New Mexico faces big deficit in health benefits fund
Treasurer seeks new controls on state spending
The state kept premiums flat, even as medical costs climbed.
Now, two state legislators say, the state
It never should have been allowed to operate at a deficit, they say, given state laws designed to prevent public agencies from spending more than is available.
Sen.
"It's not fair to retroactively ask for money for services already provided," state Sen.
He and Rep.
At issue, they say, is the state's push to collect
It's akin to paying your premiums all year, Woods said, then having the insurance company say after the fact that it should have charged more, sticking you with a new bill.
The agency's push to collect the money from local governments, however, is rooted in budget language authorized by the Legislature.
Lawmakers this year appropriated
"This fund has periodically run a deficit, including several times in past administrations," Sweeney said. "The administration looks forward to working with the legislature on a long-term plan to address the issue in the next session."
The deficit has been building for years.
In a formal response to auditors this year, the
They attributed much of the deficit to unexpected costs driven by the COVID-19 pandemic.
"There has been a perfect storm of more usage, higher costs and more illness, which has put steady pressure on health care costs," the
Governor vetoed push to raise premiums
The dispute centers on the state fund that handles group insurance for state employees and some cities, counties and universities. It covers about 58,000 individuals, according to legislative documents.
It's a type of self-insurance in which the
Independent auditors flagged the fund when evaluating the state government's 2022 financial statements.
They said it had a run up a deficit of
Risk management officials within GSD — part of the governor's administration — are empowered to set the rates. But lawmakers have pushed for increases.
Gov.
Last year, she used her line-item veto power over the state budget to strike funding for increased rates, saying she had approved no premium increase.
This year, she vetoed language calling for an increase, contending it infringed on the executive branch's authority to set the rates.
Premiums haven't increased for several years, according to legislative documents.
They had, however, been going up before the pandemic. The rates state employees pay for medical, dental, vision and other types of insurance coverage had previously increased every year for five consecutive years entering 2020.
In a written statement, Sweeney said
'No way legally'
In this year's report, state auditors didn't recommend a particular solution to address the shortfall. But they said the fund had a deficit, putting it out of compliance with state requirements.
State Auditor
"There's no way legally they could have paid claims out of a fund that doesn't have funds in it," he said.
Staff analysts for the Legislative Finance Committee raised a similar concern. In a recent report, they said the employee health benefits fund had operated at a deficit since fiscal 2021 despite a state law "designed to prevent agencies from spending without available funds."
Sen.
Deficit spending, he said, isn't permitted by law.
"We have to have a balance," Muñoz said.
Steps to curb payment 'override'
State Treasurer
In a letter to legislators, she said her office had no knowledge "of these fund account overdrafts" until Maestas, the state auditor, notified her in March.
Montoya said she is asking the Lujan Grisham administration to create an alert of some kind that would notify her of any attempts by an agency to "override the software system to approve a payment despite not having sufficient funds in the respective account."
She also wants authority to deny override attempts, though she acknowledged they can be appropriate in certain circumstances involving federal funds or when the revenue is on its way.
Legal conflict
Public agencies are now wrestling with how to bridge the shortfall.
But the
The league calls it a "retroactive" assessment intended to force cities to pay again for insurance coverage they already received and paid for.
"We expect that upon further legal review, the executive will recognize that this current approach potentially violates both the New Mexico Constitution and several state statutes," league executive director AJ Forte said in a statement, "and we would hope this leads the executive to refrain from invoicing local governments with retroactive assessments."
The assessments came after cities developed their budgets, according to documents the league released in response to a Journal request.
"Forcing local governments to cover these substantial and unanticipated costs would take money from employee pay raises and other critical needs," Forte said in a letter to cities.
But at this point, she said, she doesn't believe the state has authority to levy a special assessment.
If allowed to go through — after counties set their budgets — it could interfere with county programs, efforts to fill staff vacancies and cash for capital projects, she said.
"It's frustrating that they have not increased premiums," Esparsen said. "We could have planned and responded to that more appropriately."
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