One Year After New Mexico Made Child Care Free, Enrollment Rose but Supply and Costs Remain a Challenge

One year after New Mexico became the first state to make child care free for eligible families regardless of income, the early verdict is clear: opening the program to far more households quickly boosted enrollment and helped many applicants get approved faster. It also showed the limits of universal eligibility on its own. The state still faces too few infant care options, gaps between nominal capacity and care families can actually use, and persistent questions about how to sustain the program financially.

The change took effect Nov. 1, 2025, when New Mexico removed income limits from its Child Care Assistance program, according to the state Early Childhood Education & Care Department, or ECECD. Families generally still must be working, in school or in training, with exemptions for some groups including families experiencing homelessness, grandparents raising grandchildren and some families involved with the child welfare system.

Lawmakers later wrote the policy into state law through Senate Bill 241, signed by Gov. Michelle Lujan Grisham on March 10, 2026. The law authorized up to $700 million from an early childhood fund for 2026 through 2031, subject to fund-balance conditions, giving the policy a statutory and financial framework.

The initial response was fast. The Legislative Finance Committee, the Legislature’s budget and policy staff, reported that by Dec. 9, 2025, New Mexico was serving 31,930 children through Child Care Assistance. On the day Lujan Grisham signed SB241, her office said an additional 12,666 families and 16,706 children had enrolled since launch, and that about 30,000 families and 44,000 children were on track to receive free child care that year.

A Nov. 12, 2026, analysis by the Urban Institute, using data through June 2026, found a net increase of about 13,000 children served between July 2025 and June 2026. Urban also found that most families who applied in the program’s early months were ultimately served and that eligibility-determination wait times fell.

Provider participation rose, too, though more modestly than demand. Urban reported that between November 2025 and June 2026, 105 licensed providers and 243 registered providers opened. Many of those were reopenings rather than entirely new businesses, a sign that the expansion may have brought some providers back into the system without fully solving supply problems.

Those supply limits became the main implementation challenge.

In December 2025, the Legislative Finance Committee put total licensed and registered capacity at about 74,011 slots statewide. But raw capacity was not the same as care families could actually use. The committee said demand was growing faster than supply, and that available care did not always match families’ needs by age of child, hours of operation or location.

The mismatch was especially severe for children younger than 2, where shortages were most acute. Oversight analyses also found that registered home-based slots, which often serve lower-income families, had fallen sharply since 2019. The Legislative Finance Committee further found that as eligibility widened, the share of slots serving the poorest families declined.

That helps explain why New Mexico’s experiment has drawn national attention. Other states have expanded child care subsidies up the income scale, but New Mexico went further by dropping income limits entirely. The first year suggests demand for free care is substantial. It also suggests that access depends not just on eligibility, but on whether the right kind of care exists nearby and at the hours families need.

There are also early signs the policy may be affecting parents’ work decisions, though that is secondary to the access story. A 2026 discussion paper by economist Chris Herbst for IZA, a labor economics research network, found mixed short-run effects among mothers: employment increased among some lower-skilled mothers, while some higher-skilled married mothers reduced paid work and increased schooling.

The bigger unresolved issue is cost.

State materials projected roughly $463 million in child care assistance spending in fiscal year 2026 and less than $600 million in the first full year, fiscal 2027. The program is financed through a mix of state and federal sources, including early childhood funds backed in part by oil and gas taxes and royalties, the state general fund, and federal child care and welfare dollars.

But the Legislative Finance Committee warned that if 90% of currently private-pay slots shifted onto the public subsidy, the annual recurring cost could rise to about $849.7 million, well above fiscal 2026 spending.

Two former state finance officials later filed retaliation lawsuits alleging budget problems tied to the rollout. Former chief financial officer Carmel Pacheco-Aragon alleged an approximately $83 million fiscal 2026 shortfall. Former budget director Kimberly Gonzales alleged a larger gap; local reporting cited $258 million. Those figures are allegations in lawsuits, not established findings.

The law itself reflects those fiscal concerns. It includes automatic copay triggers tied to conditions such as inflation, revenue growth and oil prices. ECECD said in a September-October 2026 FAQ and rulemaking notice that “Universal Child Care is still completely free for all families in New Mexico” and that the state would provide 90 days’ notice before any copays took effect. The department also said one statutory trigger had been met because the 12-month change in the Consumer Price Index exceeded 3% in August 2026.

When Lujan Grisham signed SB241, she said, “All parents who need child care can now get it.” After a year, New Mexico has shown how powerful that promise can be in driving take-up. It has also shown that making care free is the easier part. Building enough infant and home-based capacity, matching care to families’ schedules and communities, and paying for the system over time are the harder tests now.