NM Legislature Passes HB253 to Protect Virtual Learning, Aid Gallup-McKinley County Schools

House Bill 253 passed the New Mexico House by a 69-0 vote, reshaping how the state counts and funds full-time distance learning and aiming to relieve budget stress tied to the Gallup-McKinley County Schools contract dispute. The bill sets new statutory definitions, reporting requirements and temporary funding adjustments intended to close a misalignment that the Public Education Department linked to a roughly $35 million shortfall.

Gallup-McKinley County Schools canceled its contract with Stride, Inc. in May 2025 after disputes over the virtual program Destinations Career Academy. That cancellation left about 3,000 students with disrupted placements; reporting shows two other districts absorbed roughly 1,500 students each, with Chama and Santa Rosa named as receiving districts. The movement of students across districts contributed to funding flows based on prior year enrollment that PED officials say drove the statewide shortfall.

HB253 requires school districts and charter schools to report projected and actual membership for students in full-time distance learning programs and directs the Public Education Department to approve and evaluate those programs for compliance with the Public School Code. The bill renames the Statewide Cyber Academy Act the Distance Learning Act, removes outdated definitions, and creates uniform requirements for full-time virtual programs. HB253 also includes a one-year moratorium on reorganizations that would create districts or programs enrolling most students in full-time distance learning and prohibits distance-learning students from generating rural population program units for FY2026 and FY2027.

Legislative Education Study Committee analysis estimates the bill’s temporary fiscal provisions would eliminate about $41.9 million in enrollment growth funding for FY26 and about $49.2 million in other program units, changes that the analysis says would close the State Equalization Guarantee shortfall and raise the FY26 final unit value by $98 to $6,899.35 from a preliminary value of $6,801.35. Separate reporting indicates the current version of HB253 would prevent Stride K12 from receiving about $38 million in state payments through district contracts in the current fiscal year. Provider cost examples in LESC materials show virtual vendors such as Edgenuity reporting roughly $9,762 per student on average in some districts.

The Legislature acted on two tracks. The Senate passed a related measure, SB19, 36-1 on Jan. 28, 2026, with an emergency clause designed to give state officials time to determine how much money might have been overpaid to Gallup-McKinley and how to recoup it. Sen. George Muñoz said SB19 "would give state education officials the time they need to figure out how much money was overpaid to Gallup‑McKinley and how they can get it back." Sen. Michael Padilla added, "We have to do it the right way," while Sen. Bill Soules called the Senate action "one of the defining bills of the session."

For McKinley County residents, HB253 keeps full-time virtual options available while imposing new reporting and oversight that should stabilize school funding flows and reduce surprises in district budgets. The next steps are governor action on SB19 if it reaches the desk and PED rulemaking and audits to implement the bill’s approval and reporting requirements. Local families and school leaders will want to watch PED’s follow-up guidance and any recoupment proceedings that could affect district finances in the months ahead.