Following is the full text of Arizona Gov. Jane Hull's annual State of the State Address delivered in Phoenix on January 14, 2002.

President Randall Gnant, Speaker James Weiers, honorable Senators and Representatives, Chief Justice Thomas Zlaket and members of the Supreme Court, distinguished guests, friends, and most importantly, my fellow citizens of Arizona: Good afternoon.

I stand before you today with mixed emotions. While I have some regrets that this is my last opportunity to deliver a State of the State address, I appreciate and am humbled by the opportunities this great state has given me. Where else but in America could a schoolteacher from Kansas City end up the governor of her adopted state? No other country on earth could have provided such tremendous opportunities and we should never take the privilege of our citizenship for granted.

That may be the greatest lesson we learned on September 11. So much of what we took for granted was shattered that day. But how quickly we woke up. In a single moment, we witnessed the worst of human behavior. And in the next, the very best of human behavior. And even more, we witnessed the tremendous spirit of Americans.

President Bush told the nation on September 11, "terrorist acts can shake the foundation of our biggest buildings, but they cannot touch the foundation of America." Before the dust settled, Americans came together to offer money, supplies and blood. I was especially moved by Arizona's children who shared their own toys and clothes for children in New York and Washington. Those who attacked us also learned a valuable lesson. You can knock us down but we'll get back up stronger than ever. We emerged from the events of September 11 more steadfast in our beliefs, more courageous in our actions and more determined to protect our values than ever before.

Today, Arizona's sons and daughters, mothers and fathers are proudly serving their country. I thought of them a few weeks ago, on December 7, as I stood in the shadow of the anchor of the U.S.S. Arizona with Pearl Harbor survivors and Navajo Code-Talkers as we remembered the day that will live in infamy. I realized then that the generations may change but the strength of our nation remains solid.

We can be especially proud of the Arizonans who assisted in so many ways. One of the first groups to be transported by military plane to Ground Zero included two members who work for the fire safety unit at the Palo Verde Nuclear Power Plant. At great risk to themselves, these partners climbed over jagged glass, electric wires and unstable rubble to search for survivors and victims. Today, I would like to introduce Steve Rochford and his dog Kona. They are here today to represent all of those who stepped forward to help. Please rise and be recognized.

Two other teams of Phoenix Fire Fighters also went to Ground Zero. As I saw them off to New York City, I noticed that many were the same brave men and women who were first responders to the bombing in Oklahoma City. They are recognized as some of the finest firefighters in the nation and we are fortunate to have them serve us daily in Arizona. The attack and our response show just how vital Arizona's military bases are to the defense of our country. We need to do everything we can to protect them.

In the wake of September 11, Arizonans can be proud of the efforts made to ensure our safety here at home. Within minutes of the attack, your Department of Public Safety mobilized its Operations Center, headed by a national expert on weapons of mass destruction. Within one hour of the attack, your Department of Emergency Management had its Emergency Operations Center up and running with federal, state and local agencies standing at alert, just as it had done in preparation for potential terrorist attacks on Y2K. Your Domestic Preparedness Task Force, in active operation for over three years, reviewed and upgraded its response plans. I ordered 200 National Guard personnel to provide additional security at 10 different airports in Arizona. National Guard personnel were also dispatched north to Hoover Dam, south to Nogales and west to the Palo Verde Nuclear Power Plant. The State Health Lab stayed open around the clock to ensure that any reports of suspected anthrax or other forms of bio-terrorism were immediately dealt with. I am happy to report that tests of all submitted samples were negative. A State Coordinating Council on Homeland Security was established to oversee all state response efforts. I activated "Operation Vigilance" at DPS, and set up a central telephone number for citizens to forward leads and intelligence information, which have been followed up by as many as 100 DPS detectives. And F-16's of the Air National Guard continue today to patrol our Arizona skies, just to be sure.

I'd particularly like to thank you, the Legislature, for your outstanding bipartisan support of our efforts to protect our citizens. I want Arizonans to know that even though these might be difficult times economically, we cannot and we will not shortchange the safety and security of our citizens.

Since September 11, members of the House and Senate, the Attorney General's Office and my office have been involved in a bipartisan effort to prepare the Arizona Homeland Security Enhancement Act. It will include a provision to help ensure that money cannot be laundered here and used to finance terrorist actions around the world. I look forward to signing it before you adjourn.

Along these same lines, I stood on this very spot one year ago and told you about the energy crisis ahead. I said, and I quote, 'I will take whatever action is necessary to protect Arizonans and Arizona power. I will not let some bureaucrat in Washington give away our power because California wasn't smart enough to plan ahead.' I am proud to say that I kept my promise and with the public's help we met our goal, averted a crisis, and showed that Arizonans can stand together to meet any challenge. I also want to thank Arizona citizens for their efforts at conserving energy last summer.

Right after the tragedy, President Bush asked Americans to get on with their lives and we did. Americans took time out to watch what will go down in history as one of the best World Series ever played. We can all be proud of our Arizona Diamondbacks, whose dignity, character and abilities earned them the title of World Champions. Now the eyes of the world turn to the 2002 Winter Olympics. Yesterday the flame of the Olympic torch was carried through our great state on its way to Salt Lake City. Arizonans from all walks of life represented the Arizona spirit as they carried the Olympic flame or as they compete in the Games.

When I delivered my first State of the State Address on January 12, 1998, I spoke of a flame burning in my heart to help Arizona's children. I said my top priority would be the children of Arizona. I have kept that promise. We've made dramatic progress towards a school system that gives every child the opportunity for a quality education in decent facilities. And one day these kids will thank us for creating an education system that holds them accountable to a high standard of academic achievement.

We've provided health coverage for our children where none previously existed. We've made sure the lights stayed on so they can do their homework. We improved the environment in which our children live, learn and play by decreasing crime and clamping down on abuse and violence in the home and on the streets. We're helping those children who cannot help themselves and giving a push to those who can. We've done it by working together for a common purpose. I see no reason to stop now.

Arizona faces many challenges ahead. None is more important or more pressing than passing a new state budget. Together we addressed the state's immediate budget needs in the recently concluded Special Session. Now we must complete the task and prepare a responsible Fiscal Year 2003 budget. As anticipated, our effort will most likely require some additional adjustments to the current FY 2002 budget as well. When you are ready, I am prepared to call a special session to address the budget. This will allow you to work within the parameters of your memorandum of understanding to complete work within 65 days.

The good news is our economy will come back. The bad news is it may take awhile. In the meantime all we can say is that the state has a significant budget shortfall that we must address. To get the job done right we must use revenue estimates based on sound, conservative economic principles. Our process must encourage constructive public input and debate. When completed, the budget must provide the services we have promised to our constituents. It should be balanced without reducing K-12 classroom funding and without crippling our universities, community colleges and state agencies. It must also be done without abdicating our responsibility to protect the public and maintain critical health services -- and without a tax increase.

I continue to watch the economy and the General Fund revenue collections with concern. I would like to mention some numbers that should get your attention. December corporate collections are down $85 million from last year. Corporate income taxes are off $140 million for the first six months of this year, compared to last year. For corporate income tax overall, we are $60 million short of our preliminary estimate. It seems clear the economy will not rebound enough or in time to save us from the difficult task ahead. I have requested that my budget office develop various budgetary scenarios so we can update the Executive revenue and expenditure estimates by late February.

The Red Book I delivered to you in November will stand as my Executive Budget proposal at this time. I will revise it when additional revenue and expenditure numbers become available and only hope that there will not be further revisions downward. However, based on the trends to date, we should be bracing ourselves to deal with further changes in the current budget. The revenue numbers tell us that this session is not the time to initiate new spending programs. Our major focus must be passing the state budget. We must establish firm priorities, maximize our resources and ferret out any and all waste. This also is not the time to cut or eliminate programs that contribute to the General Fund, like the state Lottery. In twenty years, the Lottery has raised over $1.4 billion. It has been run successfully and efficiently. This year alone, it contributed over $79 million to its beneficiaries, including the General Fund, the Heritage Fund and local transportation and economic development. You may recall, however, due to what I will kindly refer to as a "glitch" in the ballot language of 1998, the Lottery will terminate in July 2003. Voters already approved the Lottery twice. Now, it needs to be referred to the voters a third time. I recommend you act quickly and support Representative Carolyn Allen in her to place a referendum on this year's ballot to have the voters determine. But, this time, do so without shortsightedness and provide the and its beneficiaries with long-term stability.

While homeland security, the budget and the economy are on the front burner, we must continue to improve our public education system. I have said it on several occasions, several times from this podium, that providing a quality education for our children is high on my priority list. I will not stop now. Let's review the progress we've already made before we discuss what is to come. Arizona now has one of the most innovative systems of financing school construction in the nation. I believe the School Facilities Board has done an outstanding job. The board has a simple mission that is extraordinarily difficult to fulfill. Its job is to bring schools up to required standards and build new schools where they are needed. As most of us and the courts recognized, we had a significant number of substandard school facilities and a system for building new schools that was dependent on local property wealth. We met the challenge of developing an equitable finance system and changed the way Arizona builds schools.

To date, we have more than 6,000 individual renovation projects underway, correcting deficiencies in existing schools throughout Arizona. We've spent just over a $1 billion on these projects so far. We are required by law to complete these projects no later than July 1, 2003. We are on track to do just that and will have updated estimates for you at the end of February. We need to finish this mission. The Board, working with local school districts, has opened 44 new schools and another 85 are underway, as well as an additional 100 new schools planned as far out as five years. More than $1 billion dollars has been approved for these new schools. Additionally, the board has received property donations valued at $70 million for future school sites from developers. Remember our population is growing and schools are not built in a day. We expressed concern about the $51 million removed from the new construction program during the last special session. I have asked the Board to update its estimated need by the end of February. The state must provide sufficient resources to build those schools. It is quite remarkable that the School Facilities Board has accomplished so much in such a short period of time. The information on this process is open and available to anyone who wants to see it. I have urged legislators and tax groups alike to attend School Facilities Board meetings. I encourage ongoing review, but let's allow the board to continue its vital work.

It's also important to note that by next fall every school in Arizona - let me repeat that - every school in Arizona will have access to the Internet. The digital divide that once separated rural Arizona students from those in the urban centers is being erased.

Arizona is a national leader in school choice with both charter schools and tuition tax credits giving parents and their children more school choices than ever before. We've instituted a performance pay component to a teacher's salary structure, rewarding those who make that extra effort. We have rigorous academic standards and a valid assessment tool with which we can accurately measure a student's progress toward meeting those standards. And Education 2000 is providing a stable and consistent source of funding so we won't have to stop with the job half done.

So, what's next? Last spring, I appointed a K-12 Accountability Task Force with Jack Henry, the outgoing president of Greater Phoenix Leadership. The Task Force recommendations outline ways to guarantee implementation of state academic standards, develop a real accountability system and create a permanent and stable performance pay framework for teachers. Most importantly, the recommendations focus our resources on our top priority --student achievement. Many of these recommendations will be incorporated into legislation and we look forward to working with Education Chairs Senator Ken Bennett and Representative Linda Gray and all of you on this important issue.

Let's return classrooms to their primary job of providing the academic structure necessary for our children's future. If we intend to hold our administrators, teachers and students accountable - and we do - and we want to set high academic standards at every school - and we do - then we must allow teachers to teach.

At the end of the day, the most overwhelming key to a child's success is the positive involvement of parents. The state must do its share but I agree with the Superintendent of Public Instruction Jaime Molera, who says parents must be involved. No program, no teacher, no administrator can take the place of a parent who cares.

We've also made progress in finding solutions to urban sprawl and disappearing open spaces. The Growing Smarter laws now in place compel every community to plan their future growth and allow every citizen the right to be heard those decisions are made. Arizona never has been, and never will be, a "one size fits all" kind of state. Growing Smarter allows individual communities to make decisions about their own future based on their own needs and vision. Arizona citizens are already embracing their opportunity to have a real voice in the future direction of their communities. More importantly, we've put the decision-making mechanism not just closer to our citizens but actually with our citizens. Yuma can decide what's best for Yuma, and Flagstaff can decide what's best for Flagstaff.

Thanks to the Arizona Preserve Initiative, the state has protected over 38,000 urban acres of open space and has another 55,000 acres in the pipeline. Communities can purchase adjacent Arizona trust land for the purpose of preserving it. Our open spaces can be saved while at the same time our public schools receive fair value for the trust land that belongs to our students. Land Commissioner Mike Anable has done an outstanding job under difficult circumstances, most recently working with Scottsdale officials and residents to save nearly 13,000 acres of desert land while putting more than $30 million into our public school coffers. Thank you as well for putting two key land measures on the ballot. This year the public will have the opportunity to approve SCR 1004, which allows state trust land to be exchanged for other public land, and SCR 1005, which puts all new income from state trust land into the Classroom Site Fund. This is good public policy that protects our land while providing resources for our schools.

We cannot mention land without mentioning water as well. Last year, I gave the members of the Water Management Commission a big job. I asked them to evaluate Arizona's 1980 Groundwater Code, review our use of groundwater and suggest ways to increase our renewable water supplies. Under the strong leadership of Co-Chairmen Jack Pfister, John Mawhinney, Herb Dishlip and Rita Maguire, they have done great work. Thank you.

Speaking of natural resources, I would like to publicly thank my right-advisor on these critical initiatives. Most of you have worked closely with Maria Baier, who is here today with her two daughters, Christiana and Elizabeth. Maria, please rise and be recognized.

We also have made progress on two key environmental issues. I recently submitted to the EPA our state proposal to assume responsibility for the national surface water quality protection program. I often say that Arizonans should decide what's best for Arizona. In this case, approval of our application would allow Arizona experts to implement regulatory decisions dealing with surface water. Such made in Arizona, not by federal employees in California, would enable to expand more quickly and help the state's economy.

Despite Arizona's remarkable growth in recent years, we have met the current federal health standards for ozone pollution and the Environmental Protection recently approved our dust control plan. The result of these accomplishments is improved public health and fewer federal sanctions imposed on Arizona businesses.

We can't talk about growth or planning issues without discussing transportation. Again, we have made progress on several fronts: Arizona has added over 700 new travel lane miles to the state highway system during my tenure (as) governor. Wait times at MVD have been reduced considerably: 60 percent of MVD customers are being in less than 15 minutes. We adopted a new financing mechanism so the Arizona Department of Transportation will complete the Valley freeway system seven years ahead of schedule. Our ongoing commitment to establish Arizona as a major link in the international CANAMEX corridor stretching from Canada to Mexico is closer to becoming reality. The Department's "Intelligent Transportation System" has been recognized as a national model. Its real-time message signs, on-line road condition information and metered ramps have increased the capacity of our roadways without the addition of concrete. The Vision 21 Task Force, formed three years ago, has submitted its recommendations concerning the future of transportation needs in Arizona. I truly appreciate the efforts of the Task Force, led by Marty Shultz and Sharon Megdal. Its work must be seen as a starting point, not the end. The overriding message concerning transportation issues is cooperative, regional planning. We're long past the point where individual cities, especially in the crowded urban areas, can go it alone. It is now time to work together. Senator Linda Aguirre and Representative Dean Cooley will be heading our efforts to put in place some of the process changes needed to improve the state's transportation system. I know the Task Force recommendations will continue to assist policymakers in the years ahead. It is a blueprint for the future.

In terms of funding, this is the year to go after every federal highway dollar possible. I am working with our congressional delegation on the reauthorization of the Federal Transportation Act. As many of you know, this legislation comes up every six years and provides over $400 million annually for highway construction and maintenance throughout Arizona. I need your help in Washington. Last month, I stood on the bridge at Hoover Dam with Secretary of the Interior Gale Norton and Nevada Governor Kenny Guinn to reaffirm the importance of obtaining full federal funding for the Hoover Dam Bypass. The bypass will help the overburdened road system at the dam, serve as a link in the CANAMEX Corridor and protect against terrorism. We must work for timely funding for this project.

Safety on our highways has improved significantly, with the help of the Legislature and the media. We completed the installation of cable barriers on our urban freeways, established a fleet of motorist assistance vans, formed the Governor's Traffic Safety Advisory Council, funded 116 more DPS officers on the roads, distributed 6,000 child restraint devices and passed some of the toughest laws against drunk in the nation. This past holiday season, a record number of 3,200 drivers were arrested for drunken driving by our nationally recognized DUI task force. Initial reports indicate that the percentage of alcohol-related deaths may have dropped as much as 13 percent over the past year. Lives are being saved. I know that one principle reason is greater public awareness. No one has done more to foster this than Alberto Gutier, my director of the Governor's Office of Highway Safety.

Let me turn next to other ways to protect our citizens. I also have heard from parents throughout the state who share my concern over so called "Ecstasy" or "club drugs." They are a new threat to our children. Those marketing the drugs are using some dance clubs and "raves" to prey on our teenagers. Those party who knowingly permit, and even encourage, the sale of drugs to our children must be prosecuted. Destruction of our kids for profit cannot be tolerated. Our Arizona Criminal Justice Commission will have recommendations on this issue soon.

There is one crime-fighting tool whose use must be expanded. DNA tests are among the most effective. Such tests protect the innocent from wrongful conviction and analyze evidence so many violent criminals are removed from our communities. Grants and federal funds are available to cover the costs of these tests, but the state still needs the authority to obtain DNA samples from certain of criminals. I want to thank Senator Tom Smith and Representative Bill Brotherton, who are working with Judiciary Chairs Roberta Voss and Elaine Richardson, on this year's bill so that the DNA database may include, as it should, all convicted felons.

A crucial component of our justice system is the Judiciary. I would like to add that I am especially proud of the judges I have appointed during my tenure as Governor. Their decisions will impact our society for generations to come. In four years, I have appointed 66 men and women to the bench, including one Supreme Court justice, six Court of Appeals judges, and almost half of the current judges in Maricopa County. The appointments have reflected our cultural diversity while maintaining the highest quality. I have appointed 11 Latinos, and almost a third of all selected judges are women, including a Supreme Court justice and the first African-American woman to serve as a state court judge in Arizona. I know all the judges I appointed will continue to earn our trust and make me proud for many years to come.

During the last regular session and the most recent special session, measures that I see as little more than Band-Aids were applied to three health programs in state. Stop-gap measures were used to cover the Health Care Group, the Tucson Trauma Centers and the ongoing dialysis and chemotherapy coverage for undocumented residents of the state. Those measures were in addition to the 100 percent of the Federal Poverty Level coverage approved by voters in 2000. All of these programs combined challenge the state's resources in terms of both and budget. And financially, they may actually exceed our ability to pay, even if the state's economy were hitting on all cylinders.

It is time to maximize and prioritize our health care dollars. Tough decisions need to be made and they need to be made now. Government cannot be all things to all people. Many of us will be faced with health care and other service needs as our population grows older. A recent survey undertaken jointly by AHCCCS, the Health Services Advisory Group and the Flinn Foundation makes it clear that all Arizonans need more information to help them plan for long-term care needs. To that end, I have asked AHCCCS to coordinate an effort during the coming year to coordinate with businesses and other public and private agencies to develop a statewide education and public awareness program regarding long-term care. This would include informing Arizonans of potential service needs, costs, funding mechanisms and community assistance for long-term care.

Before I move away from health issues I want to make it clear that in the upcoming budget I will push strongly to maintain our commitments to responsible mental health funding and the construction of a new state health laboratory.

Now let's turn to technology. Arizona already is a recognized leader in technology, particularly in the use of technology to improve services for our citizens. When the Progress and Freedom Foundation's Digital State Awards were announced two weeks ago, Arizona ranked 5th in the nation. We are a pioneer in the innovative use of technology to enhance economic development, educate our youth, attract businesses and improve government accountability. Right now, in fact, this State of the State address is available on the Internet all over the world.

So where do we go next? I am working on an Executive Order to create an oversight group charged with finding innovative, technology-driven solutions to break down the walls between agencies. Through increased sharing of resources and information across traditional government boundaries, we can improve services while preserving limited resources.

There is another important issue we need to deal with this year -- Indian gaming compacts. Let me be clear: I have always been opposed to casino-style gaming developing statewide. But I also recognize that gaming on some tribal lands is here and must be acknowledged as something that is not going away. I also know tribes have used revenues from gaming in positive ways for healthcare, education and economic development. The only way we can ensure that Indian gaming remains limited and well regulated is to sign a compact with the tribes of this state. With such an agreement, we can deal with some difficult issues that federal law ignores, including look-a-like slot machines and card games.

Without an agreement, unlimited machine gaming and card games could throughout Arizona. I will oppose any legislation that expands gaming into our neighborhoods -- that includes any expansion at dog or horse tracks as well. I have been in discussions with our state's tribal leaders for two years. We have a common vision that would ensure that Indian gaming remains limited, becomes better regulated and accounts for state interests, including revenue sharing for the state. Ultimately, the state needs an agreement that meets the goals I have outlined and is agreeable to all parties. I still hope such any agreement, if reached, will receive your approval.

Before I close, I would like to offer four suggestions for bold institutional changes. I hope you will consider them this session. I would like to see a constitutional change to allow the Governor 15 days to review bills while the Legislature is still in session and 30 days after it adjourns sine die. The issues we deal with during every regular legislative session are both numerous and complex. The sheer number of bills transmitted to the Governor during the closing days of a session is daunting. Combine the number of bills, the short timeframe and the complicated legal and fiscal impacts of the bills, and the Governor's ability to carefully review bills is sorely tested, if not impossible. The public is not well served by the current requirements of five days when you're in session and just 10 if you've adjourned. I want to thank the leadership for considering this issue.

Second, I commend you and your leadership for efforts to reduce the use of strike-everything amendments in both chambers. There has been progress and you should get credit for that. However, I believe it is time to put an end to "strike-everything" amendments, so I am proposing the following constitutional change. We should prohibit strike-everything amendments to any bill that is not germane to the bill's original subject. And no striker should be allowed on a bill after it leaves the house of origin. These two changes would encourage, not discourage, citizen participation.

The third proposal concerns budget reductions. Due to current case law in Rios v. Symington, the Governor's hands are tied when a fiscal crisis hits. I would like to see legislation to provide the Governor with more authority if the state is undergoing a fiscal crisis. For example, the Governor could be allowed to cut funds from agency budgets or delay program implementation or contracts, if such action is then followed by legislative ratification.

And finally, I believe it is time to re-examine our laws regarding term limits. The Legislature is becoming a revolving door. Every two years a wealth of institutional knowledge must leave the Legislature, whether the constituents like it or not. More and more decisions fall by default to staff and lobbyists. We should consider expanding the amount of time legislators are allowed to serve or remove legislative term limits altogether. After all, we already have very effective term limits: They're called elections and the voters are in charge.

There's one lesson I've learned over the years: no one succeeds alone. I've surrounded myself with bright, dedicated and productive people. Rick Collins, my chief of staff and friend for over 22 years, subscribes to the Mark Twain theory: "Always do right. That will gratify some people and astonish the rest." We have probably broken a record by retaining most of the same staff over term. Yes, a few people have moved on, which I understand because these people are so talented that someone is always going to "steal them away." To top off our seamless transition of five years ago.