“Thank you. Lt. Governor Tuck, Speaker McCoy, ladies and gentlemen of the Legislature, fellow Mississippians. Thank you for being here for my third State of the State address.

I apologize for being hoarse, but I struggled with a bad cold last week…sore throat and all. For you Legislators who think that means my speech will be shorter than last year…don’t get your hopes up!

Last year, I opened my State of the State speech by saying, “It is my privilege to report the State of the State is better today than it was last year but not as good as it will be this time next year.”

In the wake of Katrina, the worst natural disaster in American history, and all the destruction she caused as she made a direct hit on the Mississippi Gulf Coast and slashed through south Mississippi and up through the eastern half of the state, in what condition do we find Mississippi today?

One thing is spectacularly better than a year ago: The return of Mississippi’s 155th Brigade Combat Team from its very successful duty in Iraq. The last few will be home within a week, and several are here with us tonight.

All of us grieve for the families of the fourteen Mississippi Guardsmen who made the ultimate sacrifice in Iraq for the cause of freedom, and I ask that we observe a moment of silent prayer in their honor and memory.

The 155th performed its mission exceptionally well; so we are not only glad to have them home, we applaud their achievements.

When I visited their four forward operating bases in Iraq during the Thanksgiving holiday, I learned they had so successfully cleaned out and cleaned up their area -- which was called “The Triangle of Death” when they were assigned to it in 2004 – that in November, Iraqi Security Forces were conducting the operations the 155th had carried out back in the spring. Their success and that of others like them is why US troops are coming home, turning over their duties to Iraqi forces. Congratulations, 155th, on a job well done.

In the year and a half prior to Katrina, that this Legislature and my Administration had been in office, the state of our state improved significantly and demonstrably.

During that period, on our watch so to speak, the state’s economy grew at the fastest rate since 1995; personal income of Mississippians increased faster than in any year since 1998; and employment – the number of people working – went up the most since 1999.

Those improvements in the state’s economic situation not only helped Mississippi families and businesses; they also helped Mississippi’s government.

The year you and I ran for office, the state’s budget had a $700 million shortfall, a gap equal to 20% of general fund revenue; special funds were raided in the amount of $270 million; one time money was spent on recurring expenses to the tune of hundreds of millions.

The budget you passed in May nearly achieved structural balance, quite an accomplishment in only two years, and it dipped into special funds by only a fraction of the 2003 total. In fact, based on actual revenues collected in the current fiscal year, full structural balance would be achieved in this budget year.

Another major achievement in state finances is that last fiscal year, the state’s bonded indebtedness actually declined for the first time in 18 years. I congratulate State Treasurer Tate Reeves on the job he is doing managing our debt.

The two keys to returning the government to financial balance have been and will continue to be controlling state government spending and increasing state revenue through economic growth and job creation. Remember, we’ve eliminated this $700 million budget hole without raising anybody’s taxes!

I recognize the Legislature has had to make some hard choices…some politically unpopular decisions, and I commend you. The budget for the current fiscal year actually sets spending at 1.75% less than spending for last year.

The second key to digging out of the deep budget hole we found ourselves in has been economic growth. State revenues grew only 2% the year you and I started our 2003 campaigns. The first year of this Legislature and Administration, tax revenue went up 4%; last year it increased nearly 8%. Revenue increases doubled two years in a row, even though we didn’t raise anybody’s taxes. And I hope this makes it easy for you and our viewers to understand why I’m against raising anybody’s taxes. I expect the viewers also understand that in a period fiscal uncertainty this is not the time to reduce revenue by cutting taxes either.

Again, I want to commend you, the Legislature, for making tough decisions. One reason our economy improved and revenue increased was tort reform, which caused insurance rates to fall. Another reason was the reform and increased funding of workforce development and job training. Your passage of the initial Momentum Mississippi legislation will help continue economic growth and stimulate job creation and retention. Getting state spending under control has also been essential to business confidence and maintaining our bond rating.

While the jury is still out on the effects Katrina will ultimately have on our budget, the verdict is clear that Katrina brought out the best in most Mississippians.

Beginning the very night of the storm, my wife Marsha began going to the Coast; working with first responders; finding help for people with special needs; encouraging local officials. She became my eyes and ears, and I’m very proud of you…and grateful to her. One day the SunHerald ran a story referring to Marsha as “an angel among us.”

It was Marsha who first described to me the strength, resilience and self-reliance of the affected people; who told me about both the can-do spirit and the pervasive selflessness she found.

Indeed the single biggest factor in the amazing response to Katrina has been the spirit of Mississippians. From the fateful day of August 29 through every stage of search and rescue, relief, recovery, rebuilding…the affected people in South Mississippi and especially on the Coast have been an inspiration.

Our people didn’t whine or mope around; they’re not into victimhood. Immediately after the storm passed through, they hitched up their britches and began helping themselves and helping their neighbors. The stories of ordinary people performing extraordinary acts of courage and selflessness are extremely common. The first responders, law enforcement, national guard, and military; but also neighbors helping neighbors, churches helping the needy and poor people more interested in others getting assistance. That Mississippi spirit was obvious to people across the country and around the world.

I salute the local elected officials who stayed put, made decisions before as well as after Katrina. Those decisions saved lives, as did the thousands of inland families who took in friends and family before the hurricane struck. The death toll, while large, was remarkably low compared to the enormity of the devastation; the decisiveness of local officials in ordering evacuations played a major role in that. And those local officials deserve immense credit for the fact that continuity of government never broke down in Mississippi as it could have. Those local governments stood tall, and we are going to stand with them, now and in the future.

Three of those outstanding officials are here with us. They are School Superintendents who got their schools back open in record time, helping Mississippians return to their communities and begin rebuilding. Let me introduce Kim Stasny from Bay St. Louis/Waveland, Rucks Robinson from Jackson County and Glen East from Gulfport.

Before discussing our plans to help the devastated areas rebuild and renew themselves, I must again thank the American people for their help.

Katrina, the worst natural disaster ever to hit America, appropriately generated the greatest outpouring of philanthropy and assistance in our country’s history. And that generosity has made a huge difference in our relief and recovery. Corporate America and small businesses, philanthropists and everyday citizens have been incredibly generous; and we genuinely appreciate everyone, especially the thousands and thousands of volunteers who’ve helped.

But I must single out the churches and faith-based groups, who were there on day one and are still there in meaningful numbers today. Theirs were the most powerful and productive efforts, and I must say hundreds of those volunteers – Protestants, Catholics, Jews and believers of other faiths – told me that by God’s grace they feel they got more out of their mission than the people they were helping. What a great blessing these groups, churches, and volunteers have been.

And I’d be remiss not to mention the crucial contributions of our sister states. Those Governors, Democrats and Republicans, sent us their state’s resources in an unprecedented manner, and they made a difference.

There has been plenty of controversy about the federal role in relief and recovery. While it hasn’t been perfect, and in fact couldn’t be, the federal agencies have done a lot more right than wrong. The Coast Guard’s helicopter crews, the U.S. Department of Transportation’s fuel supplies, the Seabees and their expertise all made a huge difference at critical times.

The President has repeatedly extended deadlines for emergency relief and debris removal that provide hundreds of millions of federal assistance dollars. The Bush Administration proposed an unprecedented package of assistance to help the states and people affected by Katrina. And on behalf of a grateful state, I thank President Bush.

A last chapter on the verdict of the effects of Katrina relates to our Congressional delegation, the 109th Congress and its leadership. Mississippi’s delegation worked ceaselessly to get us the assistance we need. Every member, Republican and Democrat; House and Senate. My office and the delegation worked together on a regular, bipartisan basis, and I appreciate the helpful attitude of all six members.

At the end of the day, a few weeks later than had been hoped, Congress passed and the President signed two unprecedented laws to help Mississippi and the Gulf Region not only recover and rebuild but to renew itself. A third important bill will be up for final passage later this month.

The United States government has never given anything like this much money or nearly this much latitude to a state as Mississippi receives under this legislation.

I briefed the Legislature on the details last week, but for our viewers, the Katrina emergency appropriations bill will spend nearly 10 billion in federal dollars in Mississippi, over and above the $15-$17 billion already destined to be spent here under existing federal disaster assistance laws.

Most unprecedented is a program that will allow the state to use approximately $4 billion of federal grant money to help homeowners whose homes were outside the flood plain but were destroyed by Katrina’s storm surge. This was the top priority of the State and for our Congressional delegation, and, even though it had never been allowed before, Congress passed it and the President signed it.

The bill contains funds for highway and bridge reconstruction, to support law enforcement, for environmental restoration, to rebuild our military facilities and for naval shipbuilding. Unprecedented funds for social services and for economic and community development programs are included.

Critically, Congress, with the Bush Administration’s support, amended the original education support provisions so Mississippi would get appropriate assistance for our schools, which have been back open for months. This change was critically important to our state, and we appreciate Secretary of Education Margaret Spellings for helping us get this change made.

Almost simultaneously, Congress passed the Gulf Opportunity Zone Act, which the President had proposed to stimulate private investment in our area. I expect the tax incentives in this law to be extremely important to the rebuilding and renewal of our affected areas. The tax incentives for projects in Mississippi are expected to total in excess of $8 billion, and they will both stimulate essential private sector investment and create jobs.

Our whole delegation worked hard for these bills, but I must specifically thank Senator Thad Cochran, who, as Chairman of the Senate Appropriations Committee, patiently and effectively guided this unparalleled appropriations bill to passage. It is a giant tribute to Thad’s ability and stature that our state is being entrusted with these much needed funds.

The tax bill – the Gulf Opportunity Zone Act – got hung up in the Senate. By the force of his personality and leadership, Senator Trent Lott single handedly broke the logjam and got the law passed.

No state has a pair of U.S. Senators near the equal of Thad Cochran and Trent Lott. They made us proud last month, during our state’s hour of greatest need. We owe them a great debt of gratitude.

We also owe them, the delegation, the entire Congress and the Administration good stewardship of these billions of taxpayer dollars. I take this opportunity to report on behalf of our State, Mississippi will be a good steward of the taxpayers’ money. We are putting into place systems of controls and accountability. We will be held accountable to spend these funds in a reasonable and responsible manner. We will meet that standard.

Because of our Congressional delegation and the federal legislation, we will have the resources we need to rebuild and renew. Because we have strong leaders in local government in the affected areas, continuity of government was never lost and recovery makes progress everyday. And because of the love and commitment of citizens to their communities on the Coast and in South Mississippi, our schools are operating, small businesses are back open, and the vast majority of the people are back in their home communities. All these things cannot help but make one optimistic about the future.

Another special factor makes me even more confident: The work of the Commission on Recovery, Rebuilding, and Renewal. I want to recognize Jim Barksdale, who has done a magnificent job of leading this Commission. Its work has exceeded my greatest expectation.

I was sent the Commission report on December 30, on schedule. It is more than impressive, and it will be – already is – extremely useful as the affected areas go forward.

Importantly, the report is the product of an inclusive, participatory, collaborative process in which literally thousands of Mississippians took part. Although the Commission’s report won’t be available to you and the public until Wednesday, let me mention a few major issues I will ask you to consider after you read the report:

1. Authorizing the formation of regional organizations for delivery of certain public services, as has previously been authorized and implemented by the DeSoto County Regional Utility Authority;

2. Innovative transportation projects that improve evacuation when future storms hit; that divert traffic from Highway 90, so it can again be a tourist-attracting Beach Boulevard; and that allow the Port of Gulfport to recover and rebuild as a stronger maritime cargo operation; and

3. Helping the local governments get back on their feet financially.

On this last point, it is critical to recognize the difference between the fiscal condition of the State and that of many local governments in the lower six counties. At the state level there remains some uncertainty about both revenue and needed expenditures, but as, you will see, of now the State is in good shape on both counts.

On the other hand a number of local governments are drowning from both required extra expenditures and definite losses of revenue. They are borrowing from both the State and federal governments. It will be years before their ad valorem taxes come back, even though there is likely to be a great surge of construction and development in these communities.

To deal with this I will ask the Legislature to authorize – authorize, not require – impact fees to be assessed by these local governments on new development projects in their communities. This will have the effect of advancing revenue on these developments so the local governments can provide services and, indeed, survive.

During the Katrina Special Session in September, the Legislature authorized me to form an office within the Governor’s Office related to recovery, rebuilding, and renewal. I have done that. Because the September legislation did not provide funding or personnel slots, I am paying for this with no state funds. That is not said in the nature of a complaint; it is appropriate that we use federal funds to pay for this office; a part of its mission is to maximize federal funding.

I’d like to introduce Dr. Gavin Smith, Director of the Governor’s Office of Recovery and Renewal, and Brian Sanderson, his deputy.

I expect this office’s work with state and local government entities to pay major dividends. I also appreciate State Auditor Phil Bryant for the help his office has been giving local governments in the areas of accountability and documentation of emergency efforts.

For all these reasons and efforts, I’m very bullish on where South Mississippi and the Coast will be in 2, 5, 20 and 30 years. We have a mighty tall mountain in front of us, but that Mississippi Spirit leaves me no doubt about the outcome.

I am pleased to tell you that even in the wake of Katrina, the budget you adopted for the year appears to be holding up. There is still some uncertainty, which is why I think most everybody believes we should not try to do the budget and appropriations until March.

But halfway through the fiscal year, as of December 31, actual revenue collected was $80 million above the estimate on which this year’s budget was based. We don’t know if this growth will continue, but the overage is enough to cover the principal planned budget shortfall, which is in debt service. While we had foreseen and believed before Katrina that actual revenue would more than cover this shortfall, I’m pleased to report that, so far, that’s holding up.

I’m also pleased to report that despite Katrina, no major state department or agency is overspending its current budget; therefore, there is no reason for any deficit appropriation, except for debt service, because actual spending through the end of December is within the amounts consistent with the budget you passed in May.

The ability of our departments and agencies to manage within their budgets is a great testament to their leaders and the state’s employees. And this has been accomplished despite the fact some legislative provisions have actually made it much more difficult for them than it should be to stay within their budgets. I will ask you to lift those counterproductive restrictions so our state’s public servants can produce more for our citizens. Still, you can see why I hope our budget situation in March will allow a pay raise for our state employees this year. And I hope we’ll be able to give them another increase next year. They’ve earned it. They deserve it.

As preeminent as Katrina and its effects are on our agenda, we have all of the state and other important issues to address between now and the end of March.

This year we must address the needs of our foster care system and the more than 3000 vulnerable children and families it serves. The provision of quality foster care is difficult but critical, especially when not only Katrina’s destruction but also the explosion of crystal methamphetamine and other narcotics have significantly increased the number of children needing foster care.

I will ask the Legislature to pass bills to increase both the number and quality of social workers actively involved in direct care, so resources are used more effectively to insure the foster care system is improved.

Shifting our focus, I want to talk to you about an industry and an area that require special attention: Our furniture manufacturing industry located largely in Northeast Mississippi.

The Franklin Center for Furniture Manufacturing and Management at Mississippi State reports our state’s furniture manufacturing firms employ some 27,000 people, down from 31,000 in the late 90’s. That 12% job loss is far less than the job losses that have occurred in the case goods industry in Virginia and the Carolinas, but it is a clear warning. According to the Franklin Center, we must learn how our competitive advantages can be maintained and improved on. I am committed to increasing our advantages and keeping our $4.1 billion furniture industry healthy, and employing Mississippians.

We began two years ago. The furniture industry told former Commerce Secretary Don Evans and me in 2003 that improving workforce quality was the best way to help the industry stay healthy. You know all that’s been done to achieve that, and I know the industry appreciates the Legislature’s efforts.

Tort reform has helped control their cost of doing business. No tax increases also has helped keep those costs down. We’ve helped create a foreign trade zone for Northeast Mississippi to reduce costs for Mississippi companies that use it.

Tonight, I propose using funds you made available when you passed Momentum Mississippi legislation last summer, to help our furniture manufacturers qualify to get the benefits of the Foreign Trade Zone. We’ll match companies dollar for dollar for their costs in applying, activating, training and commencing Foreign Trade Zone participation. It is estimated this program will save some 2000 jobs at a cost to the state of only half million dollars or so.

We will also assist the Tupelo Furniture Market in its national and international promotion in the amount of $200,000 a year, based again on a 50-50 cost share. These funds also will come from Momentum Mississippi legislation. And let me introduce Anthony Topazi, Chairman of Momentum Mississippi.

The furniture industry is hugely important to all of Mississippi. Some people seem to have given up on it; I haven’t. And I oppose using the challenges facing the furniture industry as an excuse to pit the economic development project of one part of the state against the projects of the rest of the state. As a candidate for Governor, I said I wouldn’t play favorites among the efforts by different parts of the state to attract jobs. I said it, and I meant it.

There is another part of the state about which I’m concerned; one I feel it is crucial to help. The area is our Capital City and Hinds County.

Recently, Mayor Frank Melton and Sheriff Malcolm McMillin came to see me. They asked if I’d help them fight crime, especially drug and gun crime in Jackson.

The Sheriff and the Mayor are here with us. I’m pleased to recognize them. I’m more pleased to propose we in state government help our Capitol City become a greater asset to our state as well as a better home to its citizens . I ask the Legislature to pass a bill to allow the Governor to appoint a Special Circuit Judge for Hinds County solely for the purpose of hearing criminal cases involving drugs and guns. This is what the Mayor and the Sheriff believe is needed; it is what they’ve asked for.

Why? The Hinds County jail facilities are so overloaded that misdemeanor criminals aren’t even incarcerated. They’re filled with felons awaiting trial, and the number of untried felons has increased 18% in three years. But Hinds County has lost population, so, under our regular system of adding judges, which is based on population, the statistics say Hinds County doesn’t need more judges. But those statistics are wrong. Don’t take my word for it; ask the Mayor and the Sheriff, the fellows who have to deal with drug and gun crime here in Jackson.

• In November, the Hinds County facility in Raymond was over its federal court allowed limit by 43, and 98% of capacity were indicted pre-trial felons;
• Criminals go for years without a trial;
• The overcrowding and delay led the Public Defender’s Office to say “The deals get better for my clients;”
• The cost will be less than $200,000 per year, a bargain if it helps reduce drug crime and gun crime in Jackson.

After I was elected and before I was inaugurated, Attorney General Jim Hood and I discussed the problems facing criminal justice in Hinds County, and he was very helpful. If you allow the appointment of the judge for a limited period, I’ve discussed with the Attorney General insuring there are enough prosecutors to get criminals prosecuted in the Court effectively. I appreciate his help and concern about this problem.

The last issue I want to discuss is the biggest priority we have year in and year out. Even in the wake of Katrina we all know we must continue to improve our education system.

Last year, the Legislature considered my UpGrade Education reform proposal. It was developed with strong support from my 250 member Teachers Advisory Commission. These leaders of the commission are here: Tanza Brown, Josie Williams, and Larry Perdue

I’m grateful that last year the Senate passed it 95% intact with only two votes against it. The House passed it about 80% in that again by a huge margin. However, there was never a conference report, so I will be asking you to consider it this year.

I believe the proposals are not only good policy but will also significantly improve education in Mississippi.

You will recall the leaders of K-12, community colleges, and universities endorsed UpGrade last year. I’ve been working on this with them again, though we have a couple of new leaders in place. I want to recognize and thank them for guiding me on these issues. Let me introduce State Superintendent Dr. Hank Bounds; Community and Junior College Director Dr. Wayne Stonecyper; and the Commissioner of Higher Education Dr. Tom Meredith. They are a very talented and dedicated group, and I appreciate their tireless efforts.

Education is the number one economic development issue and the number one quality of life issue in our state. It is rightly our top priority. We spend 62% of our budget on education. While this year overall budgeted state spending is lower than last year, our school teachers have received a second consecutive 8% pay raise, and they are making 30% more than five years ago. State spending on K-12 education is 7.2%, or $143 million, higher than last year. Per student spending in our public schools is more than $7000 this year, a record amount.

K-12 spending will increase again, but I urge the Legislature to give special attention and priority to higher education needs when we take up the budget in March. While we have had large and appropriate increases in spending for public schools in the last several years, state spending for universities and community colleges has gone down significantly over the same period. But, again, March is the time to take up such budget issues. The UpGrade reforms are not about funding; they are about fundamentals.

• Liberate successful schools and give them home rule. Here is an example of why: In 1994, the Gulfport School District wanted to purchase revenue interruption insurance in case a hurricane devastated their local tax base. But then-Attorney General Mike Moore correctly told them that because the school district did not have home rule, they did not have the authority to make that wise decision.

• Focus on dropout prevention. About 40% of Mississippi school children drop out before they graduate. Think what a difference even a small reduction in the drop out rate would mean.

• Prioritize teacher recruitment and retention. Nothing is as important as a quality teacher in every classroom.

• Recognize discipline is a big problem in many schools, and as my 250 member Teacher Advisory Committee has told me, more young teachers leave teaching over discipline than over pay.

• Hold parents accountable for the behavior of their children.

• Institute a pay for performance program like North Carolina has to reward increases in learning achievement.

• Redesign high school so every student who desires to can get at least a semester worth of college credit in his or her senior year of high school.

• Expand the dual enrollment program and make advanced placement classes available in every school within three years.

• Especially in light of the Cisco and Bell South investments, we must expand the use of technology, online education and distance learning so every child can have access to the best education.

These are several of the goals of my UpGrade Education reform package. I’m grateful to Senate Education Committee Chairman Mike Chaney and House Education Committee Chairman Cecil Brown for their counsel on this package and for their consideration of it.

I ask every legislator to support the final product. I believe as you review it, you will see that it is a common-sense, positive reform that will improve education in Mississippi, not for some but for all.

My speech has covered a variety of subjects – from renaissance after Katrina to cracking down on drug crime to improving education, our perennial priority.

None of these issues or solutions is political or partisan. These are my ideas about what we should do to improve our state and the lives of Mississippians. I offer them with no agenda except that I think they are good policy, and I ask you to receive them that way. That ought to be one effect of Katrina on all our activities.

It is not lost on me that Jim Barksdale, who chaired my Commission on Recovery, Rebuilding, and Renewal after Katrina, was also my opponent’s biggest contributor. That was irrelevant to him and to me; the point is Jim Barksdale wants to help Mississippi, and he was, as he proved, the best man for the job.

Our quest for renewal has produced many such efforts to help, by people who have historically been political opponents. That has been so healthy and so productive.

It is an extension of that Mississippi Spirit; that can do attitude of helping ourselves but also helping our neighbors. It still is an inspiration to me and I hope it inspires everyone to see what Mississippi can be… will be… must be.

Last year’s gigantic catastrophe, with all its destruction, gave birth to a renaissance in Mississippi that will surely result in rebuilding our state bigger and better than ever before, but I believe it will also spread prosperity and dignity across more of our citizens than ever before. I ask you to embrace that vision.”