New Mexico legislative analysts tasked with assessing fraud among state recipients of federal food assistance reported Tuesday that the state’s low fraud rate may be misleading and stems from a failure to collect data and investigate fraud allegations.

The Legislative Finance Committee’s 78-page report, six months in the making, resulted from a $50,000 appropriation Republican state legislators secured in November. At the time, the Legislature had just agreed to allocate up to $162.5 million in state funding to pay Supplemental Nutrition Assistance Program benefits amid a federal government shutdown.

New Mexico has the nation’s highest SNAP reliance rate — 21.5% — of any state in the country and typically oversees more than $90 million a month in federal SNAP benefits that go to more than 445,000 New Mexicans, or roughly one in five.

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The Legislative Finance Committee’s report, which analysts presented to lawmakers on Tuesday during an interim Legislative Committee meeting in Ruidoso, found that New Mexico’s fraud rate was .04%, far less than the national average of between 1% and 2%.

But analysts stressed that figure underestimates the state’s actual fraud rates and buttressed their assertion by providing examples of “high-risk” SNAP transactions they said the New Mexico Health Care Authority, including its inspector general’s office, should have caught.

“The HCA Office of the Inspector General is under-investigating and under-identifying potential SNAP fraud,” LFC analyst Clayton Lobaugh told lawmakers.

The transactions the LFC flagged include an estimated $85 million annually that New Mexico SNAP recipients spend in other states. While recipients can spend SNAP dollars wherever they like, repeated out-of-state SNAP spending likely means recipients are violating the state’s requirements that recipients live in New Mexico.

The LFC review also found two smoke shops in the state that each collected more than $400,000 in SNAP payments in 2025 — suspiciously high amounts for businesses that don’t primarily sell food. The LFC did not name the smoke shops but included photos of them, including one with a large sign announcing that it accepted SNAP debit cards.

The federal USDA authorizes SNAP retailers, though analysts said the state could have flagged the smoke shops to the USDA.

In addition to those specific cases, the report also looked closely at how the HCA’s Office of the Inspector General handled fraud allegations it received through a state telephone and email tipline.

Between fiscal years 2018 and 2023, the office received 9,953 tips but completed only 312 investigations, according to the report, which amounts to roughly 3%.

The HCA also disqualifies the smallest percentage of SNAP recipients after findings of potential fraud than any other state in the country, according to the report.

For instance, in fiscal year 2023, only 18 SNAP recipients were disqualified, amounting to 0.004% of the state’s SNAP recipients.

That same year, the national average disqualification rate was 0.1% — a rate 250 times higher than New Mexico’s.

HCA Secretary Kari Armijo told lawmakers that she largely agreed with the LFC report’s findings, including that the inspector general’s lack of fraud investigations “is an area that the agency needs to do better on.”

But she said the inspector general’s office often doesn’t investigate cases that allege small amounts of fraud, based partially on local prosecutors’ unwillingness to bring criminal charges unless large amounts of money are stolen. And investigating fraud takes a long time, which also means the agency might be trying to only go after major cases.

“We have an investigation backlog right now,” she told lawmakers. “Investigations don’t get cleared quickly. They take a lot of time.”

Republicans in both chambers of the Legislature said the report shows New Mexico’s food system “is broken” and accused the HCA of willfully enabling fraud.

A system that rarely verifies, seldom audits, and barely investigates fraud is a system designed to fail,” House Republicans said in a statement Tuesday morning.

But LFC Chair Nathan Small (D-Las Cruces) noted during Tuesday’s hearing that the median income of SNAP households is roughly $30,000, less than half the $77,000 median salary statewide. SNAP fraud that comprises a fraction of overall spending should not be used as reason to restrict eligibility, he said.

“These are households — without this help — their ability to sort of go and make it through a day, much less a week, much less a month, much less a year, is very, very challenging,” he said, “particularly as we see elevated fuel costs, which are going to translate into elevated food costs, because of the war on Iran.”