Unemployed New Mexicans might want to hope for a quick economic rebound. Gov. Susana Martinez announced Saturday that she will veto a business tax meant to keep the state's unemployment fund from going bankrupt.

Martinez's announcement came an hour or so after the 2011 legislative session was gaveled into history.

According to projections, New Mexico's unemployment fund could go bankrupt in March 2012 without a legislative fix. And state lawmakers passed a proposal during the session that would not only raise business taxes but also trim some jobless benefits.

The proposal won broad bipartisan support, which is why some state lawmakers were left flat-footed by the governor's threatened veto.

"Boy, that's going to be one she will regret if she does (veto it)," said Sen. John Arthur Smith, D-Deming, the chairman of the Senate Finance Committee.

Known as a fiscal conservative, Smith said taxing businesses and trimming benefits was better than allowing the federal government to step in if the fund goes bankrupt.

"The tax is about twice as much on an employer as it would be otherwise," Smith said of a federal infusion of cash. A veto "could put us in special session. It's just that big," Smith added.

Martinez, however, said she believes the fund will stay solvent this year and predicted her administration's efforts to create a more business-friendly atmosphere would put more New Mexicans to work before the fund goes bust.

New Mexico's seasonally adjusted unemployment rate in January was 8.7 percent, up from 8.6 percent in December and 8.1 percent a year ago.

Martinez's announcement capped off a 60-day legislative session that won't bring wholesale changes to New Mexicans' lives, although noticeable changes are in store for public schools, law enforcement and health care.

Also, some communities might feel the effect of what didn't get done during the 60-day legislative session.

On Saturday, a $237 million bill that would have funded everything from replacement vehicles for high-mileage school buses to $2 million in renovations at the Runnels Building in the South Capitol Complex ran out of time and died on the Senate floor.

Known as the capital-outlay bill, the legislation also had dollars for New Mexico senior centers, including two in Santa Fe County. Also losing out because of the bill's demise are the first phase of a dam spillway in Springer, projected to cost $2.7 million, and the state's roads. More than $60 million in the bill was earmarked for road improvements.

The bill's demise also means the state can't tap into $55 million in federal matching funds for projects, officials said.

"We'll probably see it in special session," House Speaker Ben Luján, D-Nambé, said of the capital-outlay bill.

While funding for brick-and-mortar projects missed this session's deadline, state lawmakers were able to pass a $5.4 billion state budget and cap at $50 million what New Mexico can pay out to TV and film projects that shoot here. They also asked state workers and public-school teachers to pay more into their pension systems, saving the state roughly $110 million for the year that starts July 1.

In addition to those big-ticket items, state lawmakers also changed state law in several areas.

Grading schools

By next fall, students won't be the only ones graded in New Mexico. Public schools will feel the pride or shame of earning an "A" or "F" school under a bill the Legislature passed.

For the next few months, officials will go through a rule-making process that will decide "what does it mean to be an A school in New Mexico, what's it mean to be a B school in New Mexico," said Hanna Skandera, Martinez's public education secretary. "That's the first step."

"We'll take the (student) test results from this spring, and then (the grades for schools) will be public in the fall," Skandera said.

Unlike the federal No Child Left Behind Act, which measures absolute test scores, the state would be able to measure a student's progress, which would factor into the school's grade, Skandera said.

Social promotion fails

While the proposal to grade schools cleared the Legislature, another of Martinez's education proposals wasn't as lucky. A proposal to end social promotion in third grade died on the Senate floor Saturday despite pleadings to Sen. Majority Leader Michael Sanchez, D-Belen, to hear the bill from Sens. Mary Jane Garcia, D-Doña Ana, and Cynthia Nava, D-Las Cruces.

He didn't block the bill, Sanchez said.

"I think there's issues with it, and there may have been some people who would have been debating it as vociferously as the two that were doing what they did," Sanchez said.

The governor didn't take kindly to the social-promotion bill not getting a hearing in the Senate.

"This is dangerous. It puts our kids at a disadvantage," Martinez said Saturday.

As she has on numerous occasions, the governor spoke of the 80 percent of New Mexico's fourth-graders who don't read proficiently.

Because they have a difficult time making up ground in later grades, "many become disillusioned and frustrated," she said of those students. "They give up, and some drop out."

Martinez was referring to New Mexico's high dropout rate.

Sen. Vernon Asbill, R-Carlsbad, a former school superintendent, said, however, that most of what was in the failed social-promotion proposal could be achieved administratively. The only part that couldn't be done administratively is a provision that gave parents the power to keep their kids from being held back, he said. Under the proposal, parents could have appealed a school decision to hold back a third-grader.

DNA samples for felony arrests

Beginning July 1, individuals arrested in New Mexico for any felony offenses will have to submit to DNA sampling.

But under an agreement reached Friday between lawmakers in the House and Senate, those DNA samples wouldn't be analyzed unless a warrant was issued, a judge ruled there was cause for arrest or the suspect posted bail and didn't show up for a court hearing.

Under current law, DNA is taken from people arrested for violent felonies, including murder, sex crimes and robbery. What lawmakers passed this year is an expansion of Katie's Law, which is named after a New Mexico State University student who was murdered.

On Saturday, Martinez praised lawmakers for passage of that bill.

"Every felon we take off the street could result in a life that is saved or a rape that is prevented," Martinez said.

Health care

On Saturday, Martinez was unsure whether she'd sign or veto two health care proposals that state lawmakers sent her.

One proposal would force health insurers seeking to hike premiums to open their financial books to the state of New Mexico. It also would change how appeals of premium rate decisions are handled.

The other would establish a state health care exchange, a clearinghouse where individuals and small businesses can shop for insurance as well as subsidies that could help them pay for it.

The exchange concept is a major plank in the nation's new health care law, which hopes to lower the number of uninsured individuals. According to conservative estimates, more than 100,000 of New Mexico's 450,000 uninsured people could become insured through the exchange.

Driver's licenses

Meanwhile, New Mexico will remain one of three states to issue driver's licenses to illegal immigrants despite a concerted push by Martinez, most Republicans and a few Democrats to stop the policy.

"I'm disappointed," Rep. Andy Nuñez, I-Hatch, who sponsored legislation to stop the practice, said Saturday morning after lawmakers couldn't agree on a proposal to address the issue.

Nuñez expressed his disappointment as Marcela Diaz and Elsa Lopez of Somos Un Pueblo Unido, an immigrant-rights group, hugged each other a few feet away.

Diaz was close to tears.

"It's been a long 60 days," Diaz said. "We know that it is not over. We have a lot of work to do to educate our lawmakers, our officials, our voters" about how important it is for public safety that New Mexico issue driver's licenses to illegal immigrants.

Advocates say issuing driver's licenses creates a database that authorities can use to keep track of people.

"Our community is being attacked from many different angles," Diaz said. "We have to be vigilant. We have to do a lot of work."

Contact Trip Jennings at 986-3050 or at tjennings@sfnewmexican.com.