On December 24th of The Year Without a Christmas, the sleigh from the North Pole crashed beyond repair in present day New Mexico.
The crew of the sleigh built a capital, and named it Santa Fee in honor of their captain's plan to raise money for (1) fixing the sleigh, and (2) adding the second "e" to the sign at the city limits.
The rest of the state was named after the rest of the crew: Rudolph Albuquerque, Prancer Gallup, Dasher Taos, Blitzen Lascruces, Cupid Tucumcari, Comet Truthorconsequences, ...