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

I am proud to come before you today to report on the state of our great state.

Before I begin, let me introduce my wife and our exceptional first lady, Susan. I can never thank her enough for her support.

Let me also recognize Senate Republican Leader Ted Gatsas and House Republican Leader Mike Whalley.

We must also be mindful of those who are not with us today - in particular the brave men and women serving in our military. Let us thank them for their service.

For the past year, the eyes of the nation have been on New Hampshire and our first-in-the-nation primary. And - despite the attempts of some - New Hampshire was first. And because of our engaged citizens, our record-breaking turnout, and our willingness to let the people decide - New Hampshire should and will remain the first primary in the nation.

The primary is always a chance to showcase New Hampshire, and we showed the nation why New Hampshire is the greatest state in the greatest country in the world.

The nation saw a place where people put partisanship to one side to solve problems and make progress.

The nation saw a place of breathtaking natural beauty, and a people committed to preserving it. A healthy state, and a people working to expand access to health care. A state focused on building a strong economy, and a people who make that economic growth possible.

The nation saw a place with great schools, and a people working to give every child a good education. A fiscally responsible state, and a people who demand and receive accountability from their leaders. A state that has acted to end discrimination, and a people who treat their neighbors with dignity and respect.

We showed the nation a place where all people, Democrats, Republicans and Independents, are finding common ground to tackle long-standing problems and make a difference in the lives of our citizens.

We face many challenges. But we are a strong state, with a solid foundation upon which to build. We must keep working to make New Hampshire a place of opportunity for all of our citizens. A state where every child gets the chance for a good education, where more of our citizens can afford health care, where families feel secure, and where hard work is recognized and rewarded.

Our state needs a strong economy to grow and thrive, and our people want and deserve the security of good jobs.

Many of our families are struggling to heat their homes, and to stretch their budgets to cover the rising costs of gasoline and food. Our families are watching the foreclosure crisis grow and the stock market decline, and worry the slowing national economy may soon affect their own jobs.

In Claremont, I met a man who saw the company where he had worked for 23 years shut its doors almost over night. He took pride in his work, and had trouble imagining what he would do next.

Our rapid response team is working to help him and other workers who have lost their jobs. They are providing job training, counseling and one-on-one assistance to help people find new work. Our economic development team is working to help existing businesses grow, and attract new jobs to the state. And when companies abruptly shut down, ignoring laws that require them to give their workers notice and severance, we stepped in. Here in New Hampshire, we stand up for our workers.

New Hampshire is better prepared for this national economic downturn than much of the country. Economists predict that New Hampshire will continue to lead the region in economic growth and our unemployment rate remains well below the national average.
We are better positioned because of our strong and educated workforce, the diversity of our economy, our tax structure, and also because we’ve worked together to make sound investments in our future.

Because companies that innovate create jobs, we created the research and development tax credit. Because we know workers need new skills to compete in the global economy, we reinstated the Job Training Fund. And in just two months, we’re already training 237 workers. And because we wanted to make New Hampshire more competitive, we cut the insurance premium tax. Now Acadia Insurance has moved from Maine to New Hampshire.

We’ve been working to transform the North Country from a paper-based economy to one that is more diverse. But, recent events … the closure of Groveton Paperboard, the pulp mill in Berlin, and now Wausau Paper … make clear the need for more dramatic action.

Coos County is struggling. Average wages are significantly lower than the rest of the state; the unemployment rate, even before the latest mill closure, is much higher; and its economic growth is expected to significantly lag behind the rest of New Hampshire.
In Groveton and Berlin, I’ve met workers whose families have lived in the North Country for generations. They love their homes and their communities, but they worry they will have to move to find good work. Many of their children don’t see their futures in the North Country.

This is not just a North Country issue. It is a New Hampshire issue. We all care about the North Country. That is why we cannot, and will not, just stand by.

That is why today I am proposing a new tax credit to encourage businesses to create good-paying jobs in Coos County.

A business that creates a good-paying job in Coos County - a job that pays at least twice the minimum wage -will receive a $1,000 credit against its business taxes for each of the next five years. Most new businesses would pay no business taxes for their first five years. Existing businesses would get the same credit for every new job they create.
This credit will help companies overcome some of the unique barriers that exist in bringing jobs to Coos County. Please join me in making sure Coos County not only survives, but thrives.

Some of the nation’s current economic problems can be traced to abuses in mortgage lending. And across New Hampshire, families are coping with losing the homes they dreamed of for years.

Last year, we passed a law to prevent people from taking advantage of families facing foreclosure. Now, we need to make sure the people who are developing mortgage agreements are responsible, follow national standards, and recognize their obligation to consumers. We should act this year to license mortgage originators and protect consumers from future abuses.

Because of our work together in the past three years to restore New Hampshire to a solid financial footing, we are in better shape than most states. We ended the last biennium with a surplus. And together, we built up our Rainy Day Fund from just $17 million when I took office to a record $89 million today.

For the first six months of the fiscal year, revenues came in almost exactly as we estimated. But since we passed the budget in June, the mortgage crisis has grown, the stock market has dropped, and oil prices have increased more than 50 percent. And we are beginning to see the impact of that national downturn in state revenues.

Barring an emergency, I will not support any bills that require additional spending this year.

In addition, I’ve been meeting with major agency heads to develop contingency plans. I expect to come to the Fiscal Committee shortly with a proposal to ensure that we end this biennium with a balanced budget.

One of the major cost drivers in our current budget was the dramatic increase in retirement costs. The state’s share of retirement costs is now $219 million, a 45 percent increase from the last biennium.

Our firefighters, police officers, teachers, municipal and state employees serve our citizens with distinction and dedication. We have a fundamental responsibility to them to ensure the long-term stability of the retirement system.

Unfortunately, decisions made as far back as the 1980s - about accounting methods, special accounts and investments - pushed problems in the retirement system down the road. What started as minor problems grew into major ones.

Last year, we began fixing the Retirement System, and that law has already improved the system’s finances. We also created a commission of financial experts, employers and employees who have presented a series of thoughtful recommendations. Those recommendations should be the foundation for further reform.

State government, local governments and employees all have a stake in this issue, and solving it will require continued compromise on all our parts. We should not leave this challenge to others. We must all work together to fix our retirement system and ensure that our public employees have the secure retirements they’ve earned.

We in New Hampshire have long prided ourselves on the quality of our roads. People always knew when they had crossed the border into New Hampshire, just by the feel of the road. We recognize the importance of well-maintained roads and bridges to our economy and public safety.

But New Hampshire hasn’t been keeping its commitment to maintaining roads - ignoring real problems on our turnpike system, letting the highway plan grow out of control, and neglecting real fiscal responsibility in both the highway and turnpike systems.

For example, in 1992, turnpike workers added wooden supports to aging bridges on the Spaulding Turnpike in order to extend their useful lives another two years. Fifteen years later, those bridges still have not been repaired. Starting this spring, they will be.

We have returned fiscal responsibility to the turnpike fund; already its bond rating has improved. We will be repairing red-listed bridges across the Turnpike System and expanding the Spaulding Turnpike.

We are also returning financial responsibility to the highway fund. For too many years, New Hampshire made false promises to communities, adding projects to the highway plan without any way to pay for those projects. The plan grew from a 10-year plan to a 35-year plan.

Last week, we submitted a realistic 10-year plan to the Legislature. This plan returns honesty and fiscal responsibility to the process, and meets critical needs. It allows us to repair the Memorial Bridge in Portsmouth; widen Interstate 93; complete the Southern leg of the Conway Bypass; complete the Granite Street exit in Manchester; and repair 89 red-listed bridges.

Together, we can make sure our citizens are once again proud of their roads.

All parents dream of better lives for their children, and they know that education is the key to making those dreams come true. An educated workforce is also the key to our state’s future.

To keep New Hampshire a national leader, we must give all of our children the very best education possible, including helping more of our young people go on to higher education.

And that’s what we’re doing. We doubled a University System scholarship program to give the neediest New Hampshire students two years free tuition. And to help families save on tuition costs, we expanded Project Running Start, which allows high school students to earn college credits right at their own schools.

We’ve expanded early learning programs. We increased alternative learning programs to help more of your young people graduate from high school. And we raised the compulsory attendance age from 16 to 18, sending a powerful message to our young people that we will not give up on them; and we won’t let them give up on themselves.

And we met our responsibility to define an adequate education. An education that begins with kindergarten.

Education is all about opportunity. The opportunity we provide all our children to have better lives and better futures. Right now, not every child in New Hampshire has an equal opportunity for a quality education. Children in wealthier communities have more opportunities than children in other communities.

I appreciate the work of the costing commission this legislature created last year, but it is working under the constraints of Supreme Court decisions. Those constraints are preventing us from putting in place the best possible education plan.

We do have a responsibility to ensure all our children have an opportunity for a quality education. But it is not good policy to send the same base amount of education aid to every school district before we help the schools that really need it. Yet that is what the Supreme Court has said we must do. That type of approach does not reduce the inequity that exists between schools. It only widens disparities and maintains the status quo.

I believe we must pass a constitutional amendment to allow us to direct more aid to communities with greater needs. Now we must come together to develop an amendment that lets us do the right thing for our kids. And we must not let unreasonable demands or partisan politics interfere with that goal.

I also believe that, after 10 years, the best chance for us to move forward on education funding is to give the people a say. Whether you are for or against an amendment, let the people vote.

Let’s give all our children, no matter where they live, the opportunity for a good education and a better life.

Here in New Hampshire, we cherish the brilliant colors of our foliage, the beauty of our mountains, forests and waterways. That is why we have acted together to protect them. Passing groundbreaking legislation to reduce mercury emissions; banning the burning of toxic construction and demolition debris; and funding the Land and Community Heritage and Investment Program.

We passed the Renewable Energy Act to stabilize energy prices, protect our environment and bring good jobs to New Hampshire. Now we must develop a transmission system - working with the federal government and the rest of New England - to ensure that the North Country can sell renewable power across the region.

Left unchecked, global climate change will dramatically change our environment in New Hampshire. That’s why I’ve created a Climate Change Task Force to develop a comprehensive strategy for continuing to address this critical issue.

In addition, New Hampshire has joined nine other states, stretching from Maine to Delaware, to develop the Regional Greenhouse Gas Initiative, or RGGI, to reduce greenhouse gas emissions from power plants, a leading cause of climate change.

We must work together to develop the best possible legislation for New Hampshire. But we must also make sure New Hampshire does not get left behind. The rest of the Northeast is already implementing RGGI. According to the University of New Hampshire, if we do not join RGGI, New Hampshire will see higher costs and job losses.

By joining RGGI, and investing its proceeds in energy efficiency, New Hampshire ratepayers will save money and our state will add jobs. That’s why we must join together to pass the Regional Greenhouse Gas Initiative this year.

We are working to keep New Hampshire one of the safest states in the nation. We’ve put more state troopers on the road, and more prosecutors in the Department of Justice. We’ve cracked down on identity theft. We are merging the state police and highway patrol to improve public safety and government efficiency. And we now have one of the toughest laws in the nation to protect our children from sexual predators.

We must keep working to make our families secure and to ensure our laws keep up with today’s criminals, especially when it comes to the safety of our children.

With technology we can sit in our living rooms and pay our bills or keep in touch with friends and family with just a couple of clicks. Unfortunately, technology also makes it easier for criminals to sneak into our homes.

Parents must take the lead in monitoring their children on the Internet. But they need help. That is why in December, the Attorney General and I joined together with bipartisan members of the legislature to propose the Online Child Safety Act.

The Online Child Safety Act modernizes our laws to protect our children from the threats of the 21st century. It increases penalties for enticing children over the Internet; toughens laws on repeat offenders; and requires convicted sex offenders to register their email addresses and online identities.

We will not allow sexual predators to hide in the shadows of cyberspace. Together, we must act to keep our children safe online.

New Hampshire remains one of the healthiest states in the nation. But we must keep working to make sure our families have the quality care they deserve, and health insurance they can afford.

We’ve been working together to meet both of those goals. We made it possible for parents to keep their children on their health insurance until age 26 and strengthened our Children’s Health Insurance Program.

Through the Citizens Health Initiative, we are working to make New Hampshire a center of health care innovation. We are working to make more information about health care costs available; to expand the use of electronic medical records; and to make New Hampshire the first state where all our providers can prescribe medications electronically.

To put health care in reach for more people, we must work to make it more affordable. We must increase the use of technology and make sure doctors are coordinating patient care. We must focus on helping people stay healthy, and on them taking responsibility for keeping themselves healthy.

Large corporations recognize that this is the future of health care. They are already working with their insurers to bring that type of innovation and focus on wellness to their health care plans. We can bring this same type of innovation and potential for cost savings to small businesses and their workers.

I ask you to join with me to create New Hampshire HealthFirst, which would require insurance companies to offer a wellness insurance plan to small businesses.

Rhode Island passed similar legislation last year. It reports a savings to small businesses of more than 15 percent when compared to similar coverage available in the market.

Many of our small businesses are struggling to keep providing health insurance to their workers. HealthFirst will offer our small businesses a new, more affordable choice for good health insurance coverage. It will help stabilize health insurance costs for our small businesses, and make it possible for more of our businesses to continue offering insurance to their workers.

Let’s continue to lead the way in health care innovation. Let us look to the future and begin changing how our health care system works. Let’s pass this bill and help more of our small businesses and their workers afford health insurance.
One of the messages we heard loud and clear during the primary this year is that our people want leaders who work together to get things done. They don’t care about what’s a Democratic issue or a Republican issue; they care about the issues that affect their lives. They don’t care who wins that day’s partisan war of words; they care about whether we are making their lives better.

That’s what we’ve been doing here in New Hampshire. And that’s what we will keep on doing. Let us keep working together to find common ground. Let us come together to strengthen our economy; to protect our kids; to expand access to health care. Let us come together to build a better, brighter future for all our citizens here in New Hampshire.