State officials tell committee lawsuit targets narrow rulemaking period in universal childcare dispute

Chair Christine Chandler convened the interim committee and invited legal staff to brief members on a lawsuit challenging the state's temporary implementation of universal childcare.

"The lawsuit is about the universal child care program between November 2025 and when SB241 took effect," Holly Agajanian told the committee, describing the plaintiffs' narrow legal theory that ECECD exceeded its authority during that window. Agajanian said the state views the challenge as limited in time and argued the later enactment of SB241 reduces or moots many of the plaintiffs' claims.

The briefing placed the litigation in the context of decades of program activity. "New Mexico began participating in the federal program in 1992," Shelley Strong, general counsel at the Early Childhood Education and Care Department (ECECD), told members. Strong walked the committee through a timeline of eligibility and appropriations: state-funded child-care assistance began in 2007, ECECD was created in 2019, and the state increased appropriations and eligibility thresholds significantly through 2025. Strong said removals of income caps, large appropriations and regulatory changes in late 2025 drove a significant increase in participation.

Members pressed officials for operational details. Representative Alan Martinez and others asked, "Have we increased the amount of providers, and what's the licensing aspect? Are they inspected?" Strong said the department has increased provider participation through rate changes, loan programs for providers, outreach to home-based providers and higher wages, and that licensing includes input to data systems, twice-yearly inspections and complaint-driven follow-ups.

On fraud prevention, Strong described measures that require providers to report attendance and hours to prevent duplicate billing and said additional inspections follow credible complaints. Agajanian said fraud is not a core allegation in the current litigation.

Members also asked how many additional children enrolled after the waiver of an income cap. "We have seen a significant increase in participation," Strong said, noting much of the rise front-loaded in the months after the rule change and offering to provide specific enrollment reports to the committee.

Legal staff identified standing and mootness as key defenses. Agajanian said some plaintiffs appear to have limited incentive to litigate (for example, a named plaintiff whose children benefited from the program), and the state will argue the plaintiffs lack an injury-in-fact in some cases. She also said the state intends to respond by the court's deadline and that a hearing is scheduled in early June.

Why it matters: committee members said the litigation could confuse public understanding of whether the state has long funded child-care assistance and whether recipients would face repayment if a court ruled for plaintiffs. "I don't think he needs to be concerned about that," Agajanian said, referring to one plaintiff's stated worry about repaying benefits.

Next steps: officials agreed to supply the committee with enrollment and provider-count data, clarify the trust-fund corpus and confirm which specific statutory authorities ECECD relied on during the November rulemaking. The committee moved on to other agenda items after the briefing.