SENATE BILL 266
57th legislature - STATE OF NEW MEXICO - first session, 2025
INTRODUCED BY
George K. Muñoz and Carrie Hamblen
AN ACT
RELATING TO HIGHER EDUCATION; PROVIDING FOR REVIEW AND APPROVAL BY THE STATE BOARD OF FINANCE FOR CERTAIN QUALIFYING AGREEMENTS WITH ADMINISTRATORS FOR STATE EDUCATIONAL INSTITUTIONS OR COMMUNITY COLLEGES; PROVIDING FOR REVIEW AND APPROVAL BY THE ATTORNEY GENERAL FOR RELEASE AND INDEMNIFICATION TERMS OF CERTAIN QUALIFYING AGREEMENTS WITH ADMINISTRATORS FOR STATE EDUCATIONAL INSTITUTIONS OR COMMUNITY COLLEGES; REQUIRING ANNUAL REPORTS REGARDING REVIEWED QUALIFYING AGREEMENTS BY THE STATE BOARD OF FINANCE TO THE ATTORNEY GENERAL; CREATING A CIVIL CAUSE OF ACTION AGAINST A BOARD OF REGENTS OR A COMMUNITY COLLEGE GOVERNING BOARD OR A MEMBER OF THOSE BOARDS FOR A BREACH OF A FIDUCIARY DUTY; REQUIRING BOARDS OF REGENTS OR COMMUNITY COLLEGE GOVERNING BOARDS TO SECURE SEPARATE COUNSEL IN THE EVENT OF A BOARD MEMBER'S BREACH OF FIDUCIARY DUTY ACTION.
BE IT ENACTED BY THE LEGISLATURE OF THE STATE OF NEW MEXICO:
SECTION 1. [NEW MATERIAL] SHORT TITLE.--This act may be cited as the "Higher Education Accountability Act".
SECTION 2. [NEW MATERIAL] DEFINITIONS.--As used in the Higher Education Accountability Act:
A. "administrator" means a president, chancellor, vice president, vice chancellor, provost or vice provost, regardless of any executive, senior or assistant designation, a director of athletics and any other person that is performing a similar executive function or role at a state educational institution or community college, regardless of that person's title. "Administrator" does not include any executive personnel who are employed by the university of New Mexico health sciences center;
B. "board of regents" means a board created by the legislature to control and manage a state educational institution as provided in Article 12, Section 13 of the constitution of New Mexico;
C. "community college" means a public educational institution that provides not to exceed two years of training in the arts, sciences and humanities beyond the twelfth grade of the public high school curriculum or, in lieu of that training or in addition to it, not to exceed two years of a vocational and technical curriculum and appropriate courses of study for persons who may or may not have completed the twelfth grade of public high school;
D. "community college board" means the governing board of a community college that has a duty to determine the financial and educational policies of that community college as provided in the Community College Act;
E. "consideration" means a thing of value that is adequate to support a promise and that is bargained for, including cash, other property, services or a form of compensation that is of a value at least equal to the value of the property interest to be conveyed;
F. "duty of care and prudent administration" means the duty of a member of a board of regents or a community college board to carry out the member's responsibilities using the degree of diligence, sound judgment and skill that an ordinarily prudent person would reasonably exercise under similar circumstances in a like position;
G. "duty of good faith" means the duty of a member of a board of regents or a community college board to act within the law to advance the interests of the state educational institution or community college for which the member serves and to carry out the member's responsibilities ethically, honestly and with sincere conduct free from malice or ill intent;
H. "duty of undivided loyalty" means the duty of a member of a board of regents or a community college board to faithfully pursue the mission of, and act solely in the best interest of, the state educational institution or community college for which the member serves, rather than for personal gain or the benefit of other organizations, groups or individuals;
I. "employment agreement" means a contract between a state educational institution or a community college and an administrator that establishes the terms and conditions of the administrator's employment, including the administrator's duties, salary, benefits, performance expectations, the administrator's role, duration of service and employment relationship with the state educational institution or community college. An "employment agreement" includes any financial instrument, however named, that serves the same purpose;
J. "indemnification" means a contractual arrangement that provides the responsibilities of one party to compensate another party for certain damages, losses or liabilities that may arise during the performance of the contract, and may include terms to hold harmless or protect one party from specific financial losses or other legal consequences resulting from the occurrence of certain events or actions;
K. "performance or incentive compensation agreement" means a contract between a state educational institution or a community college and an administrator that links additional compensation, including a bonus or other incentive, to the achievement of a specific performance target or milestone by the administrator, and may include academic, financial, athletic or operational performance goals. A "performance or incentive compensation agreement" includes any financial instrument, however named, that serves the same purpose;
L. "qualifying agreement" means an employment agreement, performance or incentive compensation agreement, retention agreement, separation agreement or settlement agreement, including a proposed qualifying agreement or an amended qualifying agreement or any financial instrument, however named, that serves the same purposes;
M. "regular full-time employee" means a non-faculty employee of a state educational institution or community college who is not employed in a part-time or temporary status, is hired for an indefinite period of time, subject to satisfactory performance and availability of funding, and who is normally scheduled to work at least forty hours each week;
N. "release of liability" means a clause or term, by any name, in a contractual agreement that provides that a party to the contract is released or discharged from liability, including any potential cause of action, obligation, promise or agreement, in exchange for some consideration;
O. "retention agreement" means a contractual arrangement that provides an administrator with a specific financial benefit to encourage the administrator's continued employment with a state educational institution or community college. A "retention agreement" includes any financial instrument, however named, that serves the same purpose;
P. "separation agreement" means a contractual arrangement between an administrator and a state educational institution or a community college that provides the terms and conditions for the administrator's voluntary or involuntary separation from employment with the state educational institution or community college and includes any severance compensation or benefit upon the administrator's separation, and may include terms related to the release of liability and indemnification of future claims or loss due to actions of a party to the agreement. "Separation agreement" includes any other financial instrument, however named, that serves the same purposes;
Q. "settlement agreement" means a contract between an administrator and a state educational institution or community college that is intended to resolve any dispute or potential legal claim that may arise from the administrator's employment or separation from the state educational institution or community college without the need for litigation or further legal proceedings. A "settlement agreement" may include release of liability or indemnification terms related to future claims or loss due to the actions of a party. "Settlement agreement" includes any other financial instrument, however named, that serves the same purposes;
R. "severance compensation" means a financial benefit or payment provided to an administrator upon the separation of that administrator from employment with the state educational institution or community college at which the administrator is employed;
S. "state educational institution" means an institution designated in Article 12, Section 11 of the constitution of New Mexico and provided for in Chapter 21, Article 1 NMSA 1978; and
T. "total compensation" means the complete package of direct monetary payments and indirect non-monetary benefits that an employee receives from the employee's employer. "Total compensation" may include base salary; performance or retention bonuses; medical, dental, life and disability insurance and the premiums for those insurances; employer and employee contributions to a retirement or pension plan; housing and relocation allowances; professional development funds; tuition discounts; research start-up funds; vehicle and travel allowances; entertainment and networking expenses; equity options or stock grants; deferred compensation payments; club or gym memberships; contributions to flexible spending accounts or health savings accounts; special annuity payments; or any other fringe benefit that has the purpose of recruiting or retaining the employee. "Total compensation" includes all direct monetary payments and indirect non-monetary benefits, whether provided directly by a state educational institution or community college or through an external entity affiliated with the state educational institution or community college, including any foundation, athletic booster club or other organization of any name with a similar fundraising purpose.
SECTION 3. [NEW MATERIAL] REVIEW REQUIRED FOR CERTAIN ADMINISTRATOR QUALIFYING AGREEMENTS--STATE BOARD OF FINANCE--ATTORNEY GENERAL--CONSEQUENCES FOR FAILURE TO SUBMIT FOR REVIEW--RULES.--
A. To promote financial stability and the responsible allocation of state funds and to maintain public confidence in the financial management of the state's educational institutions and community colleges, before the execution of a qualifying agreement for an administrator with a state educational institution or community college, the qualifying agreement shall be submitted by the state educational institution or the community college for review and approval, modification or rejection by the state board of finance if the qualifying agreement:
(1) exceeds an employment term of five years; or
(2) includes a total compensation value that exceeds ten times the total compensation value of the state educational institution's or the community college's lowest-compensated regular full-time employee at the time the qualifying agreement is submitted for review.
B. When reviewing a qualifying agreement submitted pursuant to Subsection A of this section, the state board of finance shall endeavor to prevent financial loss, waste or abuse and shall:
(1) ensure that any significant expenditures in the qualifying agreement do not impair the financial standing of the state educational institution or community college or limit the ability of the state educational institution or community college to invest in academic programs or student services;
(2) ensure that the qualifying agreement does not contain unwarranted terms, including excessive severance compensation or other financial benefits; or
(3) identify fiscally imprudent terms deemed anomalous as compared to like or similar agreements at peer institutions.
C. Within thirty calendar days of receipt of a qualifying agreement submitted for review to the state board of finance by a state educational institution or a community college, the state board of finance shall complete the state board of finance's review of the qualifying agreement by taking one of the following actions:
(1) approving the qualifying agreement;
(2) requesting modification of the terms of the qualifying agreement and providing the specific modifications requested; or
(3) rejecting the qualifying agreement and providing clearly stated reasons for the rejection.
D. If a qualifying agreement submitted to the state board of finance by a state educational institution or community college results in:
(1) an approval by the state board of finance, the state educational institution or community college may formally execute the qualifying agreement;
(2) a request for modification, the state educational institution or community college shall modify the qualifying agreement as provided for by the state board of finance; or
(3) a rejection, the state educational institution or community college may:
(a) revise the qualifying agreement in a manner that addresses the reasons for rejection provided by the state board of finance; and
(b) submit the revised qualifying agreement to the state board of finance for further review.
E. If a qualifying agreement that requires review by the state board of finance pursuant to this section includes terms providing for a release of liability or indemnification of a party to the agreement, in addition to submitting the qualifying agreement to the state board of finance for review, the state educational institution or community college shall also submit the qualifying agreement to the attorney general for review of the release of liability or indemnification terms as provided in Section 4 of the Higher Education Accountability Act.
F. A qualifying agreement executed without the review and approval of the state board of finance or the attorney general as required pursuant to this section is null and void.
G. Approval by the state board of finance of a qualifying agreement submitted for review by a state educational institution or a community college does not preclude the attorney general from instituting an action for breach of fiduciary duty against a board of regents or community college board or a member of those boards as provided in Section 6 of the Higher Education Accountability Act.
H. The state board of finance shall promulgate and adopt rules to implement this section pursuant to the State Rules Act.
SECTION 4. [NEW MATERIAL] RELEASE OF LIABILITY-- AGREEMENTS--CLAUSES--ATTORNEY GENERAL REVIEW.--
A. Before the execution of a qualifying agreement for an administrator with a state educational institution or community college that includes terms related to a release of liability or indemnification, the qualifying agreement shall be submitted by the state educational institution or community college to the attorney general for review and approval, modification or rejection.
B. Within thirty calendar days of receipt of a qualifying agreement submitted pursuant to Subsection A of this section, the attorney general shall complete the review and shall:
(1) approve the release of liability or indemnification terms within the qualifying agreement;
(2) request modification of terms to the release of liability or indemnification within the qualifying agreement and provide the specific modification requested; or
(3) reject the release of liability or indemnification terms within the qualifying agreement and clearly state the reasons for the rejection.
C. If a qualifying agreement submitted to the attorney general by a state educational institution or community college results in:
(1) an approval of the release of liability or indemnification terms by the attorney general, the state educational institution or community college may formally execute the agreement;
(2) a request for modification of the release of liability or indemnification terms, the state educational institution or community college shall modify the qualifying agreement as provided by the attorney general; or
(3) a rejection of the release of liability or indemnification terms, the state educational institution or community college may:
(a) revise the release of liability or indemnification terms in the qualifying agreement pursuant to the reasons for rejection provided by the attorney general; and
(b) submit the revised qualifying agreement to the attorney general for further review, upon which the state educational institution or community college may revise the release of liability or indemnification terms and submit the agreement for further review.
D. A qualifying agreement executed without the review and approval of the attorney general as required pursuant to this section is null and void.
E. The attorney general shall promulgate and adopt rules to implement the provisions in this section in accordance with the State Rules Act.
SECTION 5. [NEW MATERIAL] REPORTING REQUIREMENTS--STATE EDUCATIONAL INSTITUTION--COMMUNITY COLLEGE--STATE BOARD OF FINANCE REPORT.--
A. Beginning with the 2025-2026 academic year, a state educational institution or community college that employs an administrator with an existing qualifying agreement that meets the criteria established in Section 3 or Section 4 of the Higher Education Accountability Act shall submit to the attorney general and the secretary of higher education no later than June 30, 2026 and no later than each June 30 following the completion of an academic year a report containing:
(1) the name of each administrator employed with an existing qualifying agreement;
(2) the title of the administrator;
(3) the total compensation, by category, paid to the administrator; and
(4) the total compensation, by category, paid to the lowest-compensated regular full-time employee at the state educational institution or community college where the administrator is employed.
B. No later than December 31, 2025 and no later than December 31 of each year thereafter, the state board of finance shall submit to the attorney general and the secretary of higher education a report containing the number of qualifying agreements reviewed and a breakdown of the types of qualifying agreements reviewed and whether the qualifying agreements were employment, performance or incentive compensation, retention, separation or settlement agreements, and for each qualifying agreement reviewed:
(1) a designation of which state educational institution or community college submitted the agreement for review;
(2) the name and title of the administrator who is a signatory or a desired signatory to the qualifying agreement;
(3) a brief description of the qualifying agreement's terms, including the total compensation paid or intended to be paid to the administrator;
(4) the determinations reached by the state board of finance related to the qualifying agreement's approval, modification or rejection as provided in Section 3 of the Higher Education Accountability Act; and
(5) a brief explanation of the criteria relied upon to justify the state board of finance's determination.
SECTION 6. [NEW MATERIAL] BREACH OF FIDUCIARY DUTY--CIVIL CAUSE OF ACTION AGAINST BOARD OF REGENTS--COMMUNITY COLLEGE BOARD--MEMBERS OF BOARD.--
A. A member of a board of regents or a community college board or an administrator of a state educational institution or community college owes the state educational institution or community college for which the member or administrator serves a fiduciary duty, including a duty of care and prudent administration, a duty of good faith and a duty of undivided loyalty.
B. The attorney general may bring a cause of action against a member of a board of regents or community college board or an administrator of a state educational institution or community college who commits a breach of fiduciary duty. The action may be filed in the district where the state educational institution or community college is located or in the first judicial district.
C. If the attorney general brings a cause of action against a member of the board of regents or community college board, counsel for the state educational institution or the community college shall:
(1) not serve as counsel to a member named in the action;
(2) immediately submit a plan to the attorney general setting forth a process for providing independent counsel to a member of the board named in the action; and
(3) continue to provide independent counsel to an administrator named in the action consistent with the administrator's independent fiduciary duty to the state educational institution or community college.
D. If the court determines that a member of a board of regents or community college board or an administrator of a state educational institution or community college may breach or has breached a fiduciary duty owed by the member or administrator to the state educational institution or community college, the court may:
(1) enjoin the board of regents or community college board or administrator of a state educational institution or community college from committing a breach of fiduciary duty;
(2) compel performance of duties required of a member of a board of regents or community college board or an administrator of a state educational institution or community college;
(3) order the member of the board of regents or community college board or administrator of a state educational institution or community college to reimburse the state for the cost of defending the action;
(4) impound public funds related to the breach until the resolution of the action; or
(5) order any other legal or equitable relief the court deems appropriate.
E. The civil action and remedies provided by this section are not exclusive and are in addition to any other actions or remedies in law or equity otherwise available, including the ability to seek removal of a member of a board of regents under Article 12, Section 13 of the constitution of New Mexico.
SECTION 7. EFFECTIVE DATE.--The effective date of the provisions of this act is July 1, 2025.
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