New Mexico has a childcare funding problem, a rapidly growing data center industry, and an opportunity to connect the two.
New Mexico has done something remarkable. It has committed to making childcare universally available, recognizing that early childhood education is not merely a benefit for working parents but an investment in the state’s economic and social future.
Unfortunately, there is a problem. The money.
According to an October 2026 report by Source New Mexico, legislative economists are warning that the state’s Early Childhood Education and Care Fund, currently holding approximately $11 billion, could be depleted by 2048 if current spending and revenue trends continue.
By fiscal year 2030, the additional annual funding requirement could reach $340 million to $400 million.
That’s a lot of money. But perhaps not as much as we might think.
Because something else is happening in New Mexico.
Data centers. Enormous data centers.
And they consume electricity on a scale that is difficult to comprehend.
The New Industrial Revolution
New Mexico is becoming an attractive destination for large-scale data center development. These facilities house the computing infrastructure that powers artificial intelligence, cloud computing, online services, and the expanding digital economy.
One particularly ambitious development, Project Jupiter in Doña Ana County, has announced plans involving up to 2.45 gigawatts of electrical generating capacity.
That’s 2,450 megawatts.
For perspective, that’s a substantial fraction of the generating capacity required to serve an entire state.
Of course, generating capacity isn’t the same as actual consumption. A facility may never build everything it announces, and even completed facilities don’t necessarily operate at maximum capacity continuously.
So let’s make some reasonable estimates.
Suppose Project Jupiter eventually averages 1,470 megawatts of electricity consumption. Add another 200 megawatts for Meta’s Los Lunas operations and 80 megawatts for other facilities.
That gives us approximately 1,750 megawatts of continuous demand.
Over a year, that’s roughly 15.3 billion kilowatt-hours of electricity.
And here’s where things get interesting.
Three Cents
What if New Mexico imposed a dedicated electricity consumption tax on very large data centers?
Not on homeowners. Not on small businesses. Not on ordinary commercial electricity customers.
On the enormous computing facilities consuming industrial quantities of power.
Let’s say three cents per kilowatt-hour.
At our estimated 1,750 megawatts of average consumption, that tax would generate approximately $460 million annually.
That’s more than the projected $340 million to $400 million annual childcare funding gap.
Read that again.
Under those assumptions, a three-cent electricity tax on New Mexico’s large data centers could generate enough money to cover the projected additional cost of universal childcare.
And it wouldn’t require raising taxes on ordinary New Mexico families.
Even a tax of approximately 2.2 to 2.6 cents per kilowatt-hour could theoretically close the gap.
These are estimates, not guaranteed revenues. The calculations depend heavily on Project Jupiter actually reaching the assumed operating scale by 2030. If development is slower, the tax would collect less. And three cents per kilowatt-hour is a significant industrial operating cost, not an insignificant surcharge.
But the arithmetic demonstrates something important.
The potential tax base is enormous.
Why Electricity?
We could tax data center profits, but profits are notoriously difficult to pin down when dealing with multinational corporations.
We could tax property, but industrial development agreements frequently include substantial property tax incentives.
We could tax water consumption, but that might encourage conservation while generating relatively little revenue.
Electricity consumption offers something different.
It’s measurable. It’s recurring. And it’s directly connected to the scale of the operation.
A facility consuming twice as much electricity would generally pay twice as much tax.
Importantly, the tax would need to include electricity generated privately, not merely electricity purchased from a public utility.
Otherwise, the largest operators could potentially avoid the tax by constructing their own generating facilities.
The point isn’t where the electricity comes from.
It’s how much electricity the facility consumes.
And unlike a construction-related tax windfall, which arrives during development and then disappears, electricity consumption can provide recurring revenue for as long as the facilities operate.
Childcare is a recurring obligation. It needs recurring revenue.
But Won’t They Just Leave?
That’s the obvious objection.
Tax data centers, and they’ll build somewhere else.
Perhaps.
A three-cent tax would materially increase operating costs, and electricity prices are an important factor in data center location decisions. Existing development agreements, competing states, and the economics of private power generation would all matter.
New Mexico shouldn’t pretend otherwise.
But neither should we automatically assume that every proposed tax makes industrial development impossible.
Companies select locations for combinations of reasons: available land, electrical infrastructure, access to energy, construction costs, network connectivity, water availability, regulatory conditions, and tax treatment.
The appropriate question isn’t whether taxes influence corporate decisions.
Of course they do.
The question is whether New Mexico can establish a predictable tax structure that provides meaningful public revenue while remaining competitive.
That requires economic analysis rather than slogans.
And it requires recognizing that a facility’s promised investment isn’t the same thing as its long-term contribution to the state’s finances.
The Subsidy Question
New Mexico, like many states, has used tax incentives to attract major industrial development.
The argument is familiar.
Offer favorable tax treatment today, attract investment and jobs tomorrow, and eventually everyone benefits.
Sometimes that works.
Sometimes the benefits are considerably smaller than advertised.
Data centers are particularly interesting because they can require extraordinary capital investment while employing relatively few people after construction is complete.
Construction generates jobs and temporary economic activity. Operating a massive data center is a different proposition.
Highly automated facilities don’t necessarily need enormous permanent workforces.
That doesn’t make them undesirable.
It simply means we should evaluate their public benefits differently from those of a manufacturing plant employing thousands of workers.
If a data center requires enormous amounts of electricity, substantial infrastructure, and public cooperation, New Mexico has a legitimate reason to examine what continuing public revenue it should generate.
Tax incentives should be measured against benefits, not treated as permanent entitlements.
The Children Are the Investment
There’s another way to look at this.
Data centers are investments in computing infrastructure.
Universal childcare is an investment in human infrastructure.
Both matter.
Reliable childcare allows parents to participate in the workforce, reduces financial pressure on families, and creates opportunities for early childhood development.
Those benefits don’t disappear when a child enters kindergarten.
They can influence educational outcomes, workforce participation, family stability, and the state’s long-term economic prospects.
We frequently hear that artificial intelligence and advanced computing represent the future.
Fine.
But so do the children growing up in New Mexico today.
And unlike a data center, a child doesn’t have the option of relocating to another state offering a better tax incentive.
Protect the Fund
The Early Childhood Education and Care Fund was created to provide lasting financial support.
An $11 billion investment fund is a tremendous asset, but it isn’t inexhaustible.
If withdrawals consistently exceed sustainable earnings and contributions, eventually the fund begins consuming itself.
That is the danger legislative economists are identifying.
A dedicated data center tax could reduce the need for withdrawals and allow more of the fund’s investments to continue compounding.
If $400 million annually could be supplied from another source instead of withdrawn from the fund, that would preserve $4 billion in principal withdrawals over a decade, before considering additional investment earnings.
Over twenty years, the avoided withdrawals would total $8 billion.
That’s not a formal actuarial forecast. Actual results would depend on market returns, childcare expenditures, tax collections, and legislative decisions.
But the principle is straightforward.
Money left invested can continue earning money.
And a permanent program needs a permanent financial foundation.
A Tax That Grows With the Industry
There’s no reason New Mexico must establish one enormous tax immediately.
The Legislature could create a dedicated large-data-center electricity tax, apply it above a substantial consumption threshold, and phase in the rate as facilities become operational.
It could require annual reporting of electricity consumption, including privately generated power.
It could dedicate collections to early childhood programs while preserving enough flexibility to address changing circumstances.
And it could periodically adjust the tax structure based on actual revenue, industry development, and the financial condition of the childcare fund.
Existing contractual obligations would need to be respected, and the Legislature would need to ensure that the new revenue actually supplements childcare funding rather than simply replacing other appropriations.
None of this is especially exotic.
Governments routinely impose taxes on economic activities and dedicate the proceeds to public purposes.
New Mexico already understands this concept quite well.
For decades, the state has relied heavily on extracting value from natural resources to finance public services.
Now a different resource-intensive industry is arriving.
The resource is electricity.
The product is computation.
And the economic opportunity is substantial.
A Question of Priorities
I don’t believe New Mexico should discourage data centers simply because they are large, profitable, or owned by powerful corporations.
But neither do I believe the state should be so grateful for their arrival that it neglects to consider what their presence should contribute to the public good.
There is room for both industrial development and public investment.
There is room for artificial intelligence and early childhood education.
There is room for corporate profits and a sustainable childcare system.
The question is how to distribute the costs and benefits.
Our estimates suggest that a tax of roughly three cents per kilowatt-hour, applied to a sufficiently developed New Mexico data center industry, could generate around $460 million annually.
That’s not pocket change.
It’s potentially enough to cover the projected additional annual funding requirement for universal childcare.
We shouldn’t confuse a mathematical possibility with a guaranteed fiscal solution. Before writing legislation, New Mexico needs credible estimates of actual operating demand, the effects of the tax on investment, and the legal obligations associated with existing projects.
But we now have a reasonable starting point for the conversation.
New Mexico is being asked to help build the infrastructure of tomorrow’s digital economy.
Perhaps that economy should help finance the people who will inherit it.
If we’re going to power the future, we might as well educate and care for the children who will live in it.
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