NM reps say GOP bill will gut Medicaid and also reduce oil money that could help state save it
An oil well pumps during a snowstorm in the checkerboard region of northwest New Mexico. Proposed reductions in federal oil and gas royalty rates could further hurt New Mexicans covered by Medicaid, state and federal officials said. (Photo by Jerry Redfern / Capital & Main)
The 'big, beautiful' bill making its way through the United States House of Representatives this week not only would cut federal spending on healthcare on which 40% of New Mexicans rely, but state and federal officials say it also would reduce revenue the state could use to pay for that healthcare itself.
One provision in the 1,116-page spending bill that is making progress in the House would reduce federal oil and gas royalties from 16.75% to 12.5%, undoing a hike Congress and President Joe Biden approved in the Inflation Reduction Act in 2022.
Federal law requires 50% of royalties on federal land to be distributed to states in which production took place, which in 2024 meant that New Mexico received $2.88 billion from federal royalties, the biggest share of any state, according to the State Land Office.
Reducing the rate back to pre-2022 levels will mean about $480 million less in total royalties the federal government collects between now and 2031, according to the office. In New Mexico, those funds are regularly invested in trust funds the state amasses to pay for services like early childhood education or other programs.
U.S. Rep. Teresa Leger Fernandez (D-N.M.) said in a news conference Friday decrying the bill that the provision amounts to a double-whammy for New Mexico, which relies heavily on oil and gas revenue and is also where Medicaid finances more than half of all births. Republicans are helping oil companies increase their sizable profits while making it harder for New Mexico to pay for healthcare, she said.
New Mexico mom, advocates urge Congress to protect safety net programs
'At a time when the Republicans are going to make states pay more for Medicaid, they are taking away the money that New Mexico uses to fund Medicaid,' Leger Fernandez said during a news conference Friday. 'This is why we are so angry about this bill. It is a double impact on New Mexico.'
Leger Fernandez cited a May 5 letter Land Commissioner Stephanie Garcia Richard wrote to her office that laid out concerns about the Republicans' approach to federal oil and gas extraction.
'As the top recipient of federal mineral leasing distributions, the proposed reduction in the minimum royalty rate… will hit New Mexico's working families at a time when other federal funding for essential services is being slashed by the Trump Administration,' Garcia Richard wrote in the letter, which her office provided to Source New Mexico.
This legislative session, state lawmakers created a new Medicaid Trust Fund that aims to generate enough in interest to pay for at least some of what the federal government could cut in Medicaid spending.
New Mexico has the highest per-capita Medicaid enrollment in the nation, 34%, according to the non-partisan health policy research organization KFF. The state is expected to need $8.9 billion in federal Medicaid funding to support its operations this fiscal year. For perspective, New Mexico's record operating budget for this fiscal year is $10.8 billion.
NM budget expert expects Medicaid work requirements out of Congress
It's not entirely clear, however, how money in federal oil and gas royalties would make its way into the Medicaid Trust Fund that lawmakers created for the New Mexico Treasurer's Office to oversee. The bill creating the fund does not specify, saying only that the fund 'consists of distributions, appropriations, gifts, grants and donations.'
State Land Office spokesperson Joey Keefe referred comment to the State Treasurer's Office. A spokesperson there did not immediately respond to a request for that information Monday morning.
In addition to her concerns about the lost federal royalties, Garcia Richard noted that the bill would require the federal government to lease land for oil and gas extraction to companies, even if it's not in the best interest of taxpayers, by requiring quarterly lease sales, sometimes without competitive bids.
'By enabling companies to get leases directly without a competitive auction and by requiring that an arbitrary percentage of lands [be] offered at quarterly lease sales, the federal government (and the states that share in this revenue) will receive less value than they should for the parcels,' Garcia Richard wrote.
She urged Leger Fernandez and other members of the U.S. House Natural Resources Committee to vote against the proposal. Despite her effort, the committee voted to advance the bill two days later.
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