RICHMOND, Va. – Jan. 12 – Following is the prepared text of Gov. Bob McDonnell's (R) 2011 state of the commonwealth address:

Mr. Speaker. Mr. President. Justices of the Supreme Court and Judges of the State Corporation Commission Ladies and Gentlemen of the General Assembly. My fellow Virginians: It is my duty and honor to join you again tonight in Thomas Jefferson's Capitol for the annual State of the Commonwealth Address. And I want to welcome Senator Bill Stanley and Delegate Greg Habeeb to the greatest legislative body in the world, just 24 hours after the polls closed. Congratulations. At the start of this speech, I ask that we all join together in a moment of silence for the victims of the senseless violence that unfolded in Arizona this past weekend. We continue to pray for Congresswoman Giffords, and the others who were wounded or killed. And we stand together tonight and make clear that this grand experiment in liberty that we call America will never be shaken or silenced by the cowardly actions of any one person, group or nation. That is true now. It was true ten years ago on September 11th, and it was true seventy years ago at Pearl Harbor. Freedom defeats tyranny. Ideas conquer violence. Courage is stronger than fear.

Last year at this time I spoke to you twice in 48 hours, with my Inaugural Address and first State of the Commonwealth. If you're worried tonight that I have nothing left to say, don't be. I was just getting warmed up. I am glad that the First Lady and my five children are here this evening on my eldest daughter's 30th birthday. For me, like all of you, the love of family is the warmest comfort on which I have rested my entire life.

As Virginians we are heirs to a rich history, and we do stand on the shoulders of giants. Over the 404 years since the settlers walked on to the shores of Cape Henry, Virginians have witnessed years of war and times of peace; decades of growth and periods of retrenchment. And, we continue to mark milestones on our perpetual pathway of progress. In Washington D.C., Eric Cantor serves as the first-ever House Majority Leader from Virginia. In Charlottesville, Teresa Sullivan leads the University of Virginia as its first female President. And here in Richmond, on February 1st Cynthia Kinser will become the first woman to serve as Chief Justice of the Virginia Supreme Court. Through all of this progress, several constants have remained. The people of Virginia are strong in times of trouble; giving in times of need; resilient in the face of adversity; and, committed to seizing the opportunities before them.

In two weeks we will lay my father to rest at Arlington National Cemetery in a sea of American heroes. At that time I will remember anew, as we all do, the Greatest Generation that made America into the most free and prosperous country on Earth. The courage, perseverance and bravery possessed by that generation was, thankfully, not the result of a passing moment. You can see those very same traits today in the faces of the brave men and women who volunteer to defend our freedom. We gather tonight as a nation fighting a global war on terror. Virginia patriots have done their part. Thousands of Virginians serve tonight on active duty, and twelve thousand Virginia Guardsmen have been called to duty since 9-11.

In early December, I attended the funeral of U. S. Army Specialist Kyle Middleton of Chesterfield. Kyle was killed by Afghan insurgents while on a foot patrol in Kandahar. He was a 26 year-old graduate of Old Dominion University, where he was a friend of my daughter, Cailin. With us tonight are: Kyle's father, Hank Middleton; stepmother, Diane; and brother, Zach. His mother, Marleen Lee Blackburn, could not join us. Hank, Diane, Marleen and Zach: on behalf of a grateful Commonwealth we will never forget what Kyle has done for us, and we honor you. Kyle's death reminds us that for over two centuries it has been the sacrifice of the American military that has preserved freedom. President Harry Truman famously stated, "Some things have not changed at all since 1776. For one thing, freedom is still expensive. It still costs money. It still costs blood. It still calls for courage and endurance, not only in soldiers, but in every man and woman who is free and who is determined to remain free."

As this Session commences today let us resolve, together, to use the precious time God has given us to make life better for all Virginians. Let us remember that before we are Republicans and Democrats, we are Americans and Virginians. We are bound together here in the cradle of democracy by a Virginia birthright far greater than any political Party. For in these still tough times, over 8 million Virginians want results, not rhetoric; they want solutions, not politics. Let us fight strongly for our principles, but also embrace an atmosphere of civility and mutual respect as we strive to follow the golden rule. We must be able to look past the next election, to the next generation. We have a common obligation to make this a better and more prosperous Commonwealth. And that opportunity is now.

It has been said that every challenge presents an opportunity. If that's right, we have more opportunities than we know what to do with! The past few years have been marked by uncertainty, job losses, foreclosures, credit crises, and a stock market roller coaster. It has not been easy. Through the 10th Amendment, we know the states are the laboratories of democracy. During this time of distress, each state in the Union has forged its own path forward and rightly so. Some states have done better at this than others. Virginia has done better than most.

Consider our work together over the past 12 months. Since February 2010, Virginia has added 67,900 net new jobs, the 3rd highest number in the nation. We ranked 35th in this same category in 2009. Since February our unemployment rate has fallen from 7.2 percent to 6.8 percent. It is tied for the 9th lowest in the nation. Fortune 100 company Northrop Grumman is moving its headquarters from California to Fairfax. The final numbers of 2010 are on track to maintain, and possibly exceed the record breaking $2.3 billion worth of Virginia agricultural and forestry products exported from our ports in 2009 and we've seen double-digit sales growth of our wines during the last year. Looking at all the major national rankings, Virginia remains the most business friendly state in America

I want to thank Lieutenant Governor Bolling, Secretary Cheng, Senior Advisor Sledd, the Virginia Economic Development Partnership, the Department of Business Assistance and business leaders and entrepreneurs all across the state for your hard work. The jobs created aren't Republican or Democratic jobs; they are the jobs our people need. Together, we are helping forge the climate of innovation and entrepreneurship in which the private sector can create more jobs and opportunity. Our work on the economy has occurred in tandem with our efforts to promote greater fiscal responsibility. The private sector is strengthened when the public sector is restrained. Over the past year we: turned a $1.8 billion shortfall in the Fiscal Year 2010 budget into a $403 million surplus, without raising taxes, closed an historic $4.2 billion shortfall in this current budget by setting priorities, making tough choices and reducing spending to 2006 levels, defeated an attempt to levy the largest tax increase in Virginia history on our citizens during one of the most difficult economies in generations.

Our conservative budget management, innovation, and smart investments have positioned the Commonwealth in the forefront of the states. We have shouted from the rooftops that we believe rightly in democratic capitalism, that Virginia is thrilled to be open for business, and that securing the liberty and prosperity of the people is our paramount objective. This is not to say that all our economic troubles have passed. That is not the case.

Our Administration is committed to clearly and honestly identifying our problems and putting forth solutions. This is how we will cultivate the "Commonwealth of Opportunity" that all our citizens deserve to call home. These are the challenges we face: over 280,000 Virginians are unemployed. That is unacceptable. College tuition has doubled for Virginia students over the past decade. That is unconscionable. Almost a quarter of Virginia's major urban roads are congested, workers in Northern Virginia and Hampton Roads now have some of the longest commutes in the nation, parents are too often stuck in traffic when they should be spending precious time with their children. That is unreasonable. Our state government stands in need of further significant reform and a renewed focus on its core functions. That is undeniable. Our state retirement system has an unfunded liability of approximately $17.6 billion and Medicaid spending has grown 1600% over the past 27 years. That is unsustainable.

I want history to record that it was you, the 2011 session of the General Assembly, who had the vision to take the big problems head on and fix them. No excuses, no delays, no spin. We can do it together. It starts with a smart government focused on its core functions. A smart government is respectful of the taxpayers hard earned dollars; mindful of the fact that its authority comes from the people, not the other way around; cognizant of the truth that the free market is the greatest generator of wealth and opportunity in all of recorded history, and humble enough to admit that Ronald Reagan was right: sometimes, government is the problem!

Good government demands setting priorities. That is why I have called for another $191 million in cuts and reprioritizations in my amendments to this budget. Along with the $403 million budget surplus and $337 million in conservatively projected new revenues and transfers, we can focus our investments on the priorities of our citizens. Let me clearly state my four top priorities for the people this session. I am asking you to: create new job-creating tools and resources to help start, grow, and recruit new businesses, implement major reforms and more accountability in higher education to make college more affordable and accessible for our students, put $4 billion into transportation over the next three years to get traffic moving and new jobs created, without a tax increase, reform state government by prioritizing state spending, eliminating or consolidating targeted agencies, boards and commissions, and reforming our state pension system to ensure its long term viability for our employees and their families.

Last year, even while cutting $4.2 billion from the FY 11-12 state budget, and reducing spending to 2006 levels, we still were able to prioritize and budget $63.3 million to spur private sector job creation. Thank you for your investment. We're getting results. In just the first six months of this fiscal year, 122 economic development projects have been announced in the Commonwealth. Tonight we are joined by some of the newest job creators who chose Virginia last year. Ms. Anna Van Buren ,President & CEO of Faneuil, Inc which is a Hampton based business that just created 250 new jobs in Martinsville. Mr. Jaime Lederman, CEO, Mr. Alberto Peisach, President, and Ms. Gabriel Guevara, Chief Operating Officer of the Phoenix Packaging Group which chose Pulaski for its North American Headquarters and packaging center, creating 240 new jobs. Phoenix chose Virginia over Georgia, Kentucky, North Carolina, Tennessee and West Virginia. Ms. Beth DeHaven, State & Local Government Regional Account Manager for Microsoft, which just made the biggest investment in Southern Virginia history by opening the Mecklenburg Data Center, a $500 million investment that will create 50 jobs directly. Anna, Jaime, Alberto, Gabriel and Beth: we welcome you to Virginia. Thank you for your confidence in our people, and have just one more request- bring your friends!

In mid-December we announced our "Opportunity at Work" budget and legislative proposals calling for $54 million in new state funding to help us better compete with Maryland and North Carolina; India and China. Among the proposals are $25 million for a Virginia Research and Technology Innovation Program; $5 million in funding for Virginia Small Business Financing Authority, to help small businesses gain access to capital; additional funding for Virginia's growing tourism, wine and film industries, investments in successful workforce development programs, and improvements to industrial sites and enterprise zones. I thank Senators Chuck Colgan, Steve Newman, Mark Herring, Tommy Norment and Walter Stosch, and Delegates Ben Cline, Kathy Byron, Matthew James and Scott Lingamfelter for carrying this legislation. Government can't create jobs, but it can create the conditions and incentives that unleash the genius of the entrepreneur. Your approval of this money and legislation will keep us on the winning path.

When I ran for Governor, I pledged to create a pathway towards the issuance of 100,000 more degrees in the Commonwealth over the next 15 years, with a focus on science, technology, engineering, math and healthcare, which lead to the good jobs of the future. While Virginia is home to a top-ranked system of colleges and universities, the stark news we are learning is that our state and nation are falling behind other countries in these STEM disciplines which is harmful to our long term economic and military security. These new degrees will make Virginia one of the most highly-educated states in the world. A college education gives more people greater access to the American Dream. If you want to attract good jobs, you must have a well-educated workforce.

One of the most troubling Virginia statistics from the last decade is that college tuition has doubled. That cannot continue. I will not tolerate a system that prices our young people out of their futures. To fix the problem we must reverse the decade long trend of disinvestment, while requiring more accountability and innovation at our institutions. Our "Top Jobs for the 21st Century" Virginia Higher Education Opportunity Act" is highlighted by a new $50 million investment in higher education, much less than needed to fund our base adequacy model, but a start in getting there. I want to thank Senators Tommy Norment and Edd Houck, and Delegates Kirk Cox and Rosalyn Dance for leading this effort. The new dollars will be targeted to undergraduate financial aid and funding incentives for efficiency and economic development, technology, increased four-year graduation rates, year round use of facilities and degree attainment. These actions will make college more affordable and accessible and create a better educated workforce and more jobs.

Job creation will not be sustainable without a transportation system that is reliable. Transportation helps drive economic growth, and for too long Virginia has been stuck in neutral. Our failure to address our growing transportation needs is a bipartisan one. Our population has grown to over 8 million. VDOT manages the nation's third largest road network with 57,867 miles of roads, and nearly 2 million Virginia jobs in leading industries are fully dependent on the state's transportation network. Over the past 12 months we have taken a number of important steps. We launched multiple audits of our transportation agencies and found $1.4 billion for roads not being used. Friends, that was unacceptable, and it has been fixed. We authorized the sale of $492 million in Capital Project Revenue Bonds last summer, the first bonds to be sold from the 2007 transportation act, after three years of delay. By the end of December, VDOT advertised more than 350 projects totaling $1.1 billion in construction and maintenance contracts by year's end; almost double the previous year. We acquired use of the most technologically advanced maritime terminal in North America, making the Port of Hampton Roads more competitive. Working with Governor O'Malley in Maryland and Mayor Gray in the District of Columbia we are helping to reform the Metro system. We raised the speed limit to 70 mph on various interstate stretches. And yes, Virginia, the rest stops are open again!

Last month in Roanoke, I unveiled part of our plan to pump $4 billion into roads, bridges and rail over just the next three years. This would be an immediate infusion of funds the likes of which our Commonwealth hasn't seen in decades. Over the next three years we will accelerate the sale of the transportation bonds that were approved by you with overwhelming bipartisan majorities in both houses in 2007 to generate $1.8 billion by simply issuing $600 million a year instead of the current $300 million cap. Our national economic forecaster, Global Insight, projects that interest rates on Triple A rated governments bonds will increase 2.5% over the next 5 years. Accelerating the sale of these bonds can save taxpayers $7.5 million per year. We will also utilize federal GARVEE bonds, totaling $1.1 billion. And we will create a $1 billion Virginia Transportation Infrastructure Bank that will be initially capitalized with $150 million in surplus revenues, and $250 million from our VDOT audit. Let me be emphatic about the fiscal prudence of accelerating these bonds now. Interest rates are at near all-time lows, and bids on construction are coming in at the lowest in the modern era. Building now will produce another benefit for our Commonwealth: road building means job creation. It is estimated that every $100 million spent on construction generates 3,000 new jobs.

None of our transportation proposals will increase Virginia's total authorized tax supported debt. Our plan still keeps Virginia's self imposed debt ceiling at a 5% average over time. And VDOT already has the money necessary for debt service from the insurance premium tax revenue you approved in 2007. I was in New York City just last week, along with Senator Houck, Senator Colgan, Delegate Putney and Delegate Cox. The bond rating firms on Wall Street that give us our treasured Triple A rating have no concerns about our bond plans whatsoever, and they were pleased to learn that we are addressing transportation, as well as other pressing issues. I'm asking all of you to support a plan that pumps billions into roads, creates tens of thousands of new jobs, adds no new debt, starts work now, and doesn't raise taxes. This plan will fund major public private partnership projects such as a new Midtown Tunnel tube in Norfolk; the extension of HOV/HOT Lanes on I95/395 and the widening of I-66 in Northern Virginia; work on a critical section of the Coalfields Expressway in Southwest Virginia; and widening and improving of multiple sections of Route 58, an important link for southern and western Virginia. All told this plan, we believe, can fund 900 road, rail and transit projects across the Commonwealth. Every major business and transportation group in the state has endorsed our plan. I'm asking you to do so as well. And I thank Speaker Bill Howell and Senator William Wampler for sponsoring this critical legislation. It is time we reformed VDOT and built new roads, transit, rail and bridges in Virginia. This plan will. And I ask for your support.

We will also continue our efforts to fundamentally reform and restructure Virginia's state government. Over the past three years we have cut billions from our state budget. Our budget had nearly doubled in a decade; growing 28% faster than the growth in population and inflation. When we make government smaller and smarter, we make our economy stronger. Just like families and businesses regularly do, we must look at what doesn't work well and what wastes money, and fix it. This year I'm presenting you with tough and important choices.

I like PBS, it airs great programs, including, if I do say so myself, tonight's speech. But with hundreds of options in the free market, radio and television programming is not a core function of government requiring $4 million. Our ABC stores are very clean and efficient. But selling bourbon and gin is not a core function of government. I am proposing a plan to privatize the retail sales of distilled spirits, like we've done for beer, and then wine, for 76 years, and like 32 other states already do. It will generate $300 million for transportation up front, with no annual loss of general fund revenue.

Our boards and commissions do great work and are filled by talented individuals. But we have 359 of them and they consume vast support resources and time. This Commonwealth is fully capable of surviving without the Plant Pollination Advisory Board. Call me an optimist if you will, but I believe that plants are fully capable of pollinating themselves without advice from Richmond. And I will ask you to consolidate or eliminate dozens more boards this session, saving taxpayer dollars in the process. We will make the millions in savings from our hiring freeze permanent. We will end memberships in some of the countless organizations to which the Commonwealth belongs and pays millions in annual dues. Too many forget that the money that funds these programs, agencies and services doesn't come from some printing press underneath this building. We must run our budget like families and business owners run theirs: with thrift, prioritization, and efficiency. I thank Senators John Watkins, Walter Stosch and Mark Obenshain, and Delegates Steve Landes, Chris Peace, Bob Brink, Barbara Comstock and Scott Garrett for introducing these bills and leading this reform effort this session.

Our duty to our state workforce compels us to act now to ensure the long term solvency of the retirement accounts that hundreds of thousands of Virginians are counting on for their later years. The numbers are stark. According to the recent JLARC report, the Virginia Retirement System currently faces an unfunded liability of $17.6 billion. The system is funded at only 75 percent of its future liabilities, and that is projected by VRS to decline to 61percent by 2014, and only 57 percent for the teacher retirement system. We expect large rate increases from VRS soon. It would take a mythical 44 percent return on investment just to keep the status quo. No bull market can make up this shortfall. That is why I am proposing that all state employees begin paying for their share of their retirement plans. Currently Virginia is one of only four states in which the employer picks up the entire cost.

We are out of step with virtually all public and private sector retirement plans and the only solution to the situation we face is shared contribution, and shared sacrifice, from the state and our employees. I propose that the 5 percent retirement contribution that we will ask all employees to pay be offset by a 3 percent raise for our state employees, the first in years. Thus, with a net 2 percent contribution from Virginia employees, and an additional 2 percent from the state that I included in the amended budget, we will provide $311 million a year, or $4.2 billion over 10 years, in new funding for the system. These reforms have the endorsement of the Board of the Virginia Retirement System. I have also proposed a 2% performance bonus for employees based on actual savings and performance. Senators John Watkins and Walter Stosch, and Delegate Lacey Putney, will carry these bills.

The stakes are too high to not act now. Delay will only lead to greater shortfalls to be addressed in the future through more extreme measures. I won't pass this crisis to another Governor; and you should not pass this problem to future delegates and senators. This is our opportunity to make the tough choices and fix a problem that will only get worse if we fail to act. Working together we have accomplished many positive achievements for our people. We have taken important steps forward in the effort to ensure the opportunity of a clean and healthy environment for Virginians both today and tomorrow.

Just two weeks ago we were advised that Virginia's Watershed Implementation Plan for the clean-up of the Chesapeake Bay was approved by the EPA. Our plan demonstrates that environmental preservation and economic growth can go together. The recent budget surplus that we achieved allowed us to provide $36.4 million dollars to the Water Quality Improvement Fund to begin implementing this plan. I am also pleased to report that in this past year, in the middle of this tough economy, we still conserved an additional 51,000 acres of open space. Our challenging goal is to conserve 400,000 acres during this Administration, and towards that end my budget amendments propose $2 million to purchase or support the donation of conservation easements.

I started my service to the Commonwealth as a prosecutor in Virginia Beach. Public safety is the silent partner in job creation. Jobs won't be created and businesses won't be started if our citizens don't first feel safe and secure. Tonight I thank all our law enforcement professionals who bravely serve on the front lines to protect all of us. And I thank our State and Capitol Police who serve with us every day, ensuring we can do the work of freedom, free from fear. I believe in, and we have, tough statutes and sentences for those who break our laws and endanger our citizens and communities. As a result, our crime rates are down. However, our recidivism rate is still too high. Reduction in recidivism means fewer victims, and less prison costs. America is a nation of second chances and those leaving prison should have the opportunity to change. We are implementing sweeping new prisoner re-entry programs throughout our correctional system through the leadership of our first statewide prisoner re-entry coordinator and our new Director of the Department of Corrections. And I am pleased to say that since taking office we have implemented the fastest and fairest system for the restoration of civil rights in modern Virginia history.

The United States military, and our veterans, have no greater friend than the Commonwealth of Virginia. This relationship transcends politics and party. In 2011 we will see tens of thousands of new Department of Defense personnel coming to Fort Belvoir and Fort Lee as part of the most recent BRAC decisions, and historic Fort Monroe will close and the land will revert to the Commonwealth. In the past few months we have witnessed bipartisan cooperation in our efforts to protect defense infrastructure in Virginia, to keep parts of the Joint Forces Command in Hampton Roads, and to defeat arbitrary cuts in defense contracting that would hurt Northern Virginia. It is a matter of national security and Virginia jobs. Tonight I thank all our Congressional delegation, for their continued partnership and leadership to secure a strong national defense presence in Virginia.

As the Joint Forces decision demonstrates, sometimes the policies advanced in Washington D.C. are not always positive for the Commonwealth. Over the past year we've witnessed a disappointing White House decision to indefinitely block offshore energy exploration and development off the coast of Virginia that would create thousands of high paying jobs for our citizens, despite your approval last session to pursue this enterprise and dedicate the proceeds to transportation. Congressional passage of many unfunded mandates have impacted our budget. The federal health care mandate alone will cost Virginia about $2 billion by year 2022. While we all agree that all Virginians deserve the opportunity to access good medical care at affordable prices, providing that opportunity must be done in a manner that is both economical and constitutional.

I want to thank our Attorney General, Ken Cuccinelli, who, under the authority you granted to him with your bipartisan vote in support of the Virginia Healthcare Freedom Act, won a major first round victory in federal court. I join him in strongly supporting expediting the appeal to the United States Supreme Court to avoid additional years of costly litigation, and to create certainty and finality for businesses, health care providers and citizens. No state can wait for court resolution to take the appropriate steps to improve healthcare for all our citizens. Through the Virginia Health Reform Initiative of Secretary Bill Hazel, we have made 28 recommendations to improve healthcare. We will lead in innovation in delivery of healthcare services and improve training for our healthcare workforce. Virginia is a leader in tele-health already, and we are working to expand the use of technology and electronic medical records to improve quality and safety and reduce costs. Common sense insurance reforms can provide improved access to affordable insurance. We will help Virginia's businesses become smarter purchasers of insurance for their employees.

Medicaid has grown at a staggering 1600 percent over the last 27 years. That is not a rate of growth that we can sustain or afford. We need managed care and other new incentives to control costs, which I have proposed for our entire Medicaid population. We must also make a better effort to provide every citizen the opportunity to live a full life, regardless of their physical or mental disabilities. Our policy, which I sponsored as a member of this body a decade ago, to move more people from institutions to community based care is a good one, but we are still not moving fast enough toward our goal. I have proposed a 30 million dollar package of reforms that will strengthen our system of care for persons with disabilities. Virginia must move from serving so many persons in institutions, to one that is at the forefront of providing needed services in less restrictive and less expensive community based settings. We will also support the bedrock institutions in our society, by investing in proven programs to reduce the chronically high abortion rates in certain areas, and programs which strengthen the family.

Our efforts to make Virginia the "Energy Capital of the East Coast" continue to bear fruit. We must utilize a comprehensive approach to get more oil, gas, coal, nuclear, solar, wind, biomass, waste to energy and every form of economically viable energy online and into our homes, cars and businesses. Abundant low cost energy is fundamental to America's job growth potential and national security. Our first ever Governor's Conference on Energy here in Richmond drew more than 1000 participants from more than 100 companies. And we are preparing to submit a lease application to secure locations in federal waters for wind energy research and testing and environmental data gathering that will move off shore development of our wind resources forward more quickly. Virginia can be an alternative energy entrepreneurial leader, and we will soon be home to the headquarters of the Atlantic Offshore Wind Energy Consortium. We will also continue to defend Virginia energy jobs by ensuring that job-killing schemes like cap and trade which threaten our coal industry are defeated every time they come up.

Ensuring that good paying and rewarding jobs are available for our citizens in every community in this Commonwealth is the foremost priority of our Administration — in other words — Bob's Still for Jobs. Let's work together over the next 45 days to provide the opportunity and dignity of a good job to more of our fellow Virginians. We will do it by investing in economic development and attracting new businesses to the Commonwealth. We will do it by making college more affordable, accessible and accountable. We will do it by getting new roads, bridges, rail, and mass transit built without delay. We will do it by reforming state government to make it leaner and more efficient, and ensuring that long term spending programs are made sustainable and solvent. I know this is an election year. But we weren't elected just to keep running. The citizens of Virginia elected us to lead. To find solutions.

Ralph Waldo Emerson wrote, "America is another name for opportunity. Our whole history appears like a last effort of divine providence on behalf of the human race." This session, let's lend all our efforts to making this a true "Commonwealth of Opportunity" for all Virginians. Thank you all and may God continue to bless the cradle of democracy, the Commonwealth of Virginia.