Big Picture
When we looked at Vermont’s Act 76, the lesson was that a state can make child care affordable faster than it can make it available. New Mexico has now run the more extreme version of that experiment.
On November 1, 2025, New Mexico stopped asking families how much they earn before paying for their child care. Any family that works or attends school can now get state-paid care for children from birth to age 13, with no income test and, for nearly everyone, no copay. In March, the Legislature codified the program into permanent law.
Eleven months later, the results look a lot like Vermont’s, only faster.
Enrollment rose from roughly 32,000 children to about 47,000, according to state figures. Providers report waiting lists in the hundreds. And the bill arrived ahead of the forecasts, along with a legislative fight, a dismissed lawsuit, and two whistleblower complaints from inside the agency running the program.
New Mexico’s experiment shows that a state can administer universal child care. It does not yet show that other states can afford to. New Mexico is paying for universality with an $11 billion endowment built from oil and gas revenue—a resource almost no other state has.
So the answer to our “Can it scale?” question is twofold. The financing mostly doesn’t travel but the architecture around it does.
How New Mexico Got Here
New Mexico’s child-care problem is familiar: care costs too much for parents and pays too little to keep workers.
The state’s answer, unusually, was institutional before it was budgetary. In 2019, it created a cabinet-level Early Childhood Education and Care Department (ECECD) to run child care, pre-K, home visiting and early intervention as one system.
Next came the money. In 2020, lawmakers created the Early Childhood Education and Care Fund. When oil and gas revenue runs above its five-year average and state reserves are full, the surplus flows into the fund. The Permian Basin boom turned that mechanism into a fortune: the fund held about $11 billion by the end of 2025. In 2022, roughly 70% of voters also approved a constitutional amendment drawing more from the state’s Land Grant Permanent Fund, adding about $150 million a year for early childhood.
Eligibility widened as the money arrived.
Between 2019 and 2023, the income limit for child-care assistance rose from 200% of the federal poverty level to 400%, and the state waived most copays. By 2025, about 80% of New Mexico households with children already qualified.
That context matters for the scaling question. Removing the income test in 2025 did not create a new program. It removed the last fence around an existing one—bringing roughly 25,000 more children into eligibility, by the department’s estimate.
What Does SB 241 Do?
Senate Bill 241, the Child Care Assistance Program Act, passed the State Senate 25–15 and the State House 37–19 on a party-line vote; Governor Lujan Grisham signed it on March 10, 2026.
The law does three things.
It makes universality permanent. Children from birth to 13 qualify if their families work or attend school, with no income cap. Families earning up to 600% of the federal poverty level pay nothing. Families above that line can be charged a sliding-scale copay, but only if specific triggers hit—high inflation, an enrollment surge, or falling oil prices—and only with 90 days’ notice.
It builds in a brake. If money or enrollment runs ahead of plan, the department may open a waiting list. Children with disabilities or developmental delays, and families the state considers at-risk, go to the front. The department must report who is on that list, and their incomes, to legislative committees twice a year.
It pays for the transition. Lawmakers may draw up to $700 million from the endowment’s principal through fiscal 2031, on top of its regular annual distribution of at least $500 million. That draw stops if the fund would fall below $10 billion. The House cut the authorization from $1 billion after budget staff and the State Investment Council warned about the fund’s long-term health.
Importantly, the law also addresses the provider side. Payment rates must come from a cost-estimation model, tiered by quality, that reflects “adequate wages” for staff. Providers that accept the state’s enhanced rates commit to a wage floor of $18 an hour. A companion bill, SB 96, bars cities, counties and homeowners’ associations from zoning out home-based child care.
Key Policy Takeaway — Demand Moved First
The clearest outcome, as in Vermont, is participation.
The state served about 32,900 children in September 2025. By late March 2026, the department had found 18,099 newly eligible children from 13,624 families. By this September, enrollment was about 47,000. For families who get a slot, the savings are large: roughly $12,000 to $14,000 a year per child, depending on the estimate.
The harder question is who those new families are. That is the trade-off at the heart of going universal.
The department’s answer is that most were not wealthy newcomers. Through March 26, 54% of newly enrolled families earned less than 400% of the poverty level—meaning they had already qualified for help and simply had not used it. One plausible reading is that a program for everyone is simpler to apply for and easier to hear about than one for the poor.
However, the Legislative Finance Committee (LFC), the Legislature’s budget staff, reads the same data differently. About 42% of new families earned above the old cap; an earlier LFC snapshot put the share at 62.5%. In December, the LFC warned that the state would “supplant many private pay families with the state as the payer” rather than create new care. It also noted that the lowest-income children’s share of the caseload had already fallen from 60% in 2019 to 30% in 2025 as eligibility widened.
Both readings can be true. In a market with spare capacity, universality is mostly a transfer to families who were already paying. In a market without it, those families compete for the same scarce slots as the families the subsidy was built for.
New Mexico is the second kind of market. A state-commissioned analysis found the state short about 15,700 slots for children under 6, including roughly 12,400 for infants and toddlers. Yet, there is one encouraging sign on targeting. Infants and toddlers, the hardest and most expensive care to supply, were 29% of the caseload before the expansion but 39% of new enrollments after it.
The LFC had worried the youngest children would lose ground. So far, they haven’t.
So, Is It Working?
It depends which part of the system you measure.
Affordability: yes, for families who find a slot. A family that was paying $1,000 to $2,000 a month now pays nothing. For a young family, that can be the single largest cost-of-living cut government can offer.
Supply: growing, but not at the speed of demand. New Mexico’s supply was expanding before universality. Licensed capacity grew about 20% from 2019 to 2025, to roughly 71,500 slots. The state’s child-care workforce grew 64% from 2019 to 2024 while the national workforce shrank, and median wages rose 65%, the steepest increase in the country, according to the department. Since launch, the state says about 6,700 slots have been added.
Outcomes: unknown. The state can count children, providers, slots and dollars. It cannot yet say whether more parents are working, whether children are better prepared for school, or whether provider wages will hold. The LFC has said research “has not demonstrated a causal or correlative link” between the state’s child-care assistance and better educational outcomes.
As with Vermont, plausible benefits should not be reported as measured ones.
The Strongest Critique Is About Execution and Money
New Mexico’s early record calls for even more humility than Vermont’s.
The first problem was sequencing. Vermont legislated, phased in provider rate increases, then expanded eligibility. New Mexico expanded eligibility first and legislated afterward. “We’re building a rocket ship as we fly it,” the governor told The Washington Post. Rocket ships built that way tend to run over budget.
This one did. Enrollment “scaled faster than initially projected,” legislative staff said, and by May the LFC’s director estimated the program could overspend by about $50 million in its first year. The state covered part of the gap with $28.7 million in federal funds. Reported estimates of the shortfall now range from $50 million to $83 million, depending on who is counting and over what period.
The second problem is accountability. Two former senior finance officials at the department have filed whistleblower lawsuits. The former chief financial officer alleges an $83 million shortfall and money moved between programs without required approval. The former budget director alleges she was fired after flagging a $258 million gap for fiscal 2027. The department calls the allegations “manufactured and unfounded,” and no court has ruled on them. Separately, a judge dismissed a lawsuit claiming the program had skipped required rulemaking, finding the issue moot once SB 241 passed; the plaintiffs, including Republican candidates, have said they will appeal.
None of that proves mismanagement. But a program that depends on public trust in its forecasts cannot afford a dispute over whether its forecasts were honest.
The third problem is the one the law only postpones. In December 2025, the LFC estimated universal care could cost about $850 million a year at full uptake, more than double the pre-expansion budget. Its review of SB 241 projects a gap of $340 million to $400 million a year by the end of fiscal 2029, with no new recurring revenue to cover it. The $700 million draw buys time. It is not a funding source. And the endowment it draws from is filled by a commodity that New Mexico does not control.
Defenders have real answers. The fund is large, the draw is capped by a $10 billion floor, and the law includes copay and waitlist triggers so the state can respond to a downturn by law rather than by emergency. New Mexico has planned for bad news. It has not yet had to use the plan.
Can It Scale?
Governors in nearly two-thirds of states talked about child care in their 2026 State of the State addresses. All of them are now watching New Mexico.
The answer to whether its model travels has four parts.
The revenue source mostly doesn’t. Oil and gas supply 25% to 30% of New Mexico’s general fund, and few states have a resource windfall large enough to endow a social program. What does travel is the principle: child care needs dedicated, protected revenue that outlasts any single budget—an endowment, a payroll contribution like Vermont’s, or an earmarked tax.
The supply tools do, slowly. A cost-based rate model, a wage floor, facility loans and zoning protection for home-based providers are all copyable. None of them work as fast as a price cut.
Targeting is a choice. A state can make every family eligible while keeping a priority line for the children with the most to gain. SB 241 now allows exactly that. Other states may opt to stop short of New Mexico, at a high income cap like Vermont’s 575% of poverty, and spend the difference on supply.
The rollout is a cautionary tale. New Mexico underestimated how many eligible families would sign up once the program was simple and free. Vermont overestimated its payroll revenue. A state copying either should forecast uptake high and revenue low.
The Blueprint for Other States
New Mexico’s experience points to five policy design lessons.
Build the fund before you promise the benefit. New Mexico spent five years accumulating the endowment that now carries the program. A state without that runway should expand eligibility only as fast as its dedicated revenue grows.
Fund supply before, or with, eligibility. A price cut fills existing slots in weeks. New slots take years. Rate increases, wage floors and capacity grants should lead the expansion, as they did in Vermont.
Forecast uptake high. Simplicity and universality bring in eligible families who never applied before – budget for that.
Write the brakes into law on day one. Copay triggers, a priority waitlist and a fund floor are better adopted calmly than in a deficit.
Keep a priority line under universality. Universal eligibility is good politics. When slots are scarce, it still needs a rule for who goes first.
Bottom Line
Vermont showed that a state can pay to make child care affordable. New Mexico has shown that a state can make it universal—and that universality is administrable, popular enough to codify, and expensive in ways forecasts underestimate.
Neither state has yet shown it can make care available to every family that wants it. That remains the hard part.
For other states, the New Mexico lesson is the same one Vermont taught, but stated more sharply. Removing the price barrier is the easy part. The real test is whether a state can keep paying for it, and whether a parent can find – not just afford – a place for their child.