Lt. Gov. Diane Denish (Photo by Heath Haussamen)

Lt. Gov. Diane Denish (Photo by Heath Haussamen)

Anyone interpreting Republican victories in New Jersey and Virginia’s governor’s races Tuesday as a harbinger of a GOP upset next year in New Mexico, Lt. Gov. Diane Denish has a ready reply.

“I’ve lived in New Mexico all my life. I’ve never known New Mexicans to take a cue from the East Coast,” Denish said Wednesday during a late morning news conference in Albuquerque.

It was a jaunty, even witty, rejoinder in an otherwise sober event.

Denish, a Democrat, is the presumptive frontrunner in the 2010 gubernatorial race with $2 million in the bank, the backing of the state’s dominant party and a year to run to win the state’s top executive post.

But there are harsh realities that are difficult to ignore: Denish is running with a bad national economy that is at least partly to blame for the state’s budget woes and a budget deficit that could be as high as $1 billion. Meanwhile, several corruption investigations over the past four years have either ended the careers or tarnished the reputations of elected officials, mostly Democrats.

Add another factor to complicate matters: New Mexico is now less than a year from the 2010 gubernatorial election that for months has felt as if it were in full swing.

How much difference 11 months makes. It was in the same room as Wednesday’s news conference that Denish in December 2008 laid out her plans as governor-to-be, a prospect that seemed at the time a near guarantee.

Then, Gov. Bill Richardson was viewed as a short-timer, with a lock on a spot in President Obama’s cabinet as commerce secretary. Three weeks later, a federal corruption investigation, since ended without criminal charges this summer, forced Richardson to withdraw his nomination and quashed Denish’s anticipated rise to become the state’s first female chief executive.

These days GOP gubernatorial candidates Susana Martinez and Allen Weh regularly attack Denish in news releases, often playing up twin themes: She deserves part of the blame for the state’s economic difficulties, a tenuous claim given the complexity of the economy; and that Denish belongs under the same cloud of suspicion that hangs over the administration of Gov. Bill Richardson.

Asked Wednesday for a response to the GOP’s attacks, Denish largely ignored them, saying “We have a year to go and I am focused on these budgetary issues.”

And it was the state’s ailing budget that Denish primarily focused Wednesday .

Denish said tax increases and spending cuts must be discussed when state lawmakers convene in Santa Fe in January to write next year’s state budget, which could include a $1 billion shortfall.

But before state lawmakers increase revenue or cut spending, she said, they should consider eliminating “double dipping” for certain state workers and reform how the state hands out money for brick-and-mortar projects around the state.

“Double dipping” allows a retired public sector employee to earn a state salary at the same time that he or she receives a pension from the Educational Retirement Board or Public Employees Retirement Association. Richardson vetoed legislation earlier this year that would have limited the practice.

“It’s not fair,” Denish said. “New Mexico can’t afford it.”

Denish acknowledged that she wasn’t seeking the complete elimination of the practice, saying that in some areas, such as public safety, “double dipping” might need to happen. But it was a curtailing of the practice. She said closing some loopholes could save up to $7 million, although how exactly to accomplish those savings wasn’t immediately clear.

Denish also recommended dramatically reforming how New Mexico passes out dollars to pay for brick-and-mortar projects — capital outlay, or so-called pork — around the state.

Right now, the governor and state lawmakers determine each year how to divvy up money for such projects. In the past, the money earmarked for capital outlay, or pork, has sometimes ballooned to $1 billion in a single year. But several reports over the years have found that more than $1 billion of money appropriated for such projects remains unspent.

“We need to have a system that is based on the merit of the project,” Denish said.

Part of the reform Denish suggested should include the creation of a state Capital Outlay Planning Board. It would be responsible for drafting and maintaining a five-year comprehensive plan to ensure all communities receive the resources they need when they most need them. Denish was emphatic that the board should be made up of state lawmakers, the executive branch, the private sector and local governments.

The measures would save under $10 million, according to her office’s estimates.

“This is just one piece of the pie,” Denish said of measures to address the state’s budgetary shortfall.