HONOLULU, Hawaii - Jan. 25 - Following is the prepared text of Gov. Linda Lingle's (R) 2010 state of the state address:

Senate President Hanabusa, Speaker Say, Lt. Governor and Mrs. Aiona, former Governor Ariyoshi, members of the Legislature, cabinet members, Chief Justice Moon, Chair Apoliona, Mayor Hannemann, military leaders, members of the Consular Corps, distinguished guests, and to all the people of Hawai'i ... good morning and aloha! 

It is my great privilege this morning to deliver the time-honored State of the State Address to the people of Hawai'i as I have done for the past seven years. 

This address will differ from those I have delivered in the past, because it will be my last. 

And while that fact might be considered an applause line by some in the Legislature, I will miss you all when my time in office ends later this year. 

I have invited a dozen current and retired Hawai'i National Guard Generals to join me this morning to bring attention to the role they have played during my years as Governor. 

Every governor's most basic responsibility and highest priority is the physical safety of the citizens they serve. 

Whether fires, floods, tsunami threats, or earthquakes, in times of emergency they have always been there for us, and never once fallen short of my expectations. 

Please join me in thanking them and the men and women they lead for helping us to stay safe throughout the years of my Administration. 

Before sharing my vision for the coming year, I first want to express my gratitude to the people of Hawai'i for the privilege you have given me to serve two full terms as your Governor. 

Beyond the honor of public office, you have made me part of your 'ohana, and for that I will be forever grateful. 

You have put your trust in me and I have always held that trust in the highest regard as I worked to make decisions large and small. 

My Administration began seven years ago during challenging economic times and enters its final year in an even tougher economic climate. 

The difference between then and now is that the challenges we face today are so much greater, revenue loss so much larger, and the statewide impact so far-reaching that the decisions we have to make are much tougher. 

I have already had to make some very difficult decisions - cutting popular programs and services, furloughing State employees, and with great reluctance, laying off hundreds of people. 

These decisions were not easy, nor were they the decisions I wanted to make. 

They were the decisions that I had to make given the situation before us. 

Simply put, our state government is spending at a rate that substantially exceeds our revenues and at a level that cannot be sustained. 

The mid-term economic outlook requires that we further downsize government, prioritize the services we desire and can afford, and together devise innovative ways to meet the needs of Hawai'i's people. 

We must face the situation as it is - not as we wish it to be; and we must make difficult decisions now about the size and nature of government that will keep us on a positive course for the future. 

More importantly, we must do what it takes to create a future that does not financially burden our children and grandchildren simply because we weren't willing to make those difficult, sometimes gut-wrenching decisions, when destiny called on us to do so. 

Clinging to the programs, practices and government structure of the past will not work and cannot be sustained. 

We have to create a government that is more efficient and able to provide essential services in a way that is affordable today and sustainable over time. 

The global recession hit Hawai'i hard and has affected us deeply. 

Visitor spending plunged, construction stalled, unemployment doubled over 18 months, and businesses and consumers uncertain about the future retrenched. 

It will take many months before our economy begins to rebound, and likely years before it returns to its pre-recession strength. 

Because of the tough lessons we have learned about sudden and severe economic downturns, I will be proposing a Constitutional Amendment to rename and revise the State's Rainy Day Fund to create a Fiscal Stabilization Fund. 

This fund will shield us in future years from the need to raise taxes during periods when the economy is contracting and citizens can least afford to pay more. 

The Fiscal Stabilization Fund will ensure that in years when tax revenues are growing, 5 percent of the general fund's end-of-year balance will be placed in the Stabilization Fund prior to granting the currently mandated refund to taxpayers. 

This prudent and important revision to the State's Rainy Day Fund will augment the fund's current source of revenue from Tobacco Settlement moneys. 

On a positive note, the prudent fiscal management that we have exercised during both good and bad times has resulted in Hawai'i maintaining a strong, double-A bond rating. 

During my remaining 10 months as Hawai'i's chief executive, my Administration's resolve to move us forward in a fiscally responsible way will remain steadfast. 

We are at a very unique point in our state's history - it is a time when both our current challenges and our future opportunities have never been greater. 

It is with that thought in mind that I want to use my final State of the State Address to speak with you about reaffirmation and rededication. 

Reaffirmation of who we are and what we are for, and rededication to the kind of future we want for the next generation - a future we will all share. 

The budget I presented to you last month, along with our legislative proposals, are aimed at creating new jobs and maintaining current jobs, encouraging investment, and laying the foundation for educational improvement and energy security. 

Together they comprise a plan for our economic recovery and a roadmap for a brighter, more prosperous future. 

Government cannot create a strong economy, but it can help provide a positive economic climate that makes it attractive to invest and create jobs in Hawai'i. 

It can also work hand-in-hand with the business community to build the foundation upon which private enterprise will flourish. 

A good example of government creating a framework for success is the way public and private organizations have been working together to strengthen tourism - our number one industry. 

According to the latest count, nearly 580,000 additional airline seats will be added this year, creating the potential for another half a million visitors which would require businesses to call more than 5,000 people back to work. 

We will continue supporting our visitor industry while at the same time searching for other economic development opportunities both at home and abroad. 

Among all the world's nations today, nowhere is the pace of economic activity more breathtaking than in China. 

On my most recent visit, I was personally involved in kick-starting direct flights between Beijing and Honolulu, had substantive discussions on clean energy partnerships, and signed an agreement to establish the first showroom for Hawai'i products in Shanghai. 

I will return to China in a few months to further strengthen our relationships and continue efforts to promote business opportunities for local companies. 

We will join with business and cultural groups to celebrate Hawai'i Week at the American Pavilion this June at the Shanghai World Expo and celebrate the 25th anniversary of our sister-state relationship with Guangdong Province, China's manufacturing center and homeland to most of Hawai'i's residents of Chinese ancestry. 

Being a state located in the middle of the Pacific Ocean, Hawai'i faces greater challenges than most states with similar size populations. 

Because of our geographic isolation, we must do more than merely wait for opportunities to come to us. 

Hawaiian monarchs realized the importance of connecting our isolated islands to the rest of the world as far back as the time of Kamehameha II when he and his Queen Kamamalu departed for England to strengthen diplomatic ties. 

Princes Alexander Liholiho and Lot Kamehameha traveled to the United States and on to Europe in the company of Dr. G.P. Judd to negotiate treaties with Great Britain in the mid-1800s. 

Queen Emma, Queen Kapi'olani, then-Princess Liliu'okalani, and King Kal?kaua also traveled abroad. 

Previous governors have also traveled widely, and each international trip builds upon the relationships that have been developed and cultivated during prior visits. 

With a sense of our history and a focus on the future, my Administration is forging closer ties with the People's Republic of China as well as reinforcing and strengthening ties with Japan, Taiwan, the Republic of Korea and the Philippines. 

In China, as it has been in Japan and Korea, and is in most of Asia, relationships matter - particularly relationships between governments. 

We will be hosting government officials and others from 28 different countries this fall at the Pacific Asian Energy Expo and Summit, the Asia-Pacific Homeland Security Summit and the International Women's Leadership Conference. 

And while the Internet makes it easier for today's leaders to learn about the world around them, I would encourage the next Governor to continue the tradition of our Hawaiian monarchs and governors and keep Hawai'i in consistent contact with countries that present economic and cultural opportunities. 

It is vital for Hawai'i to have a cohesive and ongoing international outreach strategy that is advanced by state and county governments, business leaders, public and private universities, and various NGOs, including our ethnic chambers of commerce.

It is this kind of comprehensive and integrated approach that enabled our state to be chosen as the site of the prestigious 2011 APEC Leaders Conference. 

It was the team of Federal, State and local government officials, visitor industry and business leaders along with the expertise of the East-West Center and support from almost every business organization in the state that produced the winning bid for APEC. 

We can leverage our state's limited resources by following this same model of collaboration in others areas. 

One of our most successful collaborations is the Hawai'i Clean Energy Initiative. 

The concerted actions of many both in and out of government, have turned our over reliance on foreign oil into the impetus for a clean energy future and made us a global leader in our pursuit of energy independence. 

Clean energy is critical for our overall economic well-being, our environment and our security. 

And it is becoming an important and growing economic sector that will lead to high-quality, good-paying jobs for our residents. 

This legislative session I am proposing a package of initiatives that builds upon the foundation of the Hawai'i Clean Energy Initiative, including a ban on the construction of new power plants that burn fossil fuels. 

It is time now to show the public by our actions that we will no longer allow our economic well-being to be dependent on burning oil and coal that must be shipped here over thousands of miles of open ocean. 

Another proposal will grant a general excise tax exemption to renewable energy projects of at least two megawatts that are placed in service between January 1st of 2011 and January 1st of 2015. 

In the transportation sector we propose a rebate of general excise taxes paid on electric and plug-in hybrid vehicles as well as the charging stations that will make it practical and convenient to drive electric vehicles in our islands in the coming years. 

These proposals and others will serve as effective incentives for investment in clean energy, create new jobs and make a clear public statement that clean, renewable energy is a state priority. 

Finally, I am proposing that property owners across the state be empowered to help create a green jobs sector through the establishment of a new program called Hawai'i Clean Energy Investment Bonds. 

Similar programs, which already exist in 15 states, assist residential and commercial property owners with the upfront costs of installing clean energy systems or energy efficiency upgrades by allowing them to borrow the money from the State and then repay the loans over a period of years via an annual assessment on their real property tax bill. 

This program spurs both immediate job creation and economic activity, and moves us closer to our goal of 70 percent clean energy by 2030. 

The HCEI Bonds program to encourage a green jobs sector is just one of the economic recovery proposals my Administration will be implementing in the months ahead. 

Recognizing the economic and social imperative of getting people back to work, I am proposing a package of incentives, including help covering the costs of health insurance, and income tax credits for the creation of new jobs. 

The income tax credit proposal grants credits equal to the wages withheld by the employer for each new, full-time permanent position filled by a resident who is currently receiving unemployment benefits. 

Because we need jobs now, the tax credits will begin as soon as the law is passed and remain in effect through December 31, 2012. 

Businesses will be required to be operational for two years after their final tax credits are received. 

Also, we will actively work to expand our SEE Hawai'i Work program that currently reimburses an employee's wages and benefits for up to one year for companies that hire people off of the welfare rolls. 

The expanded program will use Federal Stimulus funds to cover for six months parents who are collecting unemployment and whose household income does not exceed a certain level. 

This program expansion does not require legislation and we will move now to get employers and employees the help they need to get back to work. 

In addition, we will begin a program next month to allow workers on unemployment to volunteer their time at a business or non-profit organization while still drawing unemployment benefits. 

This program will give workers an opportunity to demonstrate their skills to prospective employers and also help businesses evaluate an individual before they incur the cost of hiring them permanently. 

Because the construction and visitor industries have been hit especially hard during the downturn, and have the capacity to significantly stimulate the economy, we are proposing a 10 percent construction and renovation tax credit for hotels and resorts. 

This credit will be granted for the first $500 million in construction work undertaken in each of the next three years, and has the potential to create more than 23,000 new jobs. 

The cost of the credit will be more than offset by the economic activity generated. 

We will also continue expediting our airports, harbors and highways modernization programs as well as other government construction projects. 

And we will again propose legislation that places reasonable time limits on issuing construction permits for high-priority projects such as affordable housing, renewable energy and housing-related infrastructure. 

At the same time we are moving forward with these job creation initiatives, nearly every business in the state is worried about scheduled increases in unemployment insurance taxes if the Legislature does not take quick action this session. 

My Administration has been working with legislators as well as business and labor organizations to develop legislation that will moderate any increases while returning solvency to the unemployment insurance trust fund. 

Under our proposal, employers will pay only 60 percent of anticipated tax hikes, saving businesses $497 million over the next four years. 

We believe strongly that anything beyond this 60 percent threshold will cause large job losses. 

I urge the Legislature to enact this bill prior to mid-March when the Labor Department will need to send out the unemployment insurance bills to businesses across the state. 

While I am spending most of my time this morning talking about important proposals to get our economy growing again, I also want to take a couple of minutes to thank members of my team for their important contributions to Hawai'i during the past seven years. 

We have been making progress in STEM education, renewable energy, film and television production and international partnerships thanks to the creativity and hard work of Director Ted Liu and the entire DBEDT team, including their recent success in convincing Disney to film the next Pirates of the Caribbean film in Hawai'i. 

I'd like to recognize a few other cabinet members, including one who has been with me from my first day as Governor as well as during my eight years as Mayor of Maui County, Budget Director Georgina Kawamura. 

Georgina and her team at B&F have found ways to keep the State's books balanced, accommodate our innovative policy initiatives and infrastructure modernization plans, while maintaining our strong bond rating during the largest global economic crisis of the last 70 years. 

I am very grateful to have her at my side. 

I also want to thank two of my go-to guys, Comptroller Russ Saito, for the many hats he wears with such ease, including keeping our infrastructure plans on track, honchoing our various homeless initiatives, getting a new energy code adopted, and constructing clean energy retrofits on state buildings.  I also want to recognize our Director of Transportation, Brennon Morioka, for overseeing the state's largest-ever, simultaneous modernization of our highways, harbors and airports. 

And I want to thank Dr. Chiyome Fukino and Lillian Koller for the difficult yet creative adjustments they have made in order to assure the highest quality services for the greatest number of residents in need during a time of severe budget restrictions. 

Finally, I want to thank Lt. Governor Duke Aiona, a trusted friend who has provided me with wise counsel when I was facing some of the most difficult decisions of my governorship. Mahalo, Duke. 

To the Lt. Governor, all of my cabinet directors, deputies and senior staff, you have truly brought about the New Beginning we envisioned for our state. 

I ask that all members of the cabinet and deputies, as well as previous directors and deputies who are in the audience today stand so we can give you a well-deserved round of applause. 

I am proud of many of the services we deliver to the public, but one very expensive part of state government that I believe has failed to meet the community's expectations over many years now is our public school system. 

I came into office seven years ago believing we needed an entirely new governance structure in order to realize meaningful improvements in student achievement, and I enter this final year more convinced than ever that continuing the status quo structure of our public school system will never produce more than mediocre results. 

Despite consistently spending more than $2 billion a year on education, we have not achieved the kind of meaningful results any of us can be proud of, and we continue lagging far behind other states. 

The recent public concern over furloughs is understandable and I have made a generous and fair offer in an attempt to achieve a permanent solution to this situation. 

But I ask everyone to be as concerned about the quality of education, as they have become about the mere quantity of education. 

The time has come to focus not only on the number of days children are in class, but on what they are learning during those days. 

The time has come for high school diplomas to mean that a student has the skills to be career or college ready rather than being a piece of paper signifying they sat in class a set number of years. 

And the time has come for us to focus more on long-lasting systemic reform of public education than on temporary furloughs caused by the severest fiscal crisis in Hawai'i's history. 

Regardless of how quickly furloughs end, our school system needs structural reform. 

The current school system lacks clear lines of authority, responsibility and accountability. 

Because the Governor, the Legislature, the Board of Education, the Department of Education, and the Superintendent of Education all have roles to play, the public does not know who to hold accountable for consistently mediocre performance. 

If President Truman had analyzed our public school system, he might have said, "The buck doesn't stop here, or there, or there - it just gets passed around and eventually lost." 

I propose we offer our citizens the opportunity to vote on a constitutional amendment that makes the Department of Education a cabinet department with a superintendent hired by the next Governor so all of us will know clearly "where the buck stops." 

It is time for Hawai'i to make the Governor accountable for public education. 

If you want to see what can happen when the Governor's office gets involved with just a single aspect of education, look closely at the success of our robotics programs, which are among the finest in the country. 

When our Administration began a concerted focus on promoting science, technology, engineering and math programs through robotics in our schools in January of 2007, there were 95 robotics teams statewide. 

Today we have 400 robotics teams, primarily because of federal and private funding and enthusiastic and dedicated volunteers, including many teachers and some principals. 

But more importantly, robotics has proven that our children can excel in the very skills that will be in great demand by our state, national and world economies in the years ahead. 

I would like you to meet three championship teams who will represent Hawai'i on the global stage - our elementary school FIRST LEGO League Champions from Punahou and Hanahau'oli Schools and their coach Robert Piper; our VEX robotics middle school champions from Highlands Intermediate along with their teacher Joan Okai, and our high school VEX Champions from McKinley High School and their veteran robotics teacher Osa Tui. 

Please stand and be recognized. 

Every public school student in Hawai'i deserves the opportunity to participate in this kind of project-based learning program that can enhance their STEM skills. 

That is why I have allocated $10 million in discretionary federal stimulus funds to place these types of programs in every public and charter school in the state by the start of the 2011 school year. 

Besides education programs, we are intently focused on making progress during our remaining 315 days in many other areas including job creation, energy independence, and direct flights between Honolulu and Beijing. 

Regardless of the number of days remaining in my term, time will not alter our intentions or diminish our commitment to an even better future for Hawai'i. 

It is my intention and that of my cabinet to make each and every day a day devoted to improving the well-being of our citizens. 

And before I conclude my final State of the State Address, I would like to recognize one special citizen who I have held in high esteem for many years. 

On his way to being named this year's American Volleyball Coaches Association Coach of the Year, UH Women's Volleyball Coach, Dave Shoji, became only the second coach in NCAA history to win 1,000 matches. 

There are now 330 women's volleyball teams in Division I and the Wahine have been ranked in the top 10 in the final polls all but 5 of his 35 years of coaching. 

I appreciate Coach Shoji and his wife Mary for attending today so that I could have this chance to recognize him for the great person that he is and thank him for the message he has given to the youth of Hawai'i, especially the girls, that with hard work and determination they can compete with the best in the country. 

Thank you Coach for the pride you bring to the people of Hawai'i every time you walk onto the court, and for bringing us such joy this year by again taking the Wahine to the Final Four. 

Please join me in expressing our appreciation to Coach Dave Shoji for his decades of teaching and inspiring the young women of Hawai'i. 

Whether you participate in sports or simply enjoy them as a spectator, it is easy to appreciate the many lessons that they teach. 

One of the best known lessons from the world of sports is that in order to assure a successful outcome, you have to play hard for the entire game - all four quarters of football, the last out in baseball, the final hole in golf or match point in volleyball. 

And while government is no game, the sports lesson applies - everyone in my Administration is committed to work hard until the last minute of our last day. 

I pledge to the people of Hawai'i all my effort in moving our state into the best possible position before the next Governor is sworn in later this year. 

I cherish the fact that I have been allowed to serve as the Governor of the Great State of Hawai'i, a place that is so deeply traditional and yet thrillingly young. 

I know you agree that our Aloha State's greatest days are yet to come. 

I stand before you rededicated to the job ahead! 

Mahalo nui loa, and God bless Hawai'i and the United States of America.