Thank you Senate President pro Tem Steinberg, Speaker Bass, Senator Hollingsworth, Assemblyman Blakeslee, Attorney General Brown, Treasurer Lockyer,...

Now, I want to begin with a true story from which we can draw a worthwhile lesson. As you might guess, the Schwarzenegger household is something of...

Now, I have no idea how they ever figured all of this out, to tell you the truth. I mean, it's like humans figuring out how to create fire. But it is...

Now, these decisions were very hard for both sides of the aisle. On the Republican side, we had leaders who sacrificed their careers or put them at...

And there are two accomplishments in particular I want to recognize here today. Just last night the Assembly passed major educational reform, reform...

Also in the past, parents had no power to bring about change in their children's schools but that will now change too. Parents will now have the means...

Now, another major accomplishment: For decades this state was in a literal war over water, with old and deep divisions, Northern California versus Southern...

And now we must work very hard so that we pass the $11 billion in water bonds that will be on the ballot this November. And Democrats and Republicans...

It is the law that you cannot build a school or that you cannot build a factory or that you cannot build an office building or a housing development...

Now let's talk about the coming year. If I had to summarize in one word our focus for the coming year, it would be the word "priorities." We have to...

The people and businesses of California are an engine of self-betterment and progress. As long as government keeps the engine oiled with prudent policies...

First, you will receive a $500 million jobs package that we estimate could train up to 140,000 workers and help create 100,000 jobs.

And third, to stimulate other construction jobs, you will receive a proposal for homebuyer tax credits of up to $10,000 for the purchase of new or existing...

Now, while we still have a long way to go, the worst is over for California's economy. And the real good thing is that we have the right economic mix...

The basic problem is that our tax system does not reflect our economy. In 2009, California's economic growth declined only by 2.8 percent but our tax...

Now, here is what we need to accept. Our economy is 21st century and our tax system is 20th century. It is stuck in the wrong century.

The Commission proposed major, radical reforms. Now, some people right away said they are too bold and thus they would be too hard to enact. Now, what...

We must begin work on these tax reforms because we simply cannot wait for the rich to bounce back. State revenues are not expected to return to where...

And budget reform is just as important. This is something that I have been talking about since I have become governor of this great state. The budget...

I especially support its proposal for the performance-based budgeting and applying one-time spikes in revenues to one-time uses, such as debt reduction,...

And as we struggle to overcome our differences, what I ask you to remember is that the current tax and budget system is cruel. I'll tell you why I say...

Now, I will address our immediate budget situation more fully in a few days, when I present my budget but let me just give you an overview.

Big picture, let me tell you what will be required here.

But I am drawing this line. Because our future economic well-being is so dependent upon education, I will protect education funding in this budget....

30 years ago 10 percent of the general fund went to higher education and three percent went to prisons. Today, almost 11 percent goes to prisons and...

So I will submit to you a constitutional amendment so that never again do we spend a greater percentage of our money on prisons than on higher education....

I mean, if California's prisons were privately run, it would save us billions of dollars a year. That's billions of dollars that could go back into...

Now, another major item is this: Federal funds have to be part of our budget solution because the federal government is part of our budget problem....

We no longer can ignore what is owed to us or what we are forced to spend on federal mandates. We are currently owed billions of dollars by the federal...

California's congressional delegation should either vote against this bill that is a disaster for California or get in there and fight for the same...

And this is money that is taken away from important government services. This is money that cannot go to our universities and our parks and other government...

But we are about to get run over by a locomotive and we can see the lights coming at us. We can see the lights coming. I ask the legislature to join...

Now, every year, in spite of whatever challenges are before us, I stand up here and tell you how much I believe in California's future. I tell you how...

"(California) is still a dream state. In fact, the pioneering megastate…it's still the cutting edge of the American future -- economically, environmentally,...

It's also an unparalleled engine of innovation, the Mecca of high tech, biotech and now clean tech.

So now do you believe me? You see what I'm saying. This is the greatest place in the world. California has the means and the mind power to solve all...

And they told me all kinds of stories. They have seen experiences that you cannot even believe. Many have served tour after tour after tour and as a...

Their sacrifice is extraordinary and it never fails to inspire me. And if you look up to the Gallery, you will see some Californians wearing the uniform...

So, ladies and gentlemen, in closing, we in this chamber must fulfill our sacred trust to keep California the great place to come home to for our men...