Grisham told reporters on Monday.

At 34%, New Mexico is the state with the highest percentage of residents enrolled in Medicaid. It was also the top state for the percentage of population receiving Supplemental Nutrition Assistance Program benefits at 21.2% in fiscal 2024.

An updated forecast last month by New Mexico's Consensus Revenue Estimating Group projected $390 million in additional revenue from fiscal 2025 is available to be appropriated during a special session. 

The forecast also projected the federal act will reduce state revenue by about $206 million a year between fiscal 2026, which began July 1, and fiscal 2030. 

"This reduction is driven by several provisions, including $41 million from standard deduction changes, $5 million from the elimination of tax on certain car loan interest, $70 million from lifting the (state and local tax) deduction limit, $44 million from federal business tax changes, and $46 million from other non–income tax impacts," according to an Aug. 19 statement from the governor's office.

Last month, Democratic Colorado Gov. Jared Polis signed bills passed during a special session to plug a more than $1 billion hole in the state's fiscal 2026 budget largely due to corporate tax changes in H.R. 1.