This is a rush transcript from "On the Record," December 3, 2012. This copy may not be in its final form and may be updated.
GRETA VAN SUSTEREN, FOX NEWS HOST: We are just back from New Mexico, and now more with the state's Republican governor, Susana Martinez.
VAN SUSTEREN: Senator Harry Reid said in 2010, when you were running, his son was also running for governor in Nevada. He says, I don't know how anyone of Hispanic heritage could be a Republican.
SUSANA MARTINEZ, GOVERNOR OF NEW MEXICO: Well, you know, I find that disappointing that anyone would think that we're not independent thinkers. I'm an independent thinker. I am a woman. I am a Republican. And I think for myself and I decide where I vote and how I vote. And to make a statement like that is to assume that we are not independent thinkers, and we are.
VAN SUSTEREN: You've had a pretty highly contested primary for governor. Governor Sarah Palin came out and supported you, right?
MARTINEZ: She did.
VAN SUSTEREN: What do you think about the way Governor Palin has -- you know, about her political career and how the public responded to her and the media?
MARTINEZ: Well, you know, I think, certainly, she is someone that has made a difference in the Republican Party and the Tea Party. She has caused a lot of interest to come about in reference to the issues. She speaks a lot about the different issues and how strong she feels about them.
I was pleased for her to come and support me. I think it made a difference. But I also think that she is still very available to give her opinion in reference to politics and where America's going and whether we're on the right track or not. And I think she's certainly free to do that. I was pleased to receive her endorsement.
VAN SUSTEREN: When you became governor, you inherited a deficit, right? What was this -- do you remember exactly what the deficit was?
MARTINEZ: Yes. Well, the day before the election, the general election, it was $250 million.
VAN SUSTEREN: Million?
MARTINEZ: And keep in mind, the state budget is only $5.6 billion. So the day before the general election, we were having it reported as $250 million. The day after the election, it became $450 million.
VAN SUSTEREN: What happened in the 24 hours or 48, whatever it is?
MARTINEZ: Well, certainly, the administration that was in place was not being truthful with the public. And so the day after, I certainly was informed that the deficit was much bigger than...
VAN SUSTEREN: How does that happen? I mean -- I mean, weren't the public -- weren't the figures public? And didn't -- I mean, I assume that people were following and reporting on Governor Richardson as a steward of the economy here.
MARTINEZ: No. No, that was not what was happening. What was coming out of the governor's office was -- were figures that were not -- were not being honest with the people.
VAN SUSTEREN: So you must have just about fallen over when you saw the number jump in a period of 24 or 48 hours.
MARTINEZ: Absolutely. Absolutely. And it was a number that I knew we had to deal with. I knew we had to deal with $250 million. I said, Well, then we're just going to have to do what the rest of the New Mexicans are doing, which is tighten our belts and figure out how we're going to solve this problem because when I was running for office, I was committed to not raising taxes. I was going to balance the budget and I was going to make sure that we were not going to raise taxes so that we could really continue to be competitive in bringing businesses to New Mexico, grow our economy so that that deficit will never come back again.
VAN SUSTEREN: All right, well, a fast way to get money is to cut spending or eliminate waste (INAUDIBLE) grow the economy. Grow the economy takes a little bit of time. So I take it that it was expense cutting or -- because you went to -- you balanced your budget.
MARTINEZ: I did. I presented a budget. And the governor is expected to present a budget. And in that budget, my budget actually increased spending in Medicaid and in education, my proposed budget, but also trimmed back -- for example, I trimmed back on the number of exempt employees.
VAN SUSTEREN: What's that mean, exempt employees?
MARTINEZ: Exempt employees -- people who answer just to the governor versus classified employees who you have to -- you can only get rid of an employee for cause.
VAN SUSTEREN: So it's basically civil service versus appointments.
MARTINEZ: Appointments. Exactly. And Governor Richardson had grown the number of exempt employees by over 340. I have it down to I think 212 at this time. I got rid of the two chefs that were assigned to the residence. We sold the jet that Governor Richardson had purchased. We sold the jet in addition to four other planes.
We cut the exempt employees. No one was going to earn more than $125,000 for cabinet secretary. And we were going to cut back on salaries significantly. I mean, we went through the budget tooth and nail, from cell phones and takehome cars. And I put a moratorium on the purchase of brand-new cars for two years.
I mean, we went through it in a way that had never been done before. We balanced it, and we got a surplus.
VAN SUSTEREN: The method that you employed, and your Democratic house and senate -- do you see that that would be an effective way on the national level, or is the federal government so vastly different that -- you know, because your remedies seem quite straightforward and simple, but would they translate on a national level?
MARTINEZ: Well, certainly, cutting spending is one of the things that can transcend to the federal government. I mean, I think the federal government has grown by leaps and bounds, and they need to look where do they need to cut. And I'm not sure that -- I think Washington is at such a gridlock that they're not willing to even really look at where is the excess, where do we cut? And it can't be across the board.
VAN SUSTEREN: So I take it from that that you're opposed to just letting us go off the fiscal cliff because that does take a cut straight across the board.
MARTINEZ: It does. It takes us -- makes those cuts across the board. New Mexico will actually feel enormous impact. Unfortunately, New Mexico depends significantly on federal dollars. We have four military bases here in New Mexico. We have two national labs that are very important to our national defense. And so we could possibly lose 20,000 jobs.
VAN SUSTEREN: Health care exchanges -- you're setting them up. Some Republican governors are not. Why did you decide to set them up?
MARTINEZ: Well, we're moving in that direction, but we're also still negotiating with the federal government. And we're negotiating for flexibility. We're negotiating for what is best for New Mexicans, instead of the one size fits all that's coming from Washington, D.C.
Where can we be flexible that best serves New Mexicans? And we've asked many questions of the president and we're hoping for answers. It's been several months that we have been asking these questions and haven't received responses. But if at the end of the day, the responses are not what benefit New Mexicans, we can still always go and allow the federal government to push forward those exchanges.
VAN SUSTEREN: It's no secret that there are a lot of eyes on you on 2016. You're a woman, you're a governor, you're Hispanic. Any thoughts on running for president in 2016?
MARTINEZ: No thoughts on that. I am running for reelection for the governor of New Mexico. I want to make sure that I fulfill the promises that I made to New Mexicans. That's extremely important to me.
VAN SUSTEREN: And before leaving New Mexico, we also got to meet the governor's very sweet sister, Lettie Martinez.