'LET US PLEDGE ... TO RESTORE HOPE'

Excerpts from Gov. Fletcher's State of the Commonwealth address last night

I have been in office for just 36 days and during this honeymoon period, I
have enjoyed the amount of press I've been getting. But it does remind me
of what newly elected Governor Ronald Reagan said regarding his early
press: "If this has been a honeymoon, then I've been sleeping alone."

But then I suppose that's good, as I'm reminded of what Senator Bob Dole
once said: "Anything that keeps a politician humble is good for democracy." ...

The state of the commonwealth is as challenging as it has ever been in the
modern age.

We are prepared for the challenge, but let's not mince words: This is a
government with problems at its very core, and those problems have festered
for decades.

From the organization of the budget ... to the structure of the tax code
.. to the culture of state government itself ... we will find a better way.

We didn't get into this spot overnight, and it's going to take time to get
us out.

My plan is focused on improving economic opportunity throughout the
commonwealth. That will be accomplished first by reorganization. And
second, by the overhauling of our budget priorities and policy.

First, reorganization.

We have begun the largest reorganization of Kentucky government in decades,
and perhaps in the history of the state.

The analysis began months before the election, anticipating that if we won,
we would be on a fast pace to get things done in the first weeks in office.

We have reduced the number of cabinets from 14 to 8, eliminating duplicate
services, and imposing quantitative measurements of growth and quality of
service.

We have brought in the best people our state has to offer to run these
cabinets. Each is outstanding in their fields, and each has walked away
from their regular jobs to contribute their talents to Kentucky.

This is only the beginning. As we continue to reorganize, we have to look
at things at the nuts-and-bolts level.

Do we really need Economic Development offices within 10 miles of one another?

Can't more than one of our 50 state parks be financially self-sufficient?

How does issuing a purchase order cost more than the thing we're buying?

As we drill down, this list is only going to get longer.

On Jan. 6 we abolished the racing commission, and then reformed it new as
the Kentucky Horse Racing Authority. That's for starters.

I am bringing into the governor's office an expert, known nationally for
his ability to increase efficiency and productivity.

Tonight, I ask you for ratification of our first steps toward the most
comprehensive reorganization in decades.

The call for change was precipitated by the budget crisis. We have
inherited a budget crisis not only between revenue and spending, but also
in structure.

We have found a way to meet this year's shortfall of just over $300
million, and we're already planning and saving for the shortfall dictated
by that structure into next year's budget.

These choices did not come without criticism. But they were necessary to
ensure Kentucky's future.

Structural reorganization is one pillar of change. Overhauling our budget
priorities and policy is the other.

Over the years, state government has moved in many directions without the
knowledge, skills or funding to finish the job.

Government cannot do everything, so we need to first decide what government
ought to be doing ... then figure out what it's capable of doing ... and
then follow the jobs we choose to completion.

We have to decide what to fund, put off, or do without. I believe we should
select priorities that move us toward a goal we all agree on: creating new
economic opportunity.

That means giving our new graduates a reason to stay here ... Attracting
new industries, and keeping the ones we already have ... Balancing growth
and industry with the protection of our natural resources ...Making
Kentucky a place where children get an education for the 21st century
workplace ... Ensuring accessible and affordable health care ... And
fighting the scourge of illegal drugs.

This effort will begin by balancing our budget without raising taxes.

The budget we will present to you later this month will not be painless.
But let me assure you, today's bitter pill will reduce tomorrow's pain.

Consider the problems we have to prioritize.

Economically, we have not kept up with the expansion of our neighboring
states. Earnings per job in Kentucky are $3,000 below the national average.

Kentucky's economy will always include agriculture, mining and
manufacturing, but high-tech is where the next generation of jobs lies,
including advanced agriculture, manufacturing, clean coal technology,
biotech and other knowledge-based industries.

That's why I've embraced the forward-looking work of the Office of the New
Economy and connectkentucky to expand Internet access, because if we want
to compete in the new economy, we have to be a wired state.

I want Kentuckians to get their fair share of new high-tech jobs. We have
nowhere to go but up, because Kentucky is 29th in high-tech employment,
41st in the average high-tech wage, 43rd in R&D, and 46th in venture
capital investments.

We'll attract those jobs to Kentucky by making this a business-friendly
state. That's why I will work with you members of the legislature to make
life easier for women and men who have small businesses, and to pass my
Kentucky Jobs and Wages initiative.

And for those serving in our National Guard, thank you for your sacrifice,
and let me assure you: we are recruiting, and help is on the way.

In education, the improvement over the last few years has given us a firm
foundation to build on. And I want to commend you, as well as our teachers
across the commonwealth who have made that possible.

The major educational challenge of today is illiteracy. Sixty percent of
the prison population, and 90 percent of those on Death Row, can't read.

We're going to move forward on the "Read To Achieve" initiative to ensure
that every child in the state can read at grade level by the end of the
third grade.

The challenge is acute in minority communities, particularly in
African-American communities, where twice the percentage of fourth-graders
read at only the novice level, compared to non-minorities.

Let me stop at this point and introduce our first lady, Glenna. Our first
lady will be promoting "Read to Achieve," and she is passionate about it.
She will be driving home the point that reading is the foundation of every
bit of learning and success in life.

Glenna, thank you for joining Senator Kelly and Speaker Richards to take on
this job.

In higher education, we have asked our universities, along with the rest of
state government, to make some sacrifices in the short term. But, be
assured I understand and strongly support the essential role of higher
education.

We have one of the nation's leading transplant centers, and our colleges
and universities are making research advances in biotechnology,
nanotechnology and other disciplines. This is the kind of work that helps
bring more high-tech jobs to the state and introduces our young people to
opportunities they might like to pursue.

And, as I have pledged, we are going to bring a federal research lab to
Kentucky.

Healthcare is a part of opportunity, too. Because if you want to work here,
you have to want to live here. And living anywhere demands access to
top-flight health care.

But we have problems.

The cost of health care is growing out of control. Medicaid is failing to
meet its obligations, especially to seniors in long-term care. We are
sorely lacking in public education on healthy habits of living. Compared to
the rest of the country, we get less physical exercise, and have more
diabetes, cancer, and heart disease.

We need health insurance reform for the individual market and for state
employees. We need to promote preventive medicine.

These issues are especially important to me, which is why we will modernize
Medicaid to make it easier to access, and to empower people to take control
of their own health care.

That's why we're going to educate Medicaid recipients about preventive care.

And that's why we're cultivating new competition in the insurance market,
to bring new providers back to the state so we can have lower rates for
Kentuckians.

We have begun work on a medical liability program to stop the flood of
doctors heading out of the state. President Williams has made this issue a
priority, and I am pleased that today, Senate Bill 1 was passed by the
Senate's State and Local Government Committee. I know the House shares our
desire to improve Kentucky's health, and I ask for your leadership to help
us move this forward.

And there's a drug problem in this state that's destroying our communities
and our young people, whether it's methamphetamine made in somebody's
garage or inappropriate prescriptions for OxyContin.

Our lieutenant governor, Steve Pence, also serves as Cabinet Secretary of
Justice -- we're getting two jobs for the price of one out of him. Just
last week, he met with Attorney General Stumbo so they can find ways to
fight this problem.

Lt. Gov. Pence will convene a working summit of leaders as the first step
toward a comprehensive plan for education, prevention, treatment and
rehabilitation.

We must move beyond just being tough on crime to being effective on crime,
not only for the sake of those caught in the jaws of addiction but also for
the taxpayer who foots the bill.

Our economy has changed over the years, but you wouldn't know that to look
at the tax code. The basis for funding government has to reflect the nature
of the state's economy.

That's why we need a tax modernization plan that does not increase the tax
burden on Kentuckians.

Half-measures won't get it. If we change one tax this year, and change
another a couple of years down the road, we're missing the point.

This is comprehensive change in the way we do business to reflect the new
economy, and to attract the human capital we need.

It will ease our budget problems in the future by growing our economy, not
growing the tax burden. And it will ensure fairness for our low-income
citizens, who today bear one of the heavier tax burdens in any state.

I know that elections are this year, and the easy answer is to put it off.
But, I ask you to join me to accomplish this long-overdue goal.

Constitutionally, this work must begin in the House. I offer to work in a
bipartisan, bicameral way and, at the earliest opportunity, to tackle this
challenge. The longer we wait, the longer we withhold expanded opportunity
for those at whose pleasure we serve.

In closing, let me thank both sides of the aisle for how you've received
me. This means a great deal to me, and it will mean a great deal to the
people of the commonwealth as we work through these challenges together.

The people we represent expect fiscal and personal integrity from us, and
that's what we'll deliver.

We're going to work together, and we're scheduling one-on-one meetings
between each legislator and me. I want to know what you're thinking, and
what your constituents are thinking.

There isn't going to be money for every project. There is going to be some
doing without so we can pay, for what we agree together, is most vital.

The state of the commonwealth is challenging, but we are more than prepared
for that challenge.

Let us pledge together for all Kentuckians to restore hope and opportunity.

Thank you, and God bless Kentucky.