Lawmakers weigh fixes after House Bill 63 reshaped school funding

SANTA FE — At an LESC meeting beginning Nov. 17, staff told lawmakers that House Bill 63 retooled New Mexico’s school funding formula to send more money to low‑income students, English learners and middle‑ and high‑school grades but left some charter schools with reduced operating funds.

Daniel, the LESC analyst who led the presentation, said HB63 ‘‘revised the SEG by changing the at‑risk index, creating a factor for English learners, raising the factor for grades 6 through 12, and appropriating $132,900,000 to the SEG.’’ He described a new Family Income Index that relies on state tax returns, public‑benefits matches and census data to assign students to income categories at the school level rather than using district proxies.

Why it matters: Staff said the changes corrected long‑standing mismatches that had funded many charters based on their district’s poverty rates rather than their actual student demographics. That produced substantial gains for many schools — Daniel said the EL factor generated about 18,000 units (roughly $125 million) for FY26 and the secondary weighting produced nearly 14,000 units (about $93.5 million) — but also produced losers: staff estimated about 57 local education agencies were affected, including 37 charters that lost units.

The numbers: Daniel told the committee that HB63’s changes produced about 45,000 at‑risk program units, a preliminary FY26 estimate of roughly $306.6 million from at‑risk adjustments, and that statewide student membership declined from a peak of about 332,000 (FY16) to roughly 296,000 in FY26 — a trend staff said will continue to affect allocations.

Hold‑harmless gap and options: Members focused on a shortfall between the hold‑harmless appropriation in House Bill 2 and staff calculations. Sunny Lou, the LFC schools analyst, said different methodologies produce different cost estimates — ‘‘the FIR is about $3 million, LAC about $5 million, and the PED methodology ends up generating the equivalent of about $8.7 million’’ — while HB2 appropriated $1 million. Sunny laid out options for lawmakers ranging from taking no action to pausing SEG reductions for FY27, fully funding PED’s methodology, or targeting payments only to losses tied directly to the at‑risk multiplier changes.

Local impacts and examples: Staff recounted site visits showing how additional funding has been used: Loving hired a bilingual teacher, a bilingual middle‑school educational assistant and a part‑time social worker; Christine Duncan Heritage Academy used new funds to hire teachers, an attendance coordinator and a community liaison and to expand secondary fine arts.

Accountability and monitoring: Staff emphasized the need to track how the new funds are used. Daniel recommended pausing FY27 SEG reductions and directing LESC, LFC and PED to develop a shared approach for accounting for enrollment declines and to monitor HB63’s impact using accreditation reviews, ed‑plans and OpenBooks. Key monitoring metrics staff listed include counts of social workers and counselors, proficiency and graduation rates, EL exit counts and bilingual seals, and CTE participation.

Committee reaction and next steps: Several members praised HB63’s targeting of low‑income students and ELs but warned that targeted funds do not substitute for overall adequacy in the SEG. Senators and representatives asked staff to run narrower analyses (for example, charter‑only hold‑harmless costs) and to return with options that clarify whether relief should address losses caused by the formula change or by enrollment decline. The committee recessed to consider those options and to hear further presentations later in the day.

The LESC staff presentation and supporting appendices remain the committee’s primary evidence; staff recommended additional interim work to refine the hold‑harmless approach and the committee asked for follow‑up cost estimates and a plan to coordinate monitoring with PED.