Governor Susana Martinez's administration will receive money to establish a merit pay system for teachers under a proposed state budget approved by the House.
Lawmakers voted 53-16 on Thursday for the plan to allocate nearly $5.9 billion next year for government programs and public education.
The budget, which goes to the Senate, will increase spending by $239 million or about 4 percent.
About $35 million is provided for 1 percent pay raises for state workers and educators and 3 percent for state police. It will be the first across-the-board salary increase for public employees since 2008.
Several Democrats objected to the budget because it provides $3 million to establish a merit pay system to reward high-performing teachers. Martinez had requested $11 million.