Senators and representatives on the Health Committee voted to give Senate Bill 88 a due pass after a day of public testimony and committee questions about how the proposed Medicaid trust fund would be seeded, invested and protected from short-term treasury volatility.

The bill would create a Medicaid trust fund with an initial injection discussed as $300,000,000 in House Bill 2, and then use investment earnings and other transfers to build a corpus intended to draw federal matching dollars and provide a backstop if federal Medicaid funding is reduced, proponents said.

Supporters told the committee SB88 is designed to shore up Medicaid — the state’s second-largest demand on the general fund after public education — and to use state dollars to attract federal matches. “This bill addresses what’s likely to be a critical need,” said JD Bullington of the Greater Albuquerque Chamber of Commerce, who described the proposal as a way to sustain Medicaid even if federal matches shrink. Fred Nathan of Think New Mexico said the measure could produce a three-to-one federal match and estimated potential revenue of about $400 million annually from a $100 million state contribution paired with federal matching.

John Clark, the state investment officer, testified he was not taking a position for or against SB88 but warned that the bill’s current drafting applies the treasury’s positive/negative earnings allocation method to the new trust fund. “Right now in statute, if there are positive or negative earnings from the treasury, they get allocated to the general fund,” Clark said. “This bill then applies that same method to the new Medicaid trust fund. The problem is there’s no money being immediately allocated to the Medicaid trust fund. So if there are negative treasury earnings in a given month, money would need to be pulled out. But if the money’s not there or if it’s not sufficient, then it will result in audit findings and could potentially impact the state’s bond ratings.”

Committee members pressed sponsors for details on the initial deposit, expected earnings and protections against shortfalls. Representative Ferrari asked whether the initial amount is already in HB2; sponsors and staff said the proposal contemplates an initial $300 million injection in HB2 and that legislative fiscal reports (FIR) project interest-driven growth over time. Adrian Avila, chief staff for the Senate Finance Committee, told the panel the fund’s initial injection would be covered in HB2 as negotiated and that a forthcoming amendment being discussed with the executive branch would build in a buffer to reduce the risk of the trust going negative during short-term treasury fluctuations.

Staff and sponsors told committee members the investment portfolio would be managed by the State Investment Council under the prudent investor standard; officials noted the council’s historical return assumptions of roughly 5–7 percent for similar trust funds in FIR estimates. Sponsors also told the committee the fund could be used to backfill Medicaid if federal reductions occur: staff cited an early estimate of roughly $500 million in potential federal cuts in a worst-case scenario and said the trust could contribute part of the backfill, with the fund projected to have “roughly $150 million” available in its first year of operations under current assumptions.

Several advocacy groups and provider representatives urged passage. Jackie Cooper, a volunteer advocate for AARP New Mexico, framed Medicaid as a lifeline for older New Mexicans and urged support. Jim Jackson of Disability Rights New Mexico and Gabrielle Dietrich of NAMI New Mexico emphasized continuity of services and the importance of a stable state funding stream.

After questions and a brief discussion of possible technical amendments to protect the general fund from inadvertent negative allocations, the committee voted to give SB88 a due pass. On the roll call, the committee recorded six yes votes and one no vote. The motion was made by Representative Kates and seconded by Representative Anaya, and the committee chair announced the motion carried 6–1.

The measure will next go to appropriations and budget committees for consideration of the initial appropriation language in HB2 and any amendments to specify the buffer mechanics and reporting requirements sponsors said they were negotiating with the executive branch.