New Mexico officials outline how federal grants flow and legal options after funding disruption

House Judiciary Committee members heard an overview Friday of how federal funding flows into New Mexico, the state offices that manage those dollars, and the limited legal tools available if the federal government attempts to claw back or suspend grants.

State and Department of Finance and Administration officials told the committee that most federal grants the state receives are paid on a reimbursement basis and that the state “is floating almost all of the federal grants that we have,” meaning agencies spend first and request federal drawdowns later, Mark K., of the DFA financial control division, said.

That reimbursement model requires agencies and grantees to track expenditures closely and submit drawdown requests; officials said drawing down more frequently (weekly or daily rather than monthly or quarterly) can reduce cash strain if access issues arise. Cecilia Mavro Mattis, director of DFA’s Local Government Division, told lawmakers the division “authorize[s] proposed budgets and their expenditures for our local governments,” but she emphasized that DFA’s oversight generally applies to local general funds and not every federal grant that local bodies may receive.

Legal counsel and the New Mexico Department of Justice described the remedies available if the executive branch attempts to withhold or rescind federal funds. “The specific statute that governs how that happens is called the Congressional Budget and Impoundment Act,” George Hippolyte, the committee’s legal counsel, said, and he noted the act gives Congress a 45-day window to act if the executive seeks to impound funds. Officials also said affected parties may challenge unlawful unilateral grant withdrawals under the Administrative Procedure Act.

James Grayson, chief deputy at the New Mexico Department of Justice, told the panel the state is monitoring litigation tied to recent federal guidance. He said a separate lawsuit in the District of Columbia produced an administrative stay for open grants until Feb. 3 at 5 p.m., and a judge in the District of Rhode Island issued a temporary restraining order that leaves the “status quo” in place while the court considers a preliminary injunction.

Officials walked lawmakers through the make-up of federal funding in the state’s audited FY24 figures: about $8.5 billion for health and human services (including Medicaid), roughly $2.6 billion from the Department of the Interior (federal mineral leasing/royalties), and smaller amounts in transportation (about $636 million), education (about $364 million) and agriculture (about $341 million). One lawmaker cited an estimated $12.7 billion in federal funding flowing through the state in total.

Committee members pressed officials on practical consequences if federal payments were suspended. DFA staff said the state fronts many costs and could temporarily continue payments in some programs, but warned that without new appropriations the state’s cash would be exhausted. "Without an appropriation, there wouldn't be anything for us to be able to step in right away and do," Mark K. said.

Panel members and state officials also raised concerns for hospitals and patients if Medicaid claims could not be billed during a portal outage. Legal counsel said individuals and providers may have federal legal remedies, including actions under federal statutes, but acknowledged those avenues are slow relative to the immediate cash flow needs of providers and patients. Rebecca (last name not provided), a state official speaking about interagency coordination, urged entities to review each grant’s terms because "each individual grant agreement between a federal agency and an and a local state or other entity as the recipient is a contract with legally binding terms." She added that some agreements restrict unilateral federal changes.

Committee members asked what the state can do for local governments and nonprofits facing drawdown problems; DFA said it is a primary administrative resource and offered consultation, while acknowledging DFA cannot do every drawdown task for every local recipient. Officials recommended that grantees preserve documentation, confirm drawdown timing (daily/weekly when possible), and contact DFA for help with administrative or financial questions.

The hearing ended with lawmakers asking for ongoing updates as litigation and federal guidance evolve. No formal committee actions or votes were taken during the discussion.

Ending: Committee leaders said they plan to request further briefings and to coordinate with DFA and the attorney general’s office as legal and administrative situations develop.