Madam Speaker, Madam President, Mr. Chief Justice, honorable members of the Governor's Council, the Judiciary, the House and Senate, and my fellow citizens of New Hampshire:

Let me take a moment to introduce my wife and our exceptional first lady, Dr. Susan Lynch. I want to thank her for her support and for all that she does for the people of New Hampshire.

We all mourn the lives lost in the Haitian earthquake and are saddened by the suffering that so many of that country’s residents are enduring. And for some New Hampshire residents, this tragedy is very personal, as they grieve and await news of family and friends. They are in our thoughts and they are in our prayers.

I want to acknowledge a very special group of New Hampshire citizens. During the next year, more than 1,100 members of the New Hampshire National Guard will be deployed to Iraq, Afghanistan and Kuwait. They’ll leave behind their families, their jobs and their communities. Let us commit that we will be there for these brave men and women – and their families – during the next year. Let us pray for their safe return. And let us thank them, all of our citizens serving in the armed forces, and all of our veterans – for their service and for their sacrifice.

I am proud to come before you to report on the state of our great state. For the past 18 months, our state and our country have been in the grips of a deep national recession. Workers lost their jobs and businesses shut their doors. Too many families lost their homes, their health insurance and their savings. We are beginning to see glimmers of light through these dark clouds. Throughout this recession, New Hampshire has done better than most of the nation. Our state’s unemployment rate is one of the lowest in the country, and more than 30 percent below the national average. We are seeing some companies begin to hire and some people go back to work. Home sales are increasing and foreclosures are decreasing. But we must continue to help our citizens. Just as we did last week when we came together to make it easier for more than 8,000 struggling families to pay their electric bills. We acted to help New Hampshire families in need. That’s what we will keep on doing.

As recovery dawns, we must remain vigilant. We must help our businesses compete, so they can succeed, grow and hire new workers. And we cannot – and we will not – be satisfied until every New Hampshire citizen who wants a job can get a job. And as we address the very real challenges of today, we must also seize this moment to strengthen the foundation of New Hampshire’s future. The fundamentals of that foundation remain the same: a job for every citizen able to work, a fiscally responsible state government, a first-class education for every child, access to affordable health care for every citizen, a quality of life unequaled anywhere in the nation, a business climate that allows companies to compete successfully, and one of the lowest tax burdens in the country – with no sales or income tax.

In every part of our state, I’ve met business owners who are struggling to keep their workers on the job; workers worried about losing their jobs; business owners who need to train workers in new skills; and workers who don’t have the skills they need for new jobs. We must act to help companies stay in business and to keep their workers on the job. And we must act to help businesses start, grow and expand to create even more jobs here in New Hampshire. That is why today I am proposing New Hampshire Working. This three-part initiative will give companies new tools to maintain their businesses during this downturn, make it easier for them to recover, and help them be more competitive for the future. It will help our citizens stay at work if they already have jobs; return to work if they are unemployed; and ensure that they are ready to work at new jobs. Under the first part of New Hampshire Working, the state would partner with businesses and workers to provide an alternative to layoffs. Companies and workers would agree to reduced hours instead of layoffs, and the state would make up part of the lost wages for workers through unemployment benefits.

Workers would keep their jobs, their health insurance and most of their income. Companies would retain the skilled workers they need to recover. Local businesses would keep their customers. Taxpayers would avoid increased costs. And, with more people working, our economy would be stronger. The first step toward economic recovery is to keep businesses and their employees working. We can and we will keep people at work here in New Hampshire. We must make it easier for businesses to hire new workers and for workers to connect to new jobs. One impediment to hiring is the up-front costs companies bear in training new workers. That’s why this spring, we’ll launch the second part of New Hampshire Working, which will reduce upfront training costs for companies and help workers get new jobs. Unemployed workers will be able to continue to receive unemployment benefits while participating in up to six weeks of on-the-job training at a potential new employer. A company will have until the end of that period to decide if a worker has the skills the business needs.

For our economy to recover, we must make it easier for companies to hire and for workers to get new jobs. We can and we will get people back to work here in New Hampshire. We must make sure our companies can find the skilled workers that they’ll need to compete and grow in the future. That is why the third part of New Hampshire Working focuses on ensuring all our citizens are ready to work. As members of my Jobs Cabinet and I traveled the state this fall, we heard a common refrain from business leaders: Some, even in this economy, can’t find workers with the skills their companies need. Through our Job Training Fund, we’ve partnered with more than 100 companies to train nearly 5,000 workers. But that only helps the workers who already have jobs. We need to increase our efforts to train workers who are still looking for jobs.

I have asked our New Hampshire job agencies to develop a plan for assessing the job skills of all newly unemployed workers. Workers will be able to take the results of those assessments to potential employers, giving business owners confidence that new hires will have the necessary skills. But assessment alone is not enough if a worker lacks basic skills. That’s why I am asking you to allow the Department of Employment Security to use the Job Training Fund to provide training for unemployed workers. And I also ask you today to double the state’s Job Training Fund to $2 million a year beginning in 2011. For our state to prosper into the future, New Hampshire companies need skilled workers. Let’s keep good companies and good jobs here in New Hampshire. We can and we will keep New Hampshire working.

Already we’re putting people to work repairing our roads, reconstructing water treatment plants, weatherizing 1,000 low-income homes a year, and helping businesses like Foss Manufacturing in Hampton lower their costs by becoming more energy efficient. We must continue to grow the businesses and the jobs of the future here in New Hampshire. We must keep New Hampshire taxes among the lowest in the nation. We should continue to ensure state government uses every dollar as efficiently as possible. We must ensure we have a skilled and trained workforce. And we must help entrepreneurs and new businesses compete and succeed.

Clean energy holds great potential for bringing new jobs to our state. Companies like GT Solar in Merrimack are already leaders in their fields. Other New Hampshire businesses are developing new products with tremendous promise. Warner Power has created new transformers with the potential to save large amounts of energy. H&E High Efficiency Power Burners in Goffstown invented a way to retrofit boilers to make them more efficient, saving people 30 to 50 percent on their oil bills. Across our state, inventors are at work creating the technologies of the future. But some inventors need help in the final stages of bringing their products to market. They also need help navigating the worlds of finance and marketing. That is why today, in partnership with the University of New Hampshire, I am announcing the creation of the Green Launching Pad to help clean technology companies grow in New Hampshire.

With $750,000 in stimulus funds, the University of New Hampshire will put its vast expertise and resources to work helping promising and innovative companies succeed. These companies will be connected to business, science and engineering faculty to develop finance and marketing plans, and be connected with angel investors and business mentors. They will get intensive support to launch or expand their companies and to create new jobs. We can make it possible for even more companies to create the technologies that will reduce pollution, reduce energy costs and provide new sources of energy. We can and we will help these companies grow right here in New Hampshire. Economic recovery must come to every part of New Hampshire. Even before the onset of this recession, the North Country’s economy lagged behind the rest of the state. That is why we are launching two new efforts to help North Country citizens build their own businesses and to connect North Country workers with jobs. We are entering a new partnership with White Mountain Community College to help North Country citizens start their own businesses. The college will work with entrepreneurs to develop business plans, to help them develop marketing plans, and to connect them with financing and other resources. This initiative will provide aspiring entrepreneurs in the North Country the technical support they need to build their own businesses – and to create jobs for their neighbors. In September 2010, a new federal prison will open in Berlin, employing an estimated 300 people.

We will partner with White Mountain Community College to train individuals who want to work at the prison and to provide technical assistance to companies that have goods and services to sell to the prison. North Country businesses and workers deserve to reap the economic benefits of this new facility. Let’s make sure that these new jobs go to North Country workers.

An efficient and effective state government is one of New Hampshire’s great economic advantages. New Hampshire has one of lowest tax burdens in the nation and the fourth lowest government spending per capita. In the past year, we’ve made tough choices to respond to the recession’s impact on the state budget. To keep taxes low, we cut spending in nearly every state agency; we closed a prison and courthouses; we took the very hard steps necessary to reduce personnel costs. We took those steps so that we could meet our core responsibilities to preserve public safety, to protect our most vulnerable citizens, and to fund education. And I want to take a moment to thank New Hampshire’s department heads. They are an extraordinary group of individuals willing to take a new look at old practices; to work across department lines; and who always put service to the people of New Hampshire first. Many of them are seated in the gallery, and I ask that that they stand so we can thank them.

Their work, our work, did not end when the budget passed last June. We continue to make state government more efficient and put spending at every state agency under a microscope. Focusing on its delivery system, the Department of Health and Human Services is transforming the way it does business to provide better, more coordinated and more cost efficient services. We’re developing a pilot program to better manage the use of state cars. And we’ve put drivers’ license renewals online to control costs and improve customer service. We launched a new financial accounting system that makes it possible to look at spending across agencies and across state government. Increased transparency improves our ability to make good decisions. And this spring, we expect to have New Hampshire’s first monthly spending report online and available for review by every citizen. This year, we actually reduced corrections costs, long one of the state’s fastest-growing expenses.

We did it by re-thinking our Corrections system, re-directing our resources so that we could close a costly and inadequate prison. Let’s be clear: Violent felons belong behind bars for their full sentences. And some people belong in prison – and will stay in prison – for the rest of their lives. But most inmates complete their sentences and return to their communities. Unfortunately, more than half of them re-enter New Hampshire’s prisons within three years, costing taxpayers millions of dollars. This fall, we joined together to ask the Justice Reinvestment Center for concrete ideas to reduce recidivism. They will make their first set of recommendations next week. Their proposals will involve more focused supervision of high-risk offenders; applying swift and certain sanctions for probation violators; and reinvesting in treatment programs. We should move forward with those ideas that are right for New Hampshire. Instead of spending our money on increasing prison capacity, we should keep people from returning to prison. We can cut costs for taxpayers and we will keep New Hampshire one of the safest states in the nation.

Efforts like these to make state government even more efficient are critical. Because in spite of the tough choices we’ve made in the past two years, and in spite of the improving economy, we still face budget challenges. Traditionally, state revenues recover after the economy does, and increased demand for state services continues even after the economists say a recession has ended. We budgeted responsibly, but the recovery of state revenues is still lagging. And this year, the number of people needing assistance from the Department of Health and Human Services has grown by nearly 20,000. That need, driven primarily by the increase in unemployment, has vastly outpaced the department’s budget. We must manage the budget to address both of these challenges. There are difficult decisions ahead of us, including budget reductions. But these decisions are necessary. I ask for your cooperation and your best ideas so that we can respond to economic conditions and protect essential services. In 2009, the worst year of the recession, we balanced the budget. And we will do the same this year.

As we address immediate budget concerns, we must also continue our work on the long-term budget challenges facing our state. In the past several years, we’ve tackled big and long-neglected issues – from retirement to education funding to the highway fund. On each of these issues we’ve taken significant steps forward. But we have a continued responsibility to act, and we must work this year to develop solutions that can be put in place as part of the next budget. We have acted to stabilize the state’s retirement system. Accounting gimmicks and shortsighted decisions by policymakers in the past paved the way for nearly three decades of under-funding of that system. And today, we see the consequences, with unsustainable rate increases for the state and our communities.

Together, we’ve taken major steps to reform the system: Strong leadership. Sound accounting. Better fund management. But there is no silver bullet to undo years of neglect. We must continue strengthening our retirement system – to ensure security for our public employees and affordability for our taxpayers. We have developed a school-funding formula and laid the groundwork for a school accountability system that both passes constitutional muster and helps our children and our communities. Our work has been made harder by the constraints of the Supreme Court’s decisions. I still believe a constitutional amendment is the best way to ensure that we have the necessary flexibility to design a better education-funding system. But I also recognize that legislatures have rejected numerous proposed amendments. Until such time as an amendment has broader support, we must work within the current structure.

In improving our funding system, we have two primary goals: Ensuring that the costs are sustainable and directing more aid to the communities with the greatest needs. In pursuit of these goals, we must prevent abrupt large drops in aid to some communities, and we must not return to the divisive system of donor towns. Together with educators, our communities and state agencies, we must meet these goals in the next biennium. Let’s make sure that every child in New Hampshire has the opportunity for a quality education.

A quality transportation infrastructure is critical to the safety of our citizens and to economic growth. Better roads open up economic development opportunities, leading to more jobs. We’ve restored fiscal responsibility to our state’s highway fund and developed a realistic 10-year highway plan. We’re addressing long-neglected road projects. We’ve repaired, or are repairing, 82 redlisted bridges. We’re widening the Spaulding Turnpike. Construction is underway to widen Interstate 93 in Southern New Hampshire. And we’ll complete the Manchester Airport Access Road two years ahead of schedule.

Two weeks ago, I submitted the next 10-year highway plan. As we developed this plan, we heard from communities, businesses and citizens about other important road projects. But to achieve a fiscally responsible plan, we could not afford to add many of those projects. Interstate 93 is a priority, and we will invest a significant portion of our highway capital dollars in its expansion over the next 10 years. But even that investment isn’t enough to widen the road all the way through Derry and to Manchester. It would be better for our citizens and more cost-effective if we widened Interstate 93 as one project and not piecemeal. But revenue to the Highway Fund has not kept pace with construction costs or the needs of our roads. A bipartisan commission is now looking at long-term funding options. Let’s be clear: It is irresponsible to call for the acceleration of work on 93, but refuse to participate in a discussion of how to pay for it. That may be politically easy, but that’s not good budgeting. It’s time we all come together for a solution.

As we consider our transportation future in New Hampshire, we must acknowledge that more roads alone will not meet the transportation needs of our citizens. We must continue to expand bus service and car pooling. We must also continue our efforts to bring rail transit to New Hampshire. Much of what we are doing – in improving education, in reducing energy costs, in keeping taxes low, and in helping businesses create new jobs – is building the foundation for a continued economic advantage for New Hampshire.

That is why we must also address health care costs. New Hampshire is one of the healthiest states in the nation and we have one of the highest percentages of residents with health insurance. But along with the rest of New England, we have among the highest health care costs in the nation. Those costs are making it harder for our companies to grow and harder for our people to afford health care.

We have shared goals in New Hampshire: lower health care costs, better health care quality and more insured citizens. Washington is working to meet those same goals. But – as I have made clear – Congress should not pass any bill that piles unreasonable new costs on the states or that hands out special deals to individual states. Every state should be treated fairly. Here in New Hampshire, we aren’t waiting for Washington to act. We are changing our health care system now. Small businesses need access to a more affordable health care option, so we created a new less expensive, prevention-focused alternative – New Hampshire HealthFirst.

Consumers need better, more transparent information to make smart decisions, so we’ve put cost and outcome comparisons between hospitals on line. Technology can help control health care costs and improve patient safety, so we’ve worked to ensure that nearly all of our health care providers can now prescribe medications electronically. Our goal should be ensuring that New Hampshire is in the top five of all states in terms of health care outcomes, and in the lowest five in terms of costs. The current financial rewards in our health care system are backward. We should be creating incentives for better results and lower costs. Instead, the incentives are for health care providers to purchase the most-expensive equipment, use it as frequently as possible, and to compete with each other for increased market share. The direct result is higher costs. Study after study demonstrates that higher costs do not translate into better care. In fact, some of the best results come from health care systems with the lowest costs. We must be smarter in how we use our health care dollars.

To lower costs and improve their health, all patients should have a medical home – where a primary care doctor coordinates their care. But the health care system’s current focus on paying by the service makes it difficult for doctors to spend time managing the care of their patients. That’s why, in cooperation with the major insurance companies, we’ve launched nine medical home pilot projects across the state, where doctors are reimbursed for coordinating care. These pilot projects are demonstrating that we can make it financially possible for providers to focus on what’s best for their patients.

We need to expand that model across our state, and make sure our health care dollars are paying for results, not just procedures. That’s why the Citizens Health Initiative is developing a pilot project to encourage our hospitals and provider groups to transform into accountable care organizations. Accountable care organizations would take what we are learning through our medical home pilot and expand it across health networks. Under this model, a health care system is given a budget for serving its entire community and it then coordinates care across its entire system, focusing on prevention and improving outcomes. Providers and the health care system profit from providing good, cost-effective care. We’re not spending our health care dollars the right way, and it’s time for that to change. We must all stand up – employers, citizens, and state government – and say we are not going to tolerate the old way of doing business. We must demand change from the insurance companies and from health care providers. We can and we will have better, more affordable health care in New Hampshire.

A first-class education system is key to our economic future, and we are improving education so that our students can get good jobs and our companies can compete. This year, we were one of only five states in the nation that saw fourth and eighth grade math scores increase. That’s something of which we should be proud. Project Running Start last year helped more than 3,000 students earn college credits through courses offered online and at their local high schools, making higher education more affordable and accessible for our families. And for the first-time ever, when school opened in New Hampshire this year, every child in every community could attend public kindergarten. We’ve recognized that a high school diploma is the minimum a student needs to enter today’s workforce, and we’ve made it a priority to help every student graduate from high school.

Beginning this year, the compulsory attendance age is now 18 – a change that is already reducing our dropout rate and sending a strong message to our children about the importance of a high school diploma. To help more children succeed, we’ve expanded alternative education – offering students options for night school, real-world learning or to earn GEDs.

I am proud to announce today that our efforts are showing results. The number of our students dropping out of high school decreased by more than 30 percent just last year. And 24 of New Hampshire’s high schools last year cut their dropout numbers by at least 50 percent. At the Manchester PASS program, and other alternative learning programs across the state, I have met students who were ready to drop out until we gave them a chance to earn their high school diplomas in a way that works for them. Now these same students are going on to college or working in good jobs. We are going to give every child in New Hampshire that same chance to succeed. We cannot and we will not be satisfied until all New Hampshire students graduate from high school.

I continue to believe that we live in the greatest state in the greatest country in the world. New Hampshire continuously ranks as one of the one of the safest states; one of the healthiest states; and one of the best states to start and grow a business. And just last fall, New Hampshire was acknowledged as the best state in the country in which to raise kids. We should be proud of that. New Hampshire has weathered the economic storms of the past two years better than most. That’s because we have come together to lead; to make the tough decisions necessary to keep our state on a steady course; and because we haven’t lost sight of the future. The clouds have not yet dissipated, and we will need all of those skills to continue to guide our state and its people into a successful recovery. Challenging times drive innovation and new thinking. This is no time to stand still. This is the time to redouble our efforts to help every worker who wants a job to get a job. This is the time to help businesses grow and innovate. This is the time to continue to solve the problems that could threaten our future prosperity.

This is a time to envision the New Hampshire we want for the future and commit to building it. New Hampshire works best when New Hampshire works together. If we do that, New Hampshire will be stronger and more prosperous in this new decade.

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