A year ago, Gov. Susana Martinez was an unknown. After she was sworn in as New Mexico's governor two weeks before the 2011 legislative session, many lawmakers didn't know what to expect of the former Las Cruces prosecutor.

Twelve months later, the Republican governor has finished a first year in office that included a rocky relationship with the Democrat-controlled Legislature.

The state's top court twice rebuffed Martinez over vetoes that many legislators characterized as executive overreach into legislative prerogative involving the state budget and New Mexico's unemployment fund. The Legislature, meanwhile, shelved some of Martinez's biggest priorities, including repeal of the law allowing undocumented immigrants to get New Mexico driver's licenses.

Of course, Martinez notched some successes. She lobbied for and won the fight last year to cap what New Mexico pays out each year in incentives to TV and film productions. The Legislature also approved a plan to assign A-through-F grades to New Mexico schools, a high priority for Martinez.

Now comes the 2012 regular 30-day legislative session, beginning Tuesday, a high-profile venue for the first-term Republican governor to show off what she's learned about working with state lawmakers and getting things done.

Martinez is adamant that a year has made a difference. Heading into last year's 60-day session, Martinez said, she and her top aides were not only learning their jobs but also interviewing individuals for Cabinet secretary posts and putting together a state budget. Add to the sharp learning curve the big winter freeze of 2011, which required her administration to react, her staff says.

"A lot was happening in a very short period of time," the governor said recently. "We were able to meet with some legislators but not to the extent that I would have liked to. What we're trying to do differently this time is really communicate with legislators, more in advance. Where can we come to a consensus? Where can we agree on the bills and the language of those bills before those bills are filed?"

As part of this strategy, Martinez's chief of staff, Keith Gardner, a former legislator from Roswell, will interact more with his former colleagues in an effort to improve the chances of his boss's agenda, he said.

"Working together in a bipartisan way is No. 1 because at the end of the day, it is not about us, it's about the people we represent, whether they be Democrats or Republicans," Martinez said.

Some lawmakers welcome the promise of openness.

"I get the impression that given the statements that the governor has made recently, she is looking for more dialogue," said Rep. Luciano "Lucky" Varela, D-Santa Fe. "Maybe things will get better this session over last year."

Others aren't so sure.

"Actions speak louder than words," said Senate President Pro Tem Tim Jennings, D-Roswell, who, like other legislators, thought Martinez didn't always work well with state lawmakers during her first year in office. "She needs to be respectful of our constitutional duties."

The budget and taxes

The big issue before Martinez and the Legislature for the session that starts Tuesday is the state budget. Business in a 30-day session is restricted to state finances, although a governor can add items to the legislative agenda.

Unlike in recent years, New Mexico's tax revenues are stronger, meaning the state expects to have more money beyond what it will take to run state government at its current levels for the fiscal year that begins July 1.

But the extra cash, and what to do with it, is exposing a philosophical difference between Martinez and the Legislature's leadership.

Tom Clifford, Martinez's budget secretary, perhaps summed up his boss's position best. New Mexico in the past has let revenues lead spending, Clifford told a small Friends of Capitalism gathering recently at the Rio Chama Steakhouse, next door to the Capitol. In other words, he said, if revenues were there, the state looked for ways to spend them.

Martinez has proposed more than $50 million in targeted tax cuts for small businesses, research and development firms, and manufacturers.

In contrast, the Legislature's proposed budget recommends putting the expected extra cash back into programs that were cut in recent years as the state responded to falling tax revenues.

House Speaker Ben Luján, D-Nambé, told The Associated Press that tax cuts "wouldn't be smart to do at this time" because of uncertainty over the economy in New Mexico and the rest of the nation.

Varela, vice chairman of the Legislative Finance Committee, said he is open to a conversation about taxes. But Varela, like a coalition of lawmakers, wants to scrutinize the state's tax code for loopholes.

Dropping certain deductions and exemptions and ending targeted tax credits would increase revenue to the state that could go toward the programs, he said.

"I'm open to closing loopholes and enabling us to restore some of the cuts that have been made by the Legislature and the governor," Varela said.

While Martinez and the Legislature will disagree over the budget, many lawmakers expect an agreement over finances without too many fireworks.

"The budget is very close," Taylor said of spending proposals released by the governor's staff and by the Legislative Finance Committee. "There won't be a whole lot of wars over that. It comes down to the governor and the Legislature and how they deal with other pieces of legislation."

For example, bills targeting public schools.

Education

Martinez, who has made education reform a high priority, will resurrect legislation this session intended to stop the practice of social promotion of students who can't read at grade level by the end of the third grade.

Martinez and her education secretary-designate, Hanna Skandera, unsuccessfully lobbied for the legislation in last year's regular session and during a September special session. This time around, Martinez and Skandera are emphasizing early intervention, rather than retention, in the hopes of winning support of parents who may not like the idea of their children being held back.

She'll face resistance from some corners in the Legislature. Rep. Rick Miera, D-Bernalillo, and Sen. Linda Lopez, D-Bernalillo, announced a competing bill last week that supports intervention yet still gives parents the right to decide whether their third-grader should be held back, regardless of whether the student can read at grade level.

Another public-education bill the governor considers a priority is a plan to retool the state's teacher-evaluation system. It would reward good teachers with merit pay and help struggling teachers with additional resources. While that bill is still being shaped, expect it to rely largely on student test scores to determine teacher impact, administration officials said.

Finally, the governor will ask for more than $5.5 million to finance spending under the new A-to-F grading system for public schools, intended to help apportion financial help for schools in need and reward top schools.

Driver's licenses

Another issue likely to generate heated debate is Martinez's efforts to repeal a state law that authorizes issuance of driver's licenses to undocumented immigrants.

New Mexico is one of three states that allow illegal immigrants to obtain driver's licenses, although Utah provides driver's permits that do not double as government identification.

Other than redistricting during the September special session, the driver's-license bill has generated the most controversy over the past year.

An unlikely coalition of legislators — all 33 Republican lawmakers, two Democrats and the House's only Independent, Andy Nuñez of Hatch — helped push through a bill to Martinez's liking during last year's 60-day regular session.

The Senate, however, resisted the legislation while offering a competing version that would enable foreign nationals without Social Security numbers to receive state licenses, but only for two-year increments. New Mexico driver's licenses currently are issued for four and eight years, although people 75 and older have to renew their licenses every year.

Martinez confirmed earlier this month that she would again push for the repeal of the driver's-license law.

This time around, there will be an extra dose of drama, however. 2012 is an election year, meaning many legislators seeking new terms will face challengers. Will some lawmakers' positions on the driver's-license law change depending on what they hear from constituents?

Martinez hopes so.

The governor said in a recent interview that the most surprising part of her first year in office was "that some legislators didn't expect me to keep the promises that I made for 16 months as I ran for office.

"A couple of legislators, when we were working on the budget, said to me, 'You need to quit campaigning, and you need to start governing.' Initially, I didn't quite understand what they meant," she told The Associated Press.

She concluded they meant, "You shouldn't keep your word now that you are in office."

PRC reform

Last fall, Jerome Block Jr. resigned from the Public Regulation Commission after pleading guilty to fraudulent use of a state-issued gasoline card, embezzlement, identity theft and other charges.

For many state lawmakers, that scandal was the final straw.

Calls to restructure the elected regulatory body have resounded for years. But this year, it actually might happen.

State lawmakers likely will take up several pieces of legislation related to the Public Regulation Commission.

One would call for commission members to meet certain minimum qualifications, such as a bachelor's degree from a four-year college or five years of experience in law, engineering, economics or accounting.

Another would ask whether the commission's Insurance Division should become a stand-alone agency. Others would propose transferring the state fire marshal to the Homeland Security Department and moving the Corporation Reporting Division to the Secretary of State's Office. Currently, the commission is responsible for setting rules and rates for utilities, registering corporations, conducting fire inspections and acting as the arbiter for health insurance premium rates, among other things.

Staff writer Robert Nott contributed to this story.

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