LFC report: higher‑education construction costs surged as legislators weigh requiring stronger design, oversight

The Legislative Finance Committee on the record received a briefing from Legislative Finance Committee capital outlay analyst Ria Serna on a new LFC policy brief about rapidly rising construction costs for higher education projects and options to contain them.

The report says higher‑education construction costs increased about 26% between 2023 and 2024 while public‑school construction costs were essentially flat year‑over‑year, and that institutions are relying on supplemental appropriations to finish projects. “Institutions could benefit from hiring independent cost estimators,” Serna told the committee, adding that those owners’ representatives can “verify bids, identify pricing issues, recommend value engineering opportunities, and help institutions challenge high quotes.”

Why it matters: the report links design complexity, project delivery methods and incomplete early design work to budget escalation and to frequent supplemental funding requests. LFC staff and outside cost estimators analyzed two high‑cost case studies—Western New Mexico University’s Early Childhood Education Facility and Eastern New Mexico University’s Student Academic Services Building—and a third example of strong local cost containment at New Mexico Junior College in Hobbs. The brief recommends requiring more design work before construction dollars are appropriated, budgeting for owner representation during project development, and creating design standards and cost guidance the state will participate in financing.

Key findings and figures from the LFC brief presented to the committee: - Charted statewide trends show public school construction costs leveled off after a recent spike (a 2% decrease from 2023 to 2024), while higher education project costs rose about 26% over the same interval. - Supplemental funding requests accounted for about 29% of the Higher Education Department’s capital outlay recommendations totaling about $201,800,000 for FY26, the report notes. - Case study: Western New Mexico University’s Early Childhood Education Facility saw an estimated cost rise from $15.7 million in 2023 to $22.0 million in 2025; LFC’s independent estimator (CCM) identified atypical architectural features (for example a 19‑foot classroom ceiling) and difficult topography that together added roughly $1.4 million to construction costs, including about $919,000 tied to site‑topography mitigation. - Case study: Eastern New Mexico University’s Student Academic Services Building estimate rose from $16.2 million (architect estimate) to $31.3 million by 2025 after construction‑phase re‑estimates; independent review flagged oversized mechanical and electrical systems (about $1.3 million and $400,000 above reasonable estimates) and architectural choices (brick/stone veneer) tied to campus aesthetics. - The brief shows architectural and engineering fees for Eastern climbed from about $799,000 to $3.6 million as base construction costs escalated; those A/E fees increased from roughly 6% to 13.5% of the project’s maximum allowable construction cost.

Committee discussion: lawmakers pressed staff and presenters on possible legislative fixes. Representative Chatfield asked whether a multi‑year averaging or longer trend analysis had been done; LFC staff replied the higher‑education surge was driven by recently submitted 2024 requests and prompted the deeper analysis. Several members urged phased funding tied to completed design documents and stronger owner representation before capital appropriations. Representative Dela Cruz raised concerns about advertised project budgets driving contractors to bill to the dollar; Representative Munoz and other members recommended legislature require design‑level estimates and bids before releasing construction funding. Representative Dixon flagged a related bill from the previous session (House Bill 449/major projects fund language referenced by staff) that would have required a level of design prior to construction funding and suggested reintroducing similar legislation.

Local examples and alternatives: New Mexico Junior College described practices that led to projects completed within budget—direct material purchases, contract oversight, weekly coordination meetings with contractors and requiring scope offsets to cover change orders; NMJC’s operations director and the college’s vice president of operations told the committee those practices cut demolition costs by about 72% on one project and kept a 25,000‑square‑foot industrial training center about 90% complete without a single change order.

What LFC recommends: among the specific options the report lists are (1) requiring institutions to fund owner‑representation during design and preconstruction or demonstrate adequate internal capacity; (2) creating design standards and state cost‑guidelines so the legislature and the executive see comparable levels of architectural complexity before they commit construction dollars; and (3) encouraging phased appropriations with more funding for design before construction.

Discussion vs. decision: this hearing portion was a staff briefing and committee Q&A; no formal policy or appropriation was adopted at the meeting. Committee members directed staff to continue evaluating statutory or budget‑guideline changes (for example, legislative reintroduction of prior draft language requiring greater design completion before construction funding).

Ending: LFC staff said it will continue to work with the Higher Education Department and institutions on possible interim legislation and that the committee is likely to consider proposals over the summer to require more design and stronger oversight before capital outlay construction funding is released.