INDIANAPOLIS, Indiana - Jan. 11 - Following is the prepared text of Gov. Mitch Daniels' (R) 2011 state of the state address:

Mr. Speaker, members of the Assembly, Hoosier friends and neighbors, thank you yet again for the privilege of this platform.

For most of us, one of the strongest memories of our youth is that great school teacher, that magical man or woman who somehow reached us, and stretched us, and in the process left indelible recollections. For me, one of those was Bob Watson — still, today, Mr. Watson to me — who introduced us to the mysteries of the periodic table in high school chemistry. In addition to mixing potions that suddenly turned purple, and terrifying pop quizzes, Mr. Watson was famous for his aphorisms, little sayings so often repeated that his students still smile and recite them to each other decades later. And the most frequently applied of all Watson’s wisdoms was: “Good things come to those who wait. Patience is the essence of life.”

Patience does not come easily to a teenager. Or to adults, for that matter. At the grocery store, the airport scanner, or the BMV, none of us likes to wait. Like all Americans, Hoosiers are waiting tonight for a national economic recovery. Far too many are without work and, even worse than their number, is how long many have been waiting, waiting for that next job, waiting for the basic human fulfillment of knowing you are standing on your own feet, providing for yourself and your family.

The deep frustration of unemployed Hoosiers is shared by those of us charged with public duties in these times. The best efforts of our state, or any one state, to break free of recession’s suffocating clutch, are never adequate, and we can't wait for better times.

Building one of the best job climates in the country isn’t enough. Breaking the all-time record for new job commitments isn't enough. Adding new jobs at twice the national average isn’t enough. We did all those things in 2010, but it couldn’t offset the terrible drag of a national economic ebb tide that continues to leave too many boats stuck in the muck. We Hoosiers don't like to wait, when we can act. If we cannot overcome a nationwide job hemorrhage, we can fight back better than others. Again in 2010, we broke all records for road building and bridge building, for the fourth year in a row, and put thousands to work doing so.

As the final installment of our 2008 property tax cuts took effect, hard-pressed Hoosier home and business owners found an additional $600 million still in their bank accounts. Tonight, because of our action, Indiana’s property taxes are the lowest anywhere in America. And thanks to a ringing 72 percent verdict by our fellow citizens, who voted in referendum to protect those cuts in our constitution, they’re going to stay that way.

And in the clearest example of Hoosier resolve, we handled a two billion dollar drop in state revenues as any family would, as any small business would. We decided what is most important, separated the “must do’s” from the “nice to do’s,” and matched spending to income. Across the country, state spending, despite the recession, is still up sharply the last six years. But here, it is virtually flat, one-third the rate of inflation. Elsewhere, state government payrolls have grown, but here, we have the nation's fewest state employees per capita, fewer than we did in 1978. During this terrible recession, at least 35 states raised taxes, but Indiana cut them. Since '04, the other 49 states added to their debt, by 40 percent; we paid ours down, by 40 percent. Many states exhausted any reserves they may have had, and plunged into the red, but our savings account remains strong, and our credit AAA.

What we did in 2008, and 2009, and 2010, we will do again this year. We will take the actions necessary to limit state spending to the funds available. We will protect struggling taxpayers against the additional burden of higher taxes. We will continue improving our jobs climate by holding the line on taxes as our competitors take the easy way and let theirs rise. We say tonight, whatever course others may choose, here in Indiana we live within our means, we put the private sector ahead of government, the taxpayer ahead of everyone, and we will stay in the black, whatever it takes.

In two days, I will send to this Assembly a proposed budget for the next biennium. As always, I know that our final product will be a mutual one, and I welcome your amendments and improvements, so long as they live up to the following principles: One, I just mentioned; no tax increases. Can I get an “amen” to that? Two, we must stay in the black at all times, with positive reserves at a prudent level throughout the time period. Three, the budget must come into structural balance, meaning that no later than its second year, annual revenues must exceed annual spending, with no need for any use of our savings account. Four, no gimmicks. We put an end to practices like raiding teacher pension funds, and shifting state deficits to our schools and universities by making them wait until the state had the cash to pay them. That’s a form of waiting we should never impose again.

And, to hasten the return of an even stronger fiscal position, I again ask you to vote for lasting spending discipline by enacting an automatic taxpayer refund. When the day comes again when state reserves exceed 10 percent of annual needs, it will be time to stop collecting taxes and leave them with the people they belong to. Remember what the Hoosier philosopher said: “It's tainted money. ‘Taint yours, and ‘taint mine.” Beyond some point, it is far better to leave dollars in the pockets of those who earned them than to let them burn a hole, as they always do, in the pockets of government.

Doing the people’s business while living within the people’s means is our fundamental duty in public service. Redrawing our legislative lines without gerrymandering, and adjusting an out of balance Unemployment Insurance system, are other examples of duties we must meet this year. I know you'll do so, head on.

So we had a little election last November. It changed a few things, like the seating arrangement in this chamber. One thing it didn’t change at all: our common duty to take every action possible to make this a better state, a more progressive state, a standout and special and distinctive state. That election, like all elections, was not a victory for one side, it was an instruction to us all. It was not an endorsement of a political party, it was an assignment to everyone present. By itself, it accomplished nothing, but it threw open the door to great accomplishment. Starting tonight, we must step through that door, together.

One opportunity lies in reform of our criminal justice system. Helped by the nation's most respected experts, a bipartisan task force of police, judges, prosecutors, and others fashioned a package of changes to see that lawbreakers are incarcerated in a smarter way, one that matches their place of punishment to their true danger to society. We can be tougher on the worst offenders, and protect Hoosiers more securely, while saving a billion dollars the next few years. Let's seize this opportunity, without waiting.

Two years ago, the bipartisan commission led by two of Indiana’s most admired leaders presented to us a blueprint to bring Indiana local government out of the pioneer days in which it was created and into the modern age. Of their 27 proposals, seven have been enacted in some form. That leaves a lot of work to do. Indiana is waiting.

Some of the changes are so obvious that our failure to make them is a daily embarrassment. The conflict of interest when double-dipping government workers simultaneously sit on city or county councils, interrogating their own supervisors and deciding their own salaries, must end. The same goes for the nepotism that leads to one in four township employees sharing a last name with the politician who hired them.

Township government, which does not exist in most states, made some sense on the Indiana frontier. Many township lines were laid out to accommodate the round-trip distance a horse could travel in a day. We’ve come a little ways since then.

Today, over 4,000 politicians, few of them known to the voters they represent, run over a thousand different township governments. They are sitting on hundreds of millions of dollars in reserves. Some have eight years of spending needs stashed in the bank, yet they keep collecting taxes. Some townships are awash in money, while the township next door does not have enough to provide poor relief to its needy citizens. Adjacent townships each buy expensive new fire trucks when one would suffice to cover them both.

Those serving in township government are good people, and well motivated. We thank them for their service. Our problem lies not with those holding all these offices, but with the antique system that keeps them there. I support the clear and simple recommendation of the Kernan-Shepard Commission that we remove this venerable but obsolete layer of government, and assign what little remains of its duty to elected city and county officials.

Likewise, our strange arrangement of a three-headed county executive should change. No business has three CEOs; no football team has three head coaches; no military unit would think of having three coequal commanding officers. We should join the rest of America in moving to a single, elected county commissioner, working with a strengthened legislative branch, the County Council, to make decision making accountable and implementation swift and efficient.

As in the last two sessions, I look forward to constructive cooperation with the Assembly in bringing reform about. The only outcome that is unacceptable is no action at all. Hoosiers have waited for decades for our governmental design to catch up to society. Let’s not keep them waiting any longer.

In no realm is our opportunity larger than in the critical task of educating our children. The need for major improvement, and the chance for achieving it, is so enormous tonight that opportunity rises to the level of duty. Advocates of change in education become accustomed to being misrepresented. If you challenge the fact that forty-two cents of the education dollar are somehow spent outside the classroom, you must not respect school boards. If you wonder why doubling spending didn’t produce any gains in student achievement, you must be criticizing teachers. If your heart breaks at the parade of young lives permanently handicapped by a school experience that leaves them unprepared for the world of work, you must be “anti-public schools.”

So let’s start by affirming once again that our call for major change in our system of education, like that of President Obama, his education secretary and so many others, is rooted in a love for our schools, those who run them and those who teach in them. But it is rooted most deeply in a love for the children whose very lives and futures depend on the quality of the learning they either do or do not acquire while in our schools. Nothing matters more than that. Nothing compares to that

Some seek change in education on economic grounds, and they are right. To win and hold a family-supporting job, our kids will need to know much more than their parents did. I have seen the future competition, every time I go abroad in search of new jobs for our state, in the young people of Japan, Korea, Taiwan, China. Let me tell you — those kids are good. They ought to be. They are in school, not 180 days a year like here, but 210, 220, 230 days a year. By the end of high school, they have benefited from two or three years more education than Hoosier students. Along the way, they have taken harder classes. It won’t be easy to win jobs away from them.

It’s not just tomorrow’s jobs that are at stake. The quality of Indiana education matters right now. When we are courting a new business, right behind taxes, the cost of energy, reasonable regulation, and transportation facilities comes schools. “What kind of school will my children, and our workers’ children attend?” is a question we’re always asked. Sometimes, in some places, it costs us jobs today. There is no time to wait.

In 1999, Indiana passed a law that said schools must either improve their results or be taken over by new management. The little ones who entered first grade then, full of hope and promise, are eighteen now. In the worst of our districts, half of them will not be graduating. God bless and keep them, wherever they are and whatever life now holds for them. For those children, we waited too long.

And it's not just about the most failing of our schools. The last couple years have seen some encouraging advances, after years of stagnation. But the brute facts persist: only one in three of our children can pass the national math or reading exam. We trail far behind most states and even more foreign countries on measures like excellence in math: at the recent rate of improvement, it would take twenty-one years for us to catch Slovenia, and that’s if Slovenia stands still. That’s too long to wait. That's too many futures to lose.

In every discussion, someone says “This is very complicated.” Then someone says, “These changes won't be perfect,” and then you hear “The devil is in the details.” All true. But we can no longer let complexity be an excuse for inaction, nor imperfection the enemy of the good. When it comes to our children's future, the real devil is not in the details, he's in the delay, and 2011 is the year the delay must end.

We know what works. It starts with teacher quality. Teacher quality has been found to be twenty times more important than any other factor, including poverty, in determining which kids succeed. Class size, by comparison, is virtually meaningless. Put a great teacher in front of a large class, and you can expect good results. Put a poor teacher in front of a small class, do not expect the kids to learn. In those Asian countries I mentioned, classrooms of thirty-five students are common, and they‘re beating our socks off.

We won’t have done our duty here until every single Indiana youngster has a good teacher every single year. Today, 99 percent of Indiana teachers are rated “effective.” If that were true, 99 percent, not one-third, of our students would be passing those national tests. Today’s teachers make more money not because their students learned more but just by living longer and putting another certificate on the wall. Their jobs are protected not by any record of great teaching but simply by seniority. We have seen “teachers of the year” laid off, just because they weren’t old enough. This must change. We have waited long enough.

Teachers should have tenure, but they should earn it by proving their ability to help kids learn. Our best teachers should be paid more, much more, and ineffective teachers should be helped to improve or asked to move. Today, the outstanding teacher, the Mr. Watson whose kids are pushed and led to do their best, is treated no better than the worst teacher in the school. That is wrong; for the sake of fairness and the sake of our children, it simply has to end. We have waited long enough.

We are beginning to hold our school leaders accountable for the only thing that really matters: Did the children grow? Did the children learn? Starting this year, schools will get their own grades, in a form we can all understand: ‘A’ to ‘F.’ There will be no more hiding behind jargon and gibberish

But, in this new world of accountability, it is only fair to give our school leadership full flexibility to deliver the results we now expect. Already, I have ordered our Board of Education to peel away unnecessary requirements that consume time and money without really contributing to learning. We are asking this Assembly to repeal other mandates that, whatever their good intentions, ought to be left to local control. I am a supporter of organ donation, and cancer awareness, and preventing mosquito-borne disease, but if a local superintendent or school board thinks time spent on these mandated courses interferes with the teaching of math, or English, or science, it should be their right to eliminate them from a crowded school day.

And, while unions and collective bargaining are the right of those teachers who wish to engage in them, they go too far when they dictate the color of the teachers’ lounge, who can monitor recess, or on what days the principal is allowed to hold a staff meeting. We must free our school leaders from all the handcuffs that reduce their ability to meet the higher expectations we now have for student achievement. Lastly, we must begin to honor the parents of Indiana. We must trust them, and respect them enough, to decide when, where, and how their children can receive the best education, and therefore the best chance in life.

Visiting with high school seniors, I discovered one new option we should be offering. A significant fraction of our students complete, or could complete, their graduation requirements in well under twelve years. We should say to these diligent young people, and their families, if you choose to finish in eleven years instead of twelve, we will give you the money we were going to spend while you cruised through twelfth grade, as long as you spend that money on some form of further education. In this year’s survey of high school students, three out of four said they would like to have that option. Let’s empower our kids to defray the high cost of education through their own hard work, by entrusting them with this new and innovative choice.

Another new kind of choice has come to Indiana parents the last couple years, as a byproduct of our property tax reductions. Families are now able to choose public schools outside the districts they reside in, tuition-free. Schools have begun advertising campaigns, touting their graduation rates and higher test scores. This competition is a highly positive development, as long as it is fair. I ask you to protect our families against any possibility of discrimination by requiring that any school with more applicants than room fill it through a lottery or other blind selection process.

Indiana has lagged sadly behind other states in providing the option of charter schools. We must have more of them, and they must no longer be unjustly penalized. They should receive their funding exactly when other public schools do. If they need space, and the local district owns vacant buildings it has no prospect of using, they should turn them over.

Widening parents’ options in these ways will enable the vast majority of children to attend the school of their choice. But one more step is necessary: For families who cannot find the right traditional public school, or the right charter public school for their child, and are not wealthy enough to move near one, justice requires that we help. We should let these families apply dollars that the state spends on their child to the non-government school of their choice.

In that gallery and outside sit the most important guests of the evening. They are children, and parents of children, who are waiting for a spot in a charter or private school. They believe their futures will be brighter if they can make that choice. Look at those faces. Will you be the one to tell the parents “tough luck”? Are you prepared to say to them “We know better than you do”? We won’t tell you where to buy your groceries or where to get your tires rotated, but we will tell you, no matter what you think, your child will attend that school, and only that school. We have the money to send our children where we think best, but if you don’t, well, too bad for you.

These children, and their parents, have waited long enough, for a better chance in life. And Indiana has waited long enough for the kind of educational results that a great state must achieve. I have spoken of the economic implications. But, at bottom, this is not about material matters. It is about the civil right, the human right, of every Indiana family to make decisions for its children. It's about the right of all Hoosier children to realize their full potential in life. Will you join me in saying, the waiting is over, change has come, and Indiana intends to lead it?

For us sports fans, recent times have brought a frustrating string of “almosts”. At 60, Tom Watson almost won the British Open. The Colts almost won the Super Bowl. Little Butler almost won a national basketball championship. Besides the disappointment of coming so close, the bad thing about “almosts” is knowing that you may never get that close to victory, and history, again.

This cannot be the “almost” General Assembly. We are on the 18th hole, in the red zone, on the final possession of a chance for historic greatness. Indiana has waited long enough for local government that fits the realities of the 21st Century. We have waited long enough for an education system known for excellence in teaching, and accountable schools that deliver the results our kids deserve. Our parents have waited long enough for the freedom to decide which school is best for their children. We cannot “almost” end the waiting.

One thing is certain. The rest of the world will not wait on us. Other nations, and other states, are forging ahead with the kind of reforms I have proposed here. Indiana is now a leader in business climate, fiscal integrity, transportation, property taxes, and so many other respects. Now comes the chance to lead in ways that, long term, may matter more than all of those

Wishing won’t make it so. Waiting won’t make it so. But those of you in this Assembly have a priceless and unprecedented opportunity to make it so. It’s more than a proposal, it’s an assignment. It’s more than an opportunity, it’s a duty.

Our children are waiting. Our fellow citizens are waiting. History is waiting. It’s going to be a session to remember. You’re going to do great things. I can’t wait.

God bless this Assembly and this great state.