Among her initiatives: expanding voluntary all-day kindergarten to all school districts; tax incentives for small companies that offer health care coverage; raises for schoolteachers and other state employees; increased funding for law enforcement; more money for border security; new programs for seniors and veterans; a sales-tax holiday for back-to-school supplies; and cuts in car-registration fees.
But despite the good economic times, Napolitano may find it harder than ever to negotiate with GOP lawmakers to implement her agenda.
One reason: It's an election year, even though Republicans have yet to field a powerhouse candidate to challenge Napolitano.
A second reason is GOP wariness over increased spending. The budget had barely been released when Republicans began complaining that it was a 22 percent increase in spending over the current fiscal year. (Napolitano's defenders say the actual increase is much smaller when you take out mandated increases and unavoidable one-time payments.)
"To adopt the proposals would shoot us back into a structural deficit," says Rep. Steve Tully, the majority leader in the House.
But the third reason has to do with the lack of trust between Napolitano and Republican lawmakers. Although the two sides have had differences of opinion about managing the state's finances since she first took office, tensions between Napolitano and the GOP leadership have been especially high since the end of last session, when she vetoed a $5 million pilot program designed to allow corporations to claim a tax credit for scholarship funds they provide to private schools. Napolitano announced that the GOP had failed to include a sunset provision that would have ended the program after five years.
Republican leaders replied that Napolitano had signed off on the program, but reneged when legislative Democrats, education lobbyists and other members of her base objected to her approval of a step toward a voucher system. They played up the veto to the best of their ability, going so far as to hand out T-shirts that said "She Lied" to caucus members.
The memory is still fresh in the mind of the GOP caucus. One of the first bits of business this session was passing the tuition tax credit bill again, this time with the sunset provision. But Napolitano, arguing that the clock had run out on last year's budget deal, vetoed it.
"Until we have a comprehensive agreement about next year's budget, it is premature to consider individual budget-related legislation on a piecemeal budget," she wrote to House Speaker Jim Weiers.
Since then, lawmakers have attached two more versions of tuition tax credits to the English-language learners bills that were passed in an effort to resolve a federal lawsuit that's resulting in daily fines of $500,000. Napolitano has vetoed those plans, too.
Tully predicts that Napolitano's failure to make a new deal on tuition tax credits is going to make for rough relations.
"The worst part of it is that it makes it virtually impossible to meet and negotiate bills with the governor, and that makes governing very difficult," says Tully. "When you have no faith in the trustworthiness of the governor to complete a deal, our members certainly won't let us go and negotiate with the governor on any bill."
Gubernatorial spokeswoman Jeanine L'Ecuyer said it's time to let bygones be bygones.
"I don't see the sense in continuing to comment on the same old argument," L'Ecuyer says. "Yes, there was bad feeling. I will tell you that the governor doesn't believe the negotiation was handled in good faith on their side, either. But that's all been dealt with again and again and again and again. ... What we need to deal with is English-language learning right now."
Tully says if Napolitano had signed the tuition tax credit bill last month, "It would have gone a long way" toward rebuilding trust with the Republicans.
"Even if she had just let it go into law without signing it, it would have gone a long way," he adds.
L'Ecuyer says a tuition-tax-credit program is not out of the question. Napolitano "has expressed her willingness to look at a corporate tuition tax credit, provided the sunset was in there," she says.
Earlier this week, Napolitano started to cave in on the tuition tax credits, suggesting that they be used as part of the solution to the English-language learning program.
Tully predicts the lack of trust will make this year's negotiations extremely difficult.
"What's surprising to me is she doesn't recognize how difficult it will make her job," Tully says. "If she has an agenda she wants to get through, it will necessitate some trading of things with us. And since we are now obviously not going to trade with her, the likelihood of any of her agenda getting passed is slim."
