National media outlets which rarely report on any news from New Mexico were eager to report on the big news this past November that the Land of Enchantment had become the first state to have a “free” universal childcare program.
Other states may head down the same path, but before they do they need to know exactly what was done in New Mexico, why so many other similar programs created in New Mexico have failed over the years, and what unique circumstances have enabled the state’s politicians to create a massive new entitlement program without legislative approval.
Many progressives see these programs as a way to help the urban poor in particular, but they often crowd out private alternatives and leave lower-income residents with fewer childcare options. They deplete budgets that would provide necessary public services, and keep states from embracing policies that improve their overall economies and business climate.
For starters, this childcare program came out of left field. In New Mexico’s 2025 legislative session, the hot topic for my organization, the Rio Grande Foundation, and the business community was stopping an onerous paid family leave program. We won that battle.
No lawmaker introduced a single bill that year in the state’s Democratic-controlled Legislature for taxpayer-funded daycare, but in September 2025 Democratic Gov. Michelle Lujan Grisham outlined her own plans for a brand-new taxpayer-funded entitlement program: universal free childcare. According to legislative analysts, the program is estimated to cost $850 million annually to start.
The governor changed New Mexico’s childcare program from one that covered families making up to 400% of the federal poverty level ($132,000 in 2026) to a universal benefit. The Legislature finally ratified the program in the following year’s 2026 session, but the big political problem was having the governor unilaterally create a new government entitlement. That creates a dangerous precedent.
As an aside, the reason New Mexico can pay for this program – at least for now – is the unprecedented oil and gas boom in Southeastern New Mexico’s Permian Basin, which it shares with Texas. The boom, which has lasted nearly a decade, has not done much for New Mexico’s economy because lawmakers have either spent the largesse on universal pre-K, K-12, free college, and now free daycare – or they have stuffed it into the state’s massive sovereign wealth fund, valued at $75 billion and growing fast.
Politics aside, the measure raises serious policy questions. Will this improve New Mexico’s dismal outcomes for children? The state routinely ranks at the very bottom in terms of child outcomes nationally. Yet no evidence has been presented to that effect by the governor or legislators when they finally did get around to debating the program.
Barring improved conditions for children, will it lead to an increase in women in the workforce? So far, that is hard to see as New Mexico’s already dismal workforce participation rate has actually dropped from 57.6% in November 2026 when free childcare started, to 56.9% as of June 2026.
Minnesota may have received the biggest national headlines with its “learning centers,” but, unlike New Mexico’s childcare program, Minnesota’s program is not free to the user. It is also limited to low-income families and only 22,000 children participate. New Mexico’s program is free to all participants, and it already serves 33,000 children before it became universal.
From an urban-policy perspective, California’s similar experiment with free transitional kindergarten (TK), which often serves as a replacement for childcare, might be instructive. “Many advocates hoped the move would ease childcare shortages and close learning gaps between rich and poor,” according to a 2025 article in the Hechinger Report. Instead, a UC Berkeley study looking at results in Los Angeles found that more than 150 private childcare centers subsequently shuttered.
These mostly served lower-income residents, whereas the “biggest beneficiaries” of the publicly funded program were children in the city’s wealthiest neighborhoods. The best theory is the new program “siphoned 4-year-olds away from community childcare centers and private preschools” and existing “centers lost revenue when children left, and it wasn’t easy to pivot to serving younger toddlers or infants,” per the article. The taxpayer-funded program destroyed the economics of childcare centers, thus leaving the urban poor with fewer options.
Broadly speaking, these costly state-funded programs put an enormous strain on the state’s budget, thus precluding lawmakers from passing tax cuts and economic reforms that are geared towards growing and diversifying New Mexico’s economy and funding basic services. Between Nov. 1, 2025 and the end of New Mexico’s fiscal year in July, the program was running a deficit of approximately $83 million.
Two whistleblowers have come forward claiming they were retaliated against for calling out these deficits. The Early Childhood Education and Care Department’s chief financial officer, Carmel Pacheco-Aragon, filed suit, alleging she was placed on administrative leave after reporting on the shortfall and warning about improper fund transfers without legislative approval.
The department’s former budget director, Kimberly Gonzales, filed a subsequent lawsuit claiming she was wrongfully terminated for publicly reporting that the department as a whole was facing a $258 million shortfall, driven by the state’s new universal childcare program. Nevertheless, in July New Mexico’s Supreme Court ratified the program without so much as a hearing.
While other blue states will undoubtedly look at the idea, I don’t expect many of them to follow through with it due to the steep cost. Will New Mexico’s program be a beacon for other states to shoot for in the future or yet another costly disaster by one of the most poorly run states in America? My money is on the latter, but only time will tell.
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