Earlier this year, the state House reached what former Speaker Ben Luján, D-Santa Fe, characterized as a milestone in his farewell speech: Its members voted unanimously to pass the state budget.

Gov. Susana Martinez, a Republican, signed it (and line-item vetoed a few things along the way). But memories of much tougher battles are keeping veteran lawmakers like state Rep. Luciano "Lucky" Varela, D-Santa Fe, from predicting similar comity during the upcoming legislative session, which starts next month.

"We have a major change in legislators," Varela, who serves as vice-chairman of the Legislative Finance Committee, which issues the Legislature's recommendations for the budget, tells SFR. "I can't tell the stances they're going to take, depending on their philosophies."

While Democrats gained seats in the House this year and Republicans made some inroads in the Senate, roughly one-third of lawmakers in both branches are newcomers.

This year, the LFC has projected a $282 million surplus for fiscal year 2014, a slight increase over last year's $254 million bump. And once again, state agencies are clamoring for a piece of the pie after years of cuts.

The largest request comes from the Public Education Department, which is asking for a budget increase of more than $100 million for itself and the state's school districts.

The trick is figuring out how to tie the extra money to results. Even though education accounts for nearly 70 percent of the state's budget, New Mexico routinely ranks near the bottom, nationally, in public school performance. State Rep. Larry Larrañaga, R-Bernalillo, who serves on the LFC, says one way to improve performance is by funding education "below the line."

This means earmarking money for specific PED initiatives like teacher evaluations and training; rewarding schools that score high on the controversial A-F state grades; and the K-3 Plus program, which devotes more time to literacy learning for kindergarteners through third-graders. Altogether, the PED is asking for $28.3 million extra in "below the line" spending.

But Santa Fe Public Schools Superintendent Joel Boyd would rather see that money go toward at-risk students: youth living in poverty and learning English as a second language.

"Money should follow kids," he tells SFR. "It shouldn't follow adults."

Boyd says the most likely scenario for SFPS is a 3 percent budget increase from last year.

Another notable request comes from the state Human Services Department, which is asking for approximately $50 million more than last year for the state's Medicaid program, which provides health services for low-income individuals and families. Nearly $20 million of that is intended to replace lost revenue from an expiring tobacco lawsuit settlement. The state Department of Health and the Children, Youth and Families Department are also asking for $10 million and $13 million more, respectively.

But as the requests pile up—$72 million of which must be accounted for expiring revenue from the tobacco lawsuit and expiring public retirement payments that were previously "swapped" from state coffers to state employees—lawmakers will have to make priorities.

Education, health care and restructuring the state's corporate tax rate will be on Martinez' agenda. The LFC will likely focus on health care, early childhood development, education and additional funding for state employees. Both will bring forward recommendations before the legislative session starts on Jan. 15.

But lawmakers are also signaling that they'll take a scaled-back approach. Fiscally conservative state Sen. John Arthur Smith, D-Hidalgo, the LFC chairman, has already publicly cast doubts on the economic stability of the $282 million—most of which comes from expected growth in the state's oil and gas industry, which the LFC acknowledges is "inherently volatile."

Then there's the looming "fiscal cliff," which, if not resolved before the end of the year, will trigger federal spending cuts. The consequences are significant for a dependent state like New Mexico, which receives more than $2 back for every dollar it pays to the federal government. (Only Mississippi, South Carolina and West Virginia have better rates of return.) Locally, the concern isn't over indecision. It's over the likelihood of federal cuts as part of any deal.

That could mean long-term austerity measures for New Mexico.

"We have to be very careful that we don't overreach just because we've seen some growth in the revenues this time around," Larrañaga tells SFR. "That might not be the case in the next year."