SANTA FE, N.M. (AP) — New Mexico Gov. Susana Martinez sounded an optimistic note Tuesday about the state economy and government finances while calling on lawmakers to approve new business incentives and adopt stiffer criminal penalties to address concerns about public safety.

In her final State of the State address, the second-term Republican governor also highlighted the need for new investments in public education, calling for a 2 percent increase in teacher salaries and new restrictions on administrative spending at school districts.

"We must work together to keep our economy moving, pass a responsible budget, make New Mexico a safer place for families and the worst place in America to be a criminal," Martinez told the Democrat-led Legislature.

Martinez's comments marked the start of a 30-day session already aimed at boosting funding to public schools, law enforcement, courts and Medicaid health care.

After the governor's speech, Sen. Howie Morales, a Silver City Democrat, warned Martinez that lawmakers had bipartisan support on distinct criminal justice reforms and spending increases. He said lawmakers would not hesitate to seek an override in reaction to any veto or veto threat from Martinez.

"It's time for a new direction in New Mexico," said Morales, who questioned the governor's claim that 50,000 jobs were created under her tenure.

Giving state workers an across-the-board 1.5 percent raise and a new tax on tobacco were among the proposal Democrats will push, Morales said. He acknowledged the tobacco tax to fund educational programs was a long shot given the governor's resistance to new tax hikes.

State tax revenue is on the rise as lawmakers have started crafting a spending plan for the fiscal year that starts July 1. New Mexico government income for the coming fiscal year is expected to surpass annual spending obligations by more than $330 million, Martinez said. That's more than the $200 million that was projected in recent weeks.

"Maybe we should give a chunk of that back to the taxpayer," Martinez said.

Her written budget plan calls for rebuilding reserves to bolster the state's credit rating and provide a buffer to future recessions.

Martinez tapped familiar themes about the need for government austerity and limited regulation, and she urged the Legislature to reduce the cost of doing business in New Mexico by overhauling the state's gross receipts tax on sales and business services. Similar reform efforts stalled last year amid disagreements about taxation and spending priorities.

Democratic state Rep. Bill McCamley of Las Cruces said local tax reform efforts face new obstacles as state officials struggle to understand the impact of the federal tax overhaul.

The governor is likely to clash with Democrats on how to address public safety problems — especially rising property crimes and violence in Albuquerque.

Martinez has endorsed legislation that would reinstate the death penalty, expand three-strikes laws for multiple violent felonies and grant police broader immunity from prosecution. The Legislature has repeatedly rejected the reinstatement of capital punishment.

Leading Democratic lawmakers want to increase financial backing for community policing efforts at local law enforcement agencies.

House Democrats also highlighted a push to increase funding for early childhood education initiatives — proposals largely supported by Republicans and the governor.

Democratic House Speaker Brian Egolf of Santa Fe also emphasized efforts to "make sure that we have clean air, clean water and good jobs" in a message posted on YouTube.

With her second and final term wrapping up at the end of the year, Martinez has sought to link this year's fiscal and economic rebound to her administration tax policies and business incentives for companies that expand in New Mexico, including Facebook and its new data center in Los Lunas.

New Mexico's unemployment rate fell to 6.1 percent in November from 6.7 the previous year. But only New Mexico and Alaska have rates over 6 percent.

Jon Clark, chief economist for the nonpartisan Legislative Finance Committee, told lawmakers this month that the state remains more dependent than ever on the oil and natural gas sector for crucial sales-style tax revenues.

"We are still in the lost decade, in that New Mexico is still below its pre-recession peak of employment," Clark said.