Lt. Governor Denn, President Pro Tem DeLuca, Speaker Gilligan, members of the 145th General Assembly, other statewide elected officials, members of the Judiciary, members of the Cabinet, our State employees, Carla and the people of Delaware:

When I last reported to you on the state of our State, we found ourselves in the depths of Delaware’s most serious economic downturn since the Great Depression: An unemployment rate that had climbed dramatically. An $800 million budget shortfall -- the worst in our State’s history. Key industries closing their doors and families struggling to make ends meet.

We live in a time of anxiety, of tempest. “These are the times” – Thomas Paine wrote during America’s struggle for independence – “that try men’s souls.” While Delaware has weathered more difficult challenges, this was and still is a time to try our souls. It is at these times when we must be at our best. America’s independence was forged by our own Caesar Rodney’s famous ride on a stormy night. Perhaps it is the storm that brings out the best in us as we work to restore Delaware’s promise.

Navigating through any storm requires unwavering focus, clear purpose and bold action. During this storm, our focus is on creating more and better jobs and building a stronger economy for us all. To do that, Delaware must be the best state to start or grow a business. We will create an environment for new prosperity. We will encourage economic growth, demand a leaner, more efficient government and provide our children a world-class education so they can work in first class jobs.

Businesses want to operate in states that prudently manage their fiscal affairs, in good times and bad. Last year, while several states faced similar challenges and missed their deadlines for balancing their budgets, Delaware delivered. We did so by doing what we do best: working together with common purpose. In balancing the budget, we preserved core government services, such as classroom teaching and health care for our most vulnerable citizens. We acted with responsibility and prudence, fully funding our pension obligations to state employees and appropriating only 98% of our revenues, while resisting the temptation to tap our rainy day fund to balance our budget.

While we maintained core services, we made cuts that came with pain and sacrifice. Non-profit organizations and local governments received less support. We called upon the corporate community and some of our fellow citizens to pay more. We demanded a fairer share of revenues from our racinos and required vendors, like Walgreens, to accept less for doing business with the State. Finally, all of our hard-working state employees endured a pay cut – but never stopped delivering critical services.

Over the last year, I visited thousands of our state employees at dozens of facilities. I spent time with dedicated operators who plow the snow in the middle of cold, dark nights. I met with unemployment specialists who stand for hours at a time, patiently serving neighbors in need. I talked with nurses who care with dignity for our most vulnerable. I stood with teachers who reach into their own pockets to buy everything from socks to crackers for students who are without. Those are just a few. The list goes on. There is no greater testament to the call of duty and the ideal of public service than these workers. I ask you to join me in extending our appreciation and thanks to the cafeteria workers, the social workers, the public safety officers, the teachers, the program analysts and call center operators, the office staff and field employees who make State government work in these trying times. To each of you – thank you.

In the end, we were rewarded for our handling of this financial crisis when three independent agencies awarded a AAA rating to our bonds. At a time when other states are being downgraded, this was no small achievement. Our prudent fiscal management saves taxpayers money through lower interest rates and makes us more competitive when we compete for jobs against states that do not manage their finances well.

For this, and so much more, I want to thank every member of the General Assembly, in particular the leadership of both chambers.

Last year we lost a true Delaware icon, Senator Thurman Adams, who for many years was a strong voice for fiscal responsibility. While we miss him still today, I want to make special mention of Senator Tony DeLuca who, with a heavy heart, ably stepped into the large shoes of Senator Adams and has shown great leadership in tough times.

Our work to make State government leaner and more accountable is not done. We must realize further efficiencies while preserving core functions.

We slashed our vehicle fleet since I took office, saving us over $400,000 a year.

We are eliminating, without layoffs, more than 1,000 of the 15,000 positions in State government. To ensure effective operations with fewer State workers, I will propose the consolidation of a number of divisions, boards and commissions.

We are modernizing vendor payments to reduce by 100,000 the number of checks we print, and we are eliminating printing of various other documents, including the budget books.

We are reducing the total amount of square footage used by government, and we’re renegotiating real estate leases.

We successfully implemented a tax amnesty program that more than doubled our expectations.

And my budget will lay out dozens of other efficiency proposals, such as better leveraging our information technology operations, which will save millions over the next few years. These proposals will cut costs but still protect the most essential government functions.

While next year’s budget requires our immediate attention, we must not govern only for the short term. We are here to make our State better for generations to come. Many of the most important budget savings – the type that last – require action this year but will not produce significant savings for the next budget. To reduce the size of government in a thoughtful way, we will look past the next fiscal year.

For example, health care is one of our biggest financial commitments. Its rising cost creates a ticking time bomb in some unexpected ways. It is driving up our State prison health care costs, which were over $42 million last year. Many inmates sentenced under the minimum mandatory provisions adopted in the 1980s are approaching their older years. The cost of their care is soaring. If we do not act, we soon will need to operate nursing homes within our prisons. We must examine who we’re holding in our prisons and whether we can provide a less expensive but safe alternative.

Our growing elderly population is also driving up our long-term care costs under Medicaid. We will promote the community-based care that most seniors prefer to nursing homes. Not only will this increase the satisfaction of the older Delawareans it affects, it will decrease taxpayer costs over the long term. Secretary Landgraf is moving forward to do just that.

The health care and pension benefits we provide our State employees and retirees also represent increasingly daunting financial commitments. Given last year’s pay cut, I don’t want current employees to have to pay more out of pocket for health care this year. But we must act now to reduce health care and pension costs by instituting a different set of benefits for future employees. Again, this will only apply to future hires, but it will save $75 million over the next 5 years and it needs to be done.

We must also look at ways to reduce local government costs. One way we can is by consolidating the county row offices of Register of Wills and Recorder of Deeds into State government. We have good people serving in these offices, but these separate offices are a reflection of a different era that we can no longer afford. These changes will require a constitutional amendment, so we may not be able to realize these savings this year. But we need to move forward now so that these savings can eventually be captured.

Finally, the rapid free-fall of revenues that we experienced last year suggests a level of volatility that we need to address. Accordingly, I am proposing a bi-partisan panel to make recommendations that I expect to be revenue neutral but which will provide a more stable foundation for our fiscal future and which will position our State for job growth.

In the end, we want our State government to provide core services and enhance our quality of life in a way that is affordable. That’s what we are doing. By making government leaner and more efficient, we make our State a better place to create new and better jobs.

To restore Delaware’s promise and prosperity, we will reshape the way we, as a State, do business, in order to make Delaware a state where it is fundamentally better for business. We want every business to feel the way the founder of a new company that recently located in Seaford felt when he said: “After doing business with Delaware, I don’t see why anybody would do business anyplace else.” That is why Director Alan Levin, other members of my cabinet, and I have visited scores of local businesses and each time ask the simple question: “What can we do better?”

The lessons learned and the results of those visits are embedded in the actions we have taken and will take. In the end, Delaware will be known as more responsive, more nimble, and more focused on jobs than any other state.

That starts with fighting for every job that’s already here. For example, AIG Insurance was recently sold to a company with no Delaware connection – Farmers Insurance. Farmers had plenty of places it could have moved the 800 jobs involved in processing auto claims, and we were worried. But we went to work, and when the company had to decide where to cut jobs and where to invest, it not only kept those Delawareans working: Farmers held a job fair here to hire more. The Chairman of Farmers told me that our responsiveness played an important role in that decision.

We in Delaware have a number of built-in advantages. We offer a fantastic location, an excellent workforce, great schools, a low cost of doing business, and a high quality of life. To keep it so, we must grow responsibly while preserving our great quality of life for future generations. That means thinking differently. To that end, with the leadership of Representative Michael Mulrooney and Senator David McBride, we should adopt and implement a universal recycling program that will improve our environment and create jobs, while lessening the burden on retail businesses, as suggested last year by Representatives John Viola and Joe Miro, as well as Senator Margaret Rose Henry.

To restore our promise and prosperity, the State will lead by example when it comes to creating efficiencies, supporting jobs and being good stewards of our environment. Earlier this month, Senator Harris McDowell and I announced an initiative that will utilize the financing mechanisms created by the Sustainable Energy Utility. We will make State buildings more energy efficient for decades to come and create hundreds of good jobs in the process. The SEU will be our partner, covering the upfront costs. Delaware Tech has already begun training workers for these kinds of jobs. We will pay for this out of the savings we achieve from reducing our energy consumption.

The State must also lead by investing in our communities so that potential employers know their employees and their families will have safe and affordable places to live. To that end, I am recommending we provide bond bill funding for the Housing Development Fund, which will maximize federal dollars from Washington and create construction jobs here at home.

We certainly cannot rest on these Delaware advantages. To maximize job development, we will take a fresh look at how we support and incentivize economic development. The LIFT Program that we created and funded last year has helped 37 small businesses that employ more than 400 people borrow more affordably and invest in jobs. Together, we also re-capitalized the Strategic Fund, so that we could quickly respond to opportunities to help businesses grow and attract new ones to our State.

This year, I am asking you to do so again and join me in creating the Jobs Incentive Fund, which will allow us to better direct our limited economic development resources to activities that will yield the best return for Delaware. I want to recognize Senator Bob Marshall, who first created the Blue Collar Jobs tax credit program, and thank him for working with us to modernize these incentives.

We also recognize that existing Delaware businesses can be some of our best partners in luring new businesses and jobs to our State. That’s why we plan to create a business “finder's fee” to incentivize existing local businesses to attract their suppliers, partners and customers to set up shop and create jobs in Delaware.

To restore Delaware’s promise and prosperity, it isn’t enough to provide greater incentives to create jobs. We will also remove impediments to job growth. We are cutting red tape and eliminating redundant and archaic regulatory hurdles because people can’t grow their businesses and create jobs when they are waiting in line. Last week, we announced a permitting reform initiative requiring DelDOT and DNREC to respond to permit applications within 60 days. Put simply, our responsibility is to facilitate the success of our businesses. These reforms will do just that, while still protecting our great quality of life. I want to thank Representatives Bryon Short and Daniel Short for their leadership in this area.

All of these efforts are critically important. But to get people back to work, I firmly believe that Delaware needs to start making things again. It was this belief that inspired our response to the closing of the Chrysler and General Motors plants.

Thanks to all of you and our hard-working congressional delegation, Delaware is one of the few states whose former auto plant sites have found new futures. In fact, Boxwood Road will likely become the first shuttered GM plant ever to reopen and create jobs to make new cars. Fisker Automotive chose to move here despite intense efforts by much larger states. When asked why, Fisker’s CEO explained that we were able to bring together critical decision-makers across the State faster than he could get his family of four together for dinner. He also pointed to our first-class workforce. I want to recognize Joe Riccio and Dave Myers for their incredible leadership on the part of the United Auto Workers.

Fisker’s decision to locate in Delaware will only be a success when the cars produced here get sold in showrooms across the world. Fisker has announced an extensive dealer network and their business plan calls for them to export half the cars produced here. One of the most attractive aspects of Delaware was our easy access to, and high-quality workforce at, the Port of Wilmington. Businesses like Fisker need to efficiently get products to the market. That is why I am recommending $10 million in bond bill funding for the Port of Wilmington and that we move forward with the Northeast Corridor Rail project and the Route 301 bypass project – all important infrastructure projects that will make Delaware more competitive.

To restore Delaware’s promise and prosperity, we should not only build, assemble and distribute the next generation of cars in Delaware. We should invent and manufacture the technology for the cars – as well the technology for other industries of tomorrow. We have a proud legacy of technology innovation that we will build on.  Together, we will create a Delaware where entrepreneurs and inventors imagine the new products and services that make life better, more productive and more enjoyable for millions, and workers make good livings delivering these wonders to the world. 

That is why I am supporting in this year’s bond bill plans to provide a center for high-tech laboratories, health sciences, alternative energy research and development, and other emerging industries at the old Chrysler site. Businesses want to locate where the best and the brightest of our youth come to learn. Whether it be the alternative energy inventions of tomorrow that will spring from the University of Delaware, the optics research being advanced at Delaware State University, or the thousands of future workers who will garner their skills at Delaware Tech, we must entice businesses and jobs today with the promise of a better tomorrow.

That promise will be hollow, however, if our children cannot access a world-class education to compete for these higher education opportunities and jobs of the future. Let’s be clear: Providing a world-class education is not only our moral obligation -- our State’s economic future depends on it. Every state is competing for the businesses that seek the best and the brightest of our youth. So we must build on the foundations of success our hard-working teachers and administrators have already established.

To guarantee every child in Delaware access to a world-class education, my Secretary of Education, Lillian Lowery, and I launched an exhaustive quest for the best ideas and recommendations. We have visited dozens of schools and talked with thousands of students. We met with hundreds of teachers, union representatives, administrators, school board members, parents and business leaders. We asked everyone to abide by one guiding principle: Let’s make this about the children, not the adults. For my part, I speak on this issue not only as a governor, but as a father. When it comes to decisions about education, our kids deserve our total focus and commitment. That is exactly what they are getting.

The result: A new framework for education reform that is both bold in its quest for improvement and deep in its support throughout our State. Our engaged business community seeks improved student readiness. With these reforms, their objectives will be achieved. The teachers of our State seek the tools and support necessary to get the job done. We have submitted a federal Race to the Top application this week that could help to do just that. The application has the support of all of our stakeholders, including 100% of our local education associations. I’d like to ask Diane Donohue, President of the Delaware State Education Association, to stand and accept our appreciation, on behalf of all of your colleagues, for your commitment to our children.

The foundation for the future of education goes well beyond the hope of federal assistance embodied in our Race to the Top application. It is built upon four cornerstones that stand on their own:

• Improving student readiness by holding them to high standards.

When I graduated from Newark High School, my classmates and I competed for college entrance or jobs with our peers in Delaware and surrounding states.  Today, our graduates are competing with students from Pennsylvania to Pretoria and from Maryland to Mumbai.  To better compete in today’s global economy, we must adopt high standards that stack up against the rest of the world. Restoring Delaware’s promise depends on it.

But it is not enough to set high standards. Our students have to meet them. To do so, Delaware will use its rich data system and new assessment to support decision-making in the classroom. Good use of the data will make teachers and schools more effective. Parents and students will be able to use this information to demand that schools deliver.

However, great data and great standards mean little without great teachers. They are the foundation of student success. We have so many terrific teachers and other school personnel but we must improve the way we support and prepare them. To that end, we will work with our institutions of higher education to establish teacher residency programs. We will develop a pipeline for strong principals by establishing leadership preparation programs. And we must better compensate teachers who produce results in our most challenging schools.

With these new investments, and an evaluation system that uses hard data to link teacher evaluations to student growth, come new expectations and new accountability. We are requiring that new teachers show appropriate levels of student growth before receiving tenure. In addition, we have adopted a robust evaluation system under which teachers whose students do not show satisfactory levels of growth cannot be rated “effective.” Teachers whose students do show satisfactory levels of growth cannot be rated “ineffective.” We will also improve teacher preparation programs by linking teacher performance to the schools from which they graduated.

And finally, we need these great teachers, robust data and high standards to help schools that have not measured up to their potential. Too many Delaware students are in schools that are not making acceptable educational progress over a period of years. We do these kids a disservice and we’ve got to fix it. When we allow schools to drop the ball -- it means we are letting kids drop out of the American dream. We will support schools that are struggling. We will intervene when they continue to fail.

We have tremendous strengths to build on. Governors and legislators of both parties have demonstrated their commitment to our students’ success and Secretary Lowery has the determination and aptitude to build on that legacy. She’s got a teacher’s heart, so she will not let her focus stray from the interests of our children.

But having world class schools does not alone ensure that all our children will get a world-class education. For that, we need an increase in parent's engagement with their children’s education. And we need children to take full advantage of the opportunities presented.

Just as we need parents to help educate their children, businesses can partner with us to train workers and create new jobs. And as State government streamlines its operations, others will need to carry some of the load. Government cannot be all things to all people. Our commitment to protect those who cannot protect themselves is unwavering. Our commitment to educating our children is unshakable. And our commitment to creating jobs is unmistakable. But, to be clear, government alone cannot change the world – only people can.

That is why we envision a Delaware where every one of us, to the best of our abilities, contributes to bettering the lives of those around us. Two of the people who live that spirit of service are with us today. Airman Benjamin Fileti, who recently returned from Afghanistan, and Sergeant First Class Christopher Lazar, who served in Iraq, are here to represent the more than 2,500 men and women of the Delaware National Guard. Airman, Sergeant - you and your colleagues embody the best of Delaware and we salute you.

This spirit of service, particularly volunteering on a local level, is a passion for our State’s First Lady, my wife Carla. Therefore – as any of you who are married will understand – it is a particular interest of mine.

Last spring, our Department of Services for Children, Youth and their Families decided to create a small school for the youth in their care, on their campus. While we had a building that could be used for that purpose, the building did not have a library. Carla, with members of my cabinet, worked with a construction company that agreed to donate all of the materials and the labor to build the library. And she worked with parents and students at Tower Hill School to organize a book drive to begin a collection. Those kids in the care of the State will be exposed to a wider world of literacy thanks to the selfless dedication of this combination of Delaware business and citizens. That kind of selflessness gets repeated across this State every day. Carla this morning announced the launch of a new, interactive website called “We Connect Delaware,” which will link those in need to some of the opportunities and supports that our State and our generous citizens have to offer. And for that generosity, Carla and I could not be more grateful.

And that brings me back to what is really important, the common obligation and commitment that bring all of us in this chamber together. It is this common obligation that brought Representative Bill Oberle here 34 years ago, and brought George Carey and Pam Thornburg here years later. We thank each of them for their commitment to our State and wish them well in all they do next.

This common obligation is what inspires Speaker Bob Gilligan to be a leader in his 38^th year of service. It is what keeps us all forging forward. But making real our vision to restore Delaware’s promise and prosperity depends upon the willingness and ability of all Delawareans to work together for a brighter future.

We got through a difficult year together. Because we will keep our commitments to our State and each other, then someday, when we are long past these turbulent times, future generations will look back at the first years of this decade with wonder. They will say that despite enormous struggles against a record-setting recession and unprecedented budget deficits, we joined together to set the State on a better course. They will know that we restored our State’s prosperity and renewed our promise of more accountable government, world-class industries, responsible economic growth, a sustainable quality of life, a well-educated citizenry, and a society of opportunity for all. We will meet these challenges together, because we will seize this chance today and do what is best for our children’s tomorrows. Those future generations will look back and say, this was the beginning of Delaware’s finest hour.