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drilling; a bill to suspend all rules approved under the Richardson administration; and a push to change the way state agencies make rules and regulations.

HEALTH CARE:

Health care will play its part in state budget discussions.

Both budget proposals recommend Medicaid spending of more than $800 million for next year, at or slightly above this year's levels. But as one official put it, keeping spending at this year's levels doesn't mean there won't be cuts. A growing Medicaid population, and the natural rise in costs due to inflation, add to the cost of the program.

Because New Mexico is a poor state, one in every four New Mexicans uses Medicaid, the government's low-income health-insurance program. And, in all likelihood, the sagging economy will push more people onto its rolls in coming months. Estimates are that by June, more than 573,000 New Mexicans will use Medicaid.

"It's over 500,000," said Sen. Dede Feldman, D-Albuquerque, who has followed Medicaid for years. "I've never seen that before."

The battle during the session likely will emerge over how and where to trim costs, and one area under discussion is trimming "optional" medical services for adults on Medicaid.

Dental and vision care, prescription drugs and physical therapy are among the optional services offered to tens of thousands of adults.

So far, no decision has been made, officials said.

PENSIONS AND INVESTMENTS:

State employees are likely to be paying more into their pensions after lawmakers adjourn this session -- meaning a cut in take-home pay.

One legislative plan calls for all employees to temporarily pay 1.75 percent more, while Martinez has proposed a 2 percent increase for all employees except teachers. Whatever the number is, key lawmakers say employees need to pay more to help keep the pensions afloat.

"One way or the other, it looks like they will be paying more into retirement," Varela said.

Others say to expect moves to make public employees work longer before retiring, a step other states already have taken to help keep their pensions solvent.

Last year, lawmakers approved temporarily a 1.5 percent increase in pension contributions for most employees, something that is likely to become permanent on top of other changes this session.

The moves in particular should help the Educational Retirement Board plan, which faces a $5 billion unfunded liability.

Last year, the Legislature passed a bill to reduce the influence of the governor on the State Investment Council. This was in response to a study by consultants hired by the state. They determined the governor had far too much power. Sen. Tim Keller, D-Albuquerque, has pre-filed a bill (Senate Bill 17) that would completely remove the governor as a member of the SIC.

CRIME AND PUNISHMENT:

Spending on the state's prisons also might emerge as a flashpoint in this year's budget negotiations.

Under the previous administration, then-corrections secretary Joe Williams decided not to penalize two private firms that operate four of the state's 10 prisons despite repeated contractual violations. The LFC estimated the penalties the agency gave up at around $18 million.

In its budget recommendation, the LFC recommended cutting the corrections