NEWS
State early childhood dept. CFO files suit, claiming $83M shortfall from universal childcare
Employee alleges she was placed on leave as retaliation for whistleblowing
The former chief financial officer of the New Mexico Early Childhood Education and Care Department is alleging in a new lawsuit that she was placed on leave from her job after exposing an $83 million budget shortfall created by the universal childcare program.
New Mexico became the first state in the nation to offer free childcare to all residents last year. The program was unveiled Sept. 8, and the complaint alleges the announcement was made without consulting the Administrative Services Division at the ECECD or the former CFO Carmel Pacheco-Aragon, who is the plaintiff in the suit filed Wednesday in 1st Judicial District Court.
Jacob Candelaria, an attorney representing Pacheco-Aragon and a former New Mexico state senator, told the Journal his client found out about the universal childcare rollout on the same day it was announced to the public.
鈥淭here was no internal budget planning. There was no internal discussion. There was no plan in place in September when this was announced, and what that created was chaos,鈥 Candelaria said.
Pacheco-Aragon alleges in her suit that by December, payments from the state to childcare providers had grown from around $29 million per month to $45 million per month, and were projected to stabilize at $53 million monthly, 鈥渃reating a massive and unlawful budgetary shortfall,鈥 the complaint alleges.
The program will cost New Mexico $606 million in fiscal year 2027, according to a state news release.
鈥淭he degree to which this agency is playing fast and loose with people's money is something I have never seen an agency come close to during my time in the Legislature,鈥 Candelaria said. 鈥淏ut it鈥檚 being allowed to happen by a politically compliant Legislature, and at this point, a dysfunctional Department of Finance and Administration that is no longer doing its job.鈥
The lawsuit alleges that after ECECD was denied a $60 million appropriation from the state Legislature, Pacheco-Aragon and her team presented a report to Gov. Michelle Lujan Grisham鈥檚 office stating the deficit had snowballed to about $83 million for fiscal year 2026.
Pacheco-Aragon alleges that after months of attempting to warn state officials, including ECECD Secretary Elizabeth Groginsky and New Mexico State Controller Mark Melhoff, the department illegally transferred money from one program to another without written authorization and legislative approval to cover childcare payments for June, a violation of state law.
On July 8, Pacheco-Aragon was 鈥渁bruptly placed on administrative leave,鈥 the complaint says. She remained on paid leave as of Wednesday.
The complaint alleges the department told Pacheco-Aragon she was being placed on leave for blind-copying (or BCCing) an outside party on a work-related email, which court documents claim was a 鈥渂ad-faith effort to silence a high-level fiscal whistleblower.鈥
Candelaria said the agency has another week to decide whether to terminate Pacheco-Aragon.
鈥淚t's been radio silence since they walked her out of her office on July the 8th,鈥 he said.
Pacheco-Aragon is seeking reinstatement, double back pay plus interest, damages and attorney鈥檚 fees.
Kendal Chavez, deputy secretary at ECECD, said in an email that Pacheco-Aragon was placed on leave pending an active human resources investigation and not for the reasons alleged in the complaint, though the department declined to provide additional details.
鈥淓CECD does not and will not take retaliatory action against any employee for coming forward with information, questions, or concerns about the operations of our department,鈥 she wrote.
The allegations regarding the shortfall in the universal childcare budget 鈥渁re false,鈥 Chavez said.
鈥淥ur department has worked closely with the Department of Finance and Administration and the Legislative Finance Committee to appropriately and lawfully meet our childcare expenditures,鈥 she said. 鈥淲e will respond to these allegations in court.鈥
Natalie Robbins covers education for the Journal. You can reach her at nrobbins@abqjournal.com.