Can a New Mexico county or city use opioid settlement money to help build a general behavioral health facility that will treat some opioid patients along with patients who have other mental health conditions?
Plain-English summary
Curry County and the City of Clovis asked whether they could put opioid settlement money toward a joint behavioral health center that would serve patients with a wide range of mental health and substance use issues, including some opioid patients. The Attorney General said no, with a narrow carve-out.
Reading the New Mexico State-Subdivision Agreement (the contract that governs how counties and cities receive their share of the national opioid settlements with Janssen, the distributors, and others), the AG concluded that 100% of the LG Share must be spent on "Opioid Related Expenditures" as defined in Exhibit E of the underlying settlement agreements. That definition is opioid-specific. It covers OUD treatment, OUD-related housing, and training of providers who treat OUD or co-occurring conditions. It does not cover general behavioral health construction.
The opinion does leave a path forward. After the facility is built (with non-settlement money), the cities and counties can pay the share of operating expenses attributable to treating opioid patients out of settlement funds, as long as their accounting is precise enough to separate those costs from the costs of treating non-opioid patients.
What this means for you
If you are a New Mexico county or city sitting on opioid settlement money
You cannot use the LG Share to build, equip, or furnish a building that will treat a mixed patient population. The settlement language is read literally: the construction has to be for a facility that is "wholly dedicated to" opioid use disorder care to qualify as an Opioid Related Expenditure.
If your project plan involves a multi-purpose behavioral health center, talk to your bond counsel and your finance officer about funding the bricks-and-mortar piece from a different source (general fund, capital outlay, federal block grant). Then run the OUD share of operating costs through the LG Abatement Fund.
Keep the LG Abatement Fund segregated. The agreement requires "a separate fund or project on its financial books and records." Commingling those dollars with general behavioral health funding will create audit problems even if the underlying spend would have qualified.
If you are an operator or administrator at a behavioral health facility
Build a cost-allocation methodology before you accept any LG Abatement Fund dollars. The AG specifically calls out the need for "precise accounting practices to ensure that use of State-Subdivision Agreement funds are limited to these specifically intended purposes." Patient-day counts, OUD diagnosis percentages, or service-line cost accounting are the kinds of allocation bases that would defensibly tie a portion of operating expenses to the OUD population.
Co-occurring disorders are eligible. The settlement explicitly funds treatment of substance use disorder and mental health conditions when they are co-occurring with OUD. So a patient who has OUD and depression can be fully treated, and that patient's full episode of care is settlement-eligible. A patient with depression alone is not.
If you are a state legislator or oversight official
The opinion is a check on broad uses of settlement funds for general behavioral health infrastructure. If a project does not pencil out for OUD-only care, settlement dollars cannot be the bridge funding source for the construction phase. Watch for project plans that label themselves as opioid-focused but in operation will serve a mixed population without segregated accounting.
If you are a New Mexico attorney advising a local government client
The opinion treats the State-Subdivision Agreement as an unambiguous contract under New Mexico contract-interpretation rules (Richardson v. Farmers Ins. Co. of Ariz., 1991-NMSC-052). Arguments that "incidentally serving the OUD population" qualifies under the agreement are weak. The agreement's restriction to expenditures listed in Exhibit E is treated as a complete list, not an illustrative one.
Common questions
Q: Can opioid settlement money pay for a brand-new opioid treatment building?
A: Yes, if the building is wholly dedicated to opioid use disorder care. A facility that will exclusively serve OUD patients qualifies as construction supporting an Opioid Related Expenditure under Exhibit E.
Q: What if the new facility will treat OUD patients in 60% of its beds?
A: The AG's reading is that anything less than full dedication does not qualify for construction funding. The opinion frames the standard as "wholly dedicated," not "primarily dedicated."
Q: Can we use settlement money to hire behavioral health workers at a mixed-use facility?
A: Yes, if those workers are providing or expanding services for OUD and co-occurring conditions. Exhibit E specifically authorizes hiring or training behavioral health workers in support of the eligible service categories.
Q: How do we document that an operating expense is OUD-related?
A: The AG suggests proportional allocation. If 30% of patient encounters at the facility are OUD-related, then 30% of operating expenses can defensibly come from the LG Abatement Fund. Build the methodology with your auditor and document it before you draw down funds.
Q: What if the City and County jointly own the facility with other partners?
A: The State-Subdivision Agreement applies to each Participating Local Government's share. Each entity controls its own LG Abatement Fund. A joint project can be funded from multiple LG Abatement Funds, but each fund must be tracked and used for eligible expenditures from that government's share.
Q: Are the settlement agreements public?
A: Yes. The Janssen Settlement Agreement and the New Mexico State-Subdivision Agreement are public documents. The Exhibit E list of qualifying expenditures is the operative spending menu.
Background and statutory framework
The State of New Mexico, like other states, settled lawsuits against pharmaceutical manufacturers, distributors, and retailers tied to the opioid crisis. New Mexico signed Settlement Agreements with Johnson & Johnson (Janssen), Allergan, Teva, the major distributors, and others.
Each settlement was paired with a State-Subdivision Agreement that allocates the funds between the state and its participating local governments. The agreements require each Participating Local Government to create a segregated LG Abatement Fund, prohibit commingling, and require that 100% of the State Share and LG Share (other than attorneys' fees) be used "only for Opioid Related Expenditures."
Opioid Related Expenditures are defined in Exhibit E of the settlement, which lists categories such as: full-continuum OUD treatment, OUD-related housing, hiring or training behavioral health workers for OUD services, peer support, recovery services, and similar.
The opinion applies New Mexico contract-interpretation principles. Under Richardson v. Farmers Ins. Co. of Ariz., a contract provision that is unambiguous is applied as written, not interpreted. The Exhibit E list is treated as the operative menu of permissible spending.
Citations and references
Cases:
- Richardson v. Farmers Ins. Co. of Ariz., 1991-NMSC-052, 112 N.M. 73
- State ex rel Balderas, D-101-CV-2017-02541 (N.M. 1st Jud. Dist., filed Sept. 7, 2017)
Other documents referenced:
- New Mexico Janssen Settlement Agreement
- New Mexico Janssen State-Subdivision Agreement (Exhibit E)
Source
- Landing page: https://nmdoj.gov/publication/opinion/2026-01-opinion-permissible-use-of-opioid-settlement-money/
- Original PDF: https://nmdoj.gov/wp-content/uploads/AG-Opinion-2026-01-Permissible-Use-of-Opioid-Settlement-Money.pdf
Original opinion text
January 9, 2026
OPINION
OF
RAÚL TORREZ
Attorney General
Opinion No. 2026-01
To:
State Representative Andrea Reeb
Re:
Attorney General Opinion – Permissible Use of Opioid Settlement Money
Question
Is it permissible for Curry County and the City of Clovis to use opioid settlement funds distributed
through the New Mexico Opioid Allocation Agreement to partially fund a behavioral health
facility that will "undoubtedly"—but not specifically—provide services to individuals suffering
from opioid use disorder?
Short Answer
Based on the question posed, such use is not permitted. The use of these funds to build a general
behavioral health facility is not permitted, even if some of the patients ultimately treated at the
facility suffer from opioid use disorder. In order to make use of the funds, a more precise allocation
of the funds to address opioid issues is necessary. For instance, it may be permissible to use the
funds to pay operational expenses of the facility, in proportion to the percentage of expenses used
to treat opioid patients.
Background
As a consequence of the harms caused by opioid use and abuse, the State of New Mexico, along
with other states and political subdivisions, filed a series of lawsuits against pharmaceutical
manufacturers, distributers, and retailers. See, e.g., State ex rel Balderas, D-101-CV-2017-02541
(N.M. 1st Jud. Dist., filed Sept. 7, 2017). These lawsuits resulted in several very similar settlement
agreements with various entities in the pharmaceutical industry. New Mexico entered into
agreements with Johnson & Johnson (a/k/a Janssen), Allergan, Teva Pharmaceuticals, the
pharmaceutical distributors, and some smaller companies ("Settlement Agreements"). New
Mexico's agreement with Johnson & Johnson ("Janssen Settlement Agreement") is representative
of these Settlement Agreements.
New Mexico Department of Justice
408 Galisteo Street | Santa Fe, NM 87501 | (505) 490-4060 | NMDOJ.GOV
The Settlement Agreements provided for the creation of State-Subdivision Agreements, in which
the settling state reaches agreement with the subdivisions of that state regarding the allocation,
distribution, and/or use of funds allocated to that state and to participating subdivisions in that
state. See Janssen Settlement Agreement, § I(78). The State of New Mexico and its subdivisions
entered into three of these State-Subdivision Agreements, concerning the distribution funds from
four different national Settlement Agreements. The State-Subdivision Agreement concerning the
combined funds from the settlements with Janssen and the distributors ("Janssen State-Subdivision
Agreement") is representative of these agreements.
The Janssen State-Subdivision Agreement requires that "[e]very Participating Local Government
shall create a separate fund or project on its financial books and records that is designated for the
receipt and expenditure of each entity's portion of the LG Share, called the 'LG Abatement Fund.'"
Janssen State-Subdivision Agreement, § C(1). The money from this fund cannot be comingled
with other funds of the local government. Id. In addition, the Agreement requires that "[e]xcept as
provided herein or as provided by court order, 100% of the State Share and the LG Share,
regardless of allocation, shall be utilized only for Opioid Related Expenditures." Id. § B(6). While
the Agreement provides for the setting aside of funds to pay attorneys' fees in the event that these
fees are not paid out of the Settlement Agreements themselves, it contains no other provision for
alternative use of the funds.
"Opioid Related Expenditures" are defined as those listed in Exhibit E of the Settlement
Agreement. This Exhibit describes three types of expenditures that might be relevant to this
Opinion:
Provide the full continuum of care of treatment and recovery services for OUD
(Opioid Use Disorder) and any co-occurring SUD/MH (Substance Use
Disorder/Mental Health) conditions, including supportive housing, peer support
services and counseling, community navigators, case management, and
connections to community[-]based services.
Exhibit E to Settlement Agreement, § B(2).
Provide access to housing for people with OUD and any co-occurring SUD/MH
conditions, including supportive housing, recovery housing, housing assistance
programs, training for housing providers, or recovery housing programs that allow
or integrate FDA approved mediation with other support services.
Id. § B(4).
Hire or train behavioral health workers to provide or expand any of the services or
supports listed above.
New Mexico also entered into its own settlement agreements with some of the other defendants.
Id. § B(16).
In the opinion request, Rep. Reeb describes a joint project of Curry County and the City of Clovis,
in conjunction with several other local governments in Eastern New Mexico, to build a behavioral
health center that will "undoubtedly" serve some individuals suffering from opioid use disorder.
Rep. Reeb seeks this office's opinion as to whether Clovis and Curry County can partially use
funds from the State-Subdivision Agreement opioid settlement funds "to build and construct a
crisis triage center and short-term inpatient rehabilitation facility (including furniture, fixtures, and
equipment), in addition to providing services."
As described below, the use of the settlement funds for construction of a behavioral health center
that will serve patients with a wide variety of mental health issues would not be a compliant use
of the Settlement Funds. However, once the facility is built, operational expenses directly related
to the treatment of patients with opioid use disorder, including treatment of these patients for co-occurring mental health issues, would be a compliant use.
Analysis
Under New Mexico contract law, "[a]bsent ambiguity, provisions of contract need only be applied,
rather than construed or interpreted." Richardson v. Farmers Ins. Co. of Ariz., 1991-NMSC-052,
¶ 7, 112 N.M. 73. The provision in the State-Subdivision Agreement that the money be spent in
its entirety on "Opioid Related Expenses," as delineated in Exhibit E of the Settlement Agreement,
is unambiguous. Thus, this provision needs to be applied as written, so any expense that is not
encompassed by Exhibit E of the Settlement Agreement is not a permitted use of funds. The clauses
described by Rep. Reeb in the opinion request exclusively pertain to services to patients with
opioid use disorder. While it also mentions other mental health or substance use issues, the State-Subdivision Agreement only allows for treatment of those issues when they are "co-occurring"
with opioid use disorder. Thus, the treatment of patients who do not suffer from opioid use disorder
would not be a permissible use of funds from the State-Subdivision Agreement. Accordingly, it
would not be appropriate to use the funds to construct a facility that will "undoubtedly"—but not
specifically—treat patients with opioid use disorder. The facility would need to be wholly
dedicated to that purpose for its construction to be properly funded using State-Subdivision
Agreement funds.
However, once the facility is constructed, it would be perfectly appropriate to use funds to pay the
share of operational expenses that could be directly attributed to the treatment of patients with a
diagnosis of opioid use disorder, as well as any concurrent diagnoses attached to those patients.
The facility would need to adopt precise accounting practices to ensure that use of State-Subdivision Agreement funds are limited to these specifically intended purposes.
Conclusion
The City of Clovis and Curry County can use their opioid settlement money to treat patients with
opioid use disorder at the proposed behavioral health facility. However, they may not use the
money for the construction of any facility that is not wholly dedicated to opioid use disorder.
Please note that this opinion is a public document and is not protected by the attorney-client
privilege. It will be published on our website and made available to the general public.
RAÚL TORREZ
ATTORNEY GENERAL
/s/ Lawrence M. Marcus
Assistant Solicitor General