keep the program on the books which makes it tougher for congress. >> i agree with mr. arnold's statement.

er raf congressional history. i'm confident we can move these issues forward in a bipartisan way. chairman issa and congressman connelly reform act. it passes committee on a bipartisan basis. we need the committee to put forward a bipartisan low-hanging fruit year. more than just one a year. and take the information that we have readily availability to us. we are agreeing on of it. we aren't doing anything really about it. so this committee still finds those and you do too the $900 hammers. i look forward to many more hearings like this and finding real area of cooperation. we can make a difference. thank you very much for being here. >> i thank the gentlelady. i thank the members. i mean, i know chairman issa appreciates everyone's cooperation. i have to thank our witnesses

for the extensive testimony and participation today. it's a great way to start off the new year. there being no further business before the government reform and oversight committee, this meeting is adjourned. thank you. [inaudible conversations]

[inaudible conversations] in about an hour from now show expected to discuss jobs, infrastructure, and education initiative. you can see it live at 7:00 p.m. eastern on c-span two. press secretary jay carr knee briefed reporters earlier today. he discussed the upcoming winter olympics and the concern over a possible terrorist attack. the president spoke with president putin of russia what

more would the white house like to see russia doing on security there. what more would the united states like to do or be involved in to address the how abouting -- mounting concerns? let me say that starting with the call yesterday. that the united states has offered the full support and any assistance to the russian government in its security preparations for the soji games. russian authorities will be responsible for overall security at the limericks. and the state department bureau of diplomatic security has a security leads for the united states. we will send them to lee -- that is the standard operating procedure for large events like this. thousand of u.s. citizens, athletes from team u.s.a., american corporate sponsors and members of the u.s. media are present for an extented period of time.

the united states and russia have had discussions on counterterrorism cooperation in a number of venues including in working group of the bilateral presidential commission. the united states has been working with the russian government through the international security events group on soji preparations specifically as with any host country. u.s. citizens planning to attend the games in soji should be in contact with the state department. potential threat to safety and security can be found on the embassy's website and the department of state travel website. i'm note we have seen an uptick in threat reporting prior to the olympics. which is, of course, of concern we have offered assistance to the russians. any assistance they might need to counter that threat.

i refer you to the department of defense for details assistance that have been offered i would also say we're having ongoing conversations with the russians about this and have offered any assistance we can provide. they obviously have the need for security and the olympics. i think that this is an international event. there will be a large u.s. citizens presence there for an extended period of time. we take the necessary precautions. as you would expect i think the pentagon said on monday this week the united states offered the russian government and it includes the two u.s. shifts consent to be black sea. it's part of the prudent planning and preparations are required for an event like this. that was part of today's white house briefing. you can see the entire briefing any timed at c-span doirpg.

it's underway right now on c-span. the d.c. circuit court of appeals heard an oral argument last week on debit card sweep fees charged to retailers under the dodd-frank law they can place a cap on swipe fees. the fees were set at 44 cents by card networks before the law, and reduced to 21 cents by the federal reserve in 2011. this is an hour. >> thank you, your honor. this case involves the straight forward issue and the fees allowable for interchange are unequivocally foreclosed by section 920 of the electronic fund transfer act. if not whether the board's policy decisions reflect a permissible interpretation of

the statute. let me first talk about network exclusivity and routing. debit cards operate over two main meths signature in which you sign the slip or pen based on the atm. signature is based on credit card infrastructure. because of the historical root it's easier for cards to be enabled with different pin numbers but not -- >> we -- [inaudible] we understand the networks work. why don't you focus on -- >> so before our rule was effective, the network had exclusivity clauses in the agreement that prevented merchants or issuers from having multiple options available on their cards in some cases. to put an end to those exclusivity arrangements section 920 be 1a requires the -- payment card network cannot by contract requirement condition penalty or otherwise restrict

the number of payment card networks in which a transaction may be processed to less than two unaffiliated network. the board regulation does that. it does it in the very words of the statute. [inaudible] this is supposed to focus on ensuring two unaffiliated network for each transaction. we understand how it works. >> thank you. i want you to give quickly to the exchange statement. >> okay. the language of the statute does not require two unaffiliated network for every transaction. it's focusing on affirmative restrictions imposed by the issuer or the payment card network. it's the language, as i said, is -- we have to have regulations providing that the issuer or network shall not restrict.

now what the merchants say is the important word is transaction in that paragraph in that section. but the important word is restricted. it's looking at the restrictions imposed by networks and issuers on the number of networks available for a france action. the network and are not the one that restrict the number. now there's a minimum of two networks available on every card the networks and issuers are not ones who are restricting the number of networks available to fewer than two. so in our view, the disowrt just misread the strag story provision which is aimed at restrictions by issuers and merchants. >> maybe you can start on explaining the fixed cost issue for us. and how be --

[inaudible] >> i certainly can. i would like to put aside for the moment whether they can be incremental cost. the main point on the fee provision is that we are not limited in the statute to incremental cost. thing is, again, the misunderstanding or the misreading of the district court. the board's instruction from congress is to establish a standard that where the fees can be -- will be emergency room and proforcal to the cost enforced by the with respect to the transaction. that's the main goal here. reasonable and proportional to the cost. congress then provided some additional strubs to us about things to think about. but did not say as the merchants have you believe those are the only things that the board can take in to consideration. we have to consider this.

>> hay do not equal 100%. >> they may -- between must and may not, there's a big empty space. that's may. that's what the board looked at to see what costs are -- >> find the question how can fixed costs be related to a specific transaction? >> what the board looked at and considered was costs that had to be incurred in order for an electronic debit transaction to occur. and so for example if you have a server over which the transactions are implemented, if you don't have the server you don't have the transaction. it's going a cost that it's a cost incurred by the issuer with respect to the transaction. >> i'm sorry.

[inaudible] time incremental costs. >> i think -- [inaudible] dpactly. one of the difficulty with the words like incremental. it's -- there's not a standard definition of it. and -- [inaudible] a subset of incremental. that's one way to think about it. the -- were there people who provided comments who were thinking as i think in some ways the her chabts are thinking. each individual transaction. the incremental cost of the one transaction is what congress has in minds. what we determined is we didn't actually have to enter that and define incremental costs because what we did was look at all the costs that are incurred other than the ones that we're prohibited from looking at under

-- >> it's has to be fixed with respect to authorization clearances. >> no. it does not -- >> i'm asking. i know. i would say no we are not saying it has to be fixed with respect to -- what we're seeing is that unless it is prohinted -- not specific to a particular electronic debit transaction. unless prohibited by that. there are costs we must consider network fees are not fixed. >> i understand your answer -- with respect to -- >> i'm sorry. >> with respect to authorization clearances. one of the fixed costs are you talking about? >> the type of fixes costs we're talking about labor costs. we're talking about the costs of

computer software and hardware. those are the type of fixed costs that we're included in the standard. >> and the authorization clearance . >> yes. i'm sorry, your honor. i'm sorry. you're right. those are within the -- those are authorization settlement. as i was making a point that we are not required under the statute. >> i'm trying to understand the -- your answer to my question on what kind of costs are we talking about, you're -- you don't mean to suggest all fixed costs. that's not your argument. >> correct. >> i thought it was mostly about fixed costs related to authorization and -- >> that's correct, your honor. >> let me ask your definition. >> i'm sorry. -- [inaudible] in term of the board in term of the -- specific to a particular transaction the board -- [inaudible] necessary.

>> right. okay. so when we get the transaction monitoring, the difficult category the board has a different definition of the same phrase specific to a particular transaction. it's per transaction costs. not system wide costs. >> transaction monitoring. >> yeah. so how can this same phrase mean one thing for fixed costs and another thing for monitoring costs. >> i'm sorry, your honor, i don't think that we changed our -- [inaudible] >> right. i don't think that -- what we're saying about transaction monitoring cost, they are, in fact, part of the authorization process. they -- tran action monitoring -- there are at lough parts of authorization that involve

checking to make sure that the -- [inaudible] procedures being confined with rules and the arguments in this -- [inaudible] in the broad prevention pocket

for the issuers to avoid -- [inaudible] what we would say is what we have done in the fraud separate fraud adjustment is to limit that only to fraud -- programmatic activities that are intended to reduce fraud. not in a particular transaction. not at the transaction level but in over the entire program. >> what would be an example of someone that falls in the line of -- [inaudible] that would be the fraud monitoring. i'm sorry the transaction monitoring that we included within the interchange -- >> the training and things. >> compliance program and

perhaps public announcements and outreach. >> judge williams said it requires cost the subject to -- [inaudible] set by the board. right? >> why wouldn't that also be true of monitor activities in specific transaction. like, for example, i assume you're talking about those computer algorithm that -- right? >> right. >> subject it board standards? >> well, there isn't it doesn't direct us to limit the -- to include everything that could possibly relate to fraud. in fact, as i mentioned there's many part of the -- and therefore because transactions monitoring also

fits within a four and actually a three the reasonable proportional to the cost concurred to the issuer. it can be covered in that section. the board choose to put it there carefully keeping them out. in our view they were not required. the board was not required to go that. a2 and a3 and no one under a5.

no. there are costs that are not related to authorization clearance and settlement that relate to fraud revenge such as public service announcements and the other things we've been talking about that are broader programmatic. >> the congress would have wanted -- the public service announce wants to only be done pursuant to regulations by the board but everything else doesn't need to comply with fraud prevention regulations? that doesn't make sense. the line that the board drew was between the costs that were related to authorizations the transaction itself which we saw the being encompassed within a three. and other costs related to fraud prevention that are covered in

a5. and so we drew the line there. [laughter] try dog here. [laughter] the mind of the way we read the statute was to enable us to put in the interchange transaction fee all the costs that are related to -- that are incurred by the issuer with respect to the transaction. because it includes this transaction monitoring element. we included that i know it's not

answering your question about why congress would have made that choice. >> i wasn't asking that. why the board distinguish between the two different category. speaking of that. let me take you back to fixed costs. what -- there are fixed costs related to -- that can be included. it allows them to include commuter services and connection fees, for example. the compare southern to check which clears at par.

and the provision of the card is a good example in which the board did that. in the check transaction world, banks are not reimbursted for producing the check that the consumers pay for it. but banks are not reimbursed through the clearance system. and so for that reason, we determined that the card itself was the price of the card of creating a card was not one that we were going to include. >> all right. that's interesting. let me try another one. that's a good point. it includes the board included fixed fees by third parties. right in process. the tran actions but excluded corporate overhead which can be disaggravated. the way the board saw this was that over head was something that was not sufficiently -- at the let of, say, executive

compensation was not incurred by the issue or with respect to transactions. that those overhead costs would exist anyway. and for that reason, they were excluded from the free standard. >> just one more question. suppose we thought that some of the specific items like fixed costs or transaction monitoring shouldn't be included or wasn't sufficient explanation for. should we they candidate the rule or -- well, hotly discussed at the the district court level. it was going to keep the rule in place while the board worked on a revision. i would think that would be the

appropriate thing to do here as well. the industry and the -- all of the players in this -- in the debit card world are relying on this rule to limit the fees and certainly congress wants the fees limited from where they have been before. which was double what the 21 cents fee we imposed here. so we would certainly say that at most the -- >> okay. all right. >> thank you. may it please, the court. with the court's permission i'll reserve two minutes for rebuttal. let me go first to the questions judge you were asking.

with respect to interchange fees. the district court found that the language of section 920 is so clear that under sheaf ron step one, it's impossible to read the language of section 920 to include the four categories of cost that are actual challenged in this litigation. that was incorrect. section the are 920 feigns in addition to all the rulemaking requirements contains one mandate one mandate that governs primary conduct not what the board shall do. it's included in a2 and repeated in a3 and mandates that interchanged fees, quote, shall be reasonable and proportional to the costs incurred by the issuer with respect to the transaction. there is no way that language can be read to exclude the four

costs that are an issue in this case. indeed, we think our position is there is no way that the lack can be read to exclude any of those costs and for that matter, some other costs that the board -- >> excuse me? they have to be related to a specific transaction. >> yes. it talks about the -- >> these four category get the standard. >> exactly right. we think they do, and just pick through them. okay. the network charges that is the amount that the issuer has to pay the network in order to engage in the process of authorization clearing and settlement are clearly particular to a specific transaction. they are charged on the basis of that transaction. transaction -- yeah. excuse me. >> what about fixed? >> okay response fixed.

>> yeah. >> the statute doesn't talk about fixed costs. it talks about costs and what the board did in the regulation was to say we are going include what they call transactions processing costs. that is those costs in the course of a transaction. i was certainly going to make the point that judge williams already plead. but the board -- we think that all of these costs are incremental and that in fact the board recognized in the comments whether one calls an incremental cost fixed -- >> have to be -- under your theory they don't have to be; right. they have to be cost related to

specific transactions. >> that's right. we agree with the board. let me be clear about it. we agree with the board that, you know, roman f little i and -- and there is another category of costs specifically costs that are specific to trans-- particular transaction arcs but not incremental acs costs that can be included. we are further submission is that the four categories of cost that are issued here. including what referring to as fixed costs are in fact incremental acs costs in any event. let me try to make my point on the fixed versus average variable. when the intord talking about -- what we're talking about fixes costs that are specific to a

particular transaction. we are talking about hardware software. the dedicated personnel necessary to effectuate that. whether one views those costs. and the board recognized those as quote fixed or quote variable. depend on the time period you're looking at and the volume range you're looking at. because in any event the statute talks about incremental costs. the costs that it takes an issue to go from zero transactions to one are huge. it may not be -- it may be lesser if you're looking in terms of the extra pennys that have to be submitted for transaction two, three, and four. but if you have a system that can accommodate 20,000 debit transactions or 20,000 debit transactions in a day, and your volume goes up to 20,001. it and those additional costs in

hardware and software are incremental as to that additional transaction. which is the reason we think the board was right in saying we don't have to decide which definition of incremental we -- we're not deciding whether these four categories of costs are incremental or not. because >> what about a5. i mean, -- tank action monitoring. [inaudible] have drawn somewhat arbitrary to be sure. nonetheless -- [inaudible] distinctions between joint costs separation -- [inaudible]

this is -- the question in this case the line that the board drew was within the confidence given the dictate of the statute. what the board said here was, look, it serves the purpose of fraud prevention which is correct. what the board said was with

respect to, you know, network monitoring, that kind of the fraud prevention that occurs incident to a specific request to authorize clear and settle a particular debt transaction. that's included in costs recoverable in the base. >> with respect to -- [inaudible] but the two categories. and the decision is -- remove all together from one category complying the rules. >> oh. i would have to degree with you. we -- we could either agree or disagree about the distinction that the board drew is the best one or the one we would. but what they said is we're

going disting wish between fraud prevention activities in general. that is research and development on how to hardin the system or give you a specific example my -- i got an e-mail last night as it turns out from my card company. asking me to call. i called and they told me they had charged my wife's card for auto repair services. i kid you not, in toronto, ontario, yesterday. that i wanted to know whether -- [inaudible] [laughter] the person who called acknowledged there was also three or four charges at the white flint mall on her card. but they were calling because they thought this was suspicious. they had -- >> right. that call goes in the a5 category. they already processed the thing. but they were calling and underguidelines that the board does promulgate.

they were alling after the fact to ascertain whether something needed to be done with the duplicate card. the two type of transaction monitoring costs and other and either the pure fraud prevention subject to a compliance and regulation or the issue do it that way it can put all in the transaction monitoring that too is subject to the confine of the requirement. >> i'm not here arguing that the board could not have made that choice. i happen to think that the choice the board made in the issuers perspective we want to be compensated for the cost --

we necessarily undertake in the course of the acs or because the board has resumes requiring us do it. and the one thing that i think we are -- know for a certainty here there's no intention of congress to simply say we are not going allow issuers to recover their legitimate cost. the merchant position here is they should be able to recover from us only some of the costs and they should go to the depositive iters to receive the other. and the notion that senator durbin or anybody else thought that the issuers should be transferring their cost to small depositors is i think -- thank you.

let's stay with the interchange. press the button on the right. the bottom to the right. down, down, [laughter] can someone help him. you see the button there? >> are you suggesting it is too low? >> yes. >> already done that. sorry. >> sorry. your honor, look, the notion that there is a third bucket of costs here that there is a category over which the board has discretion is simply incorrect. >> can i suggest that you're going launch to a discussion of -- [inaudible] i think you might want to save the time. i think you can safely think that the panel thinks that the

critical fact is the -- [inaudible] the absence of a comma makes it restrictive phrase. i think you should assume for purposes that you are -- [inaudible] spend your argument over the assumption we think there are nonincremental costs that are transaction specific that can be included. and focus on the -- [inaudible] i would not spend any time. you ought to move on. >> i'm sorry. [inaudible] we would on either step. what the judge is saying is focus on the -- [inaudible] >> sure. the definition is the problem is the exclusion of the second category. the narrowing of the second category by the board. what the board has cone is

interpreted not specific to a particular transaction to mean not common to all. they have done exactly the opposite of what the statute says and what the statute intends. so it is that definition and that major narrowing -- [inaudible] other than which the common issue, what the statute supports that? well, the statute -- [inaudible] rely on other than -- the these are two statutory phrases that work together. the statutory -- cost reasonably proportion to specific transaction. >> reasonable proportion to specific transaction. >> yes. and the next section says in determining what reasonable proportion to the transaction means, so you to take in toy

account the considerations. >> these two distinctions. correct. they cocount and there's another pot of costs that don't fall in to either one can be included. i'm asking what [inaudible] statute supports your position that these costs can be included. the -- particular and specific. that is what we're saying. what the board has done. to get to understand how the board includes fixed costs. the costs that are necessary force are the transactions to be executeed certainly aren't specific to a particular transaction. have to have a computer to handle it. the computer handles more than

one transaction. right? correct. the point is that if a particular transaction can be processed without changing the costs, those are not costs that are specific to a particular transaction. and your honor, you point out that the board's inconsistency here on page 55 and 66 in the brief and talking about a5, the board says which congress wanted to speak about transactions as a whole it used much different language than a4 but the board is also interpreting a in that very same way. is your argument that are you arguing that only incremental acs laws can be included and these aren't that.

our are you saying even if -- incremental costs can be included these aren't those. well, these are not -- well, i'm not saying these are incremental acs costs and the board isn't saying these are incremental acs costs. the board hasn't defined what an incremental acs cost is. you can't defer to what the board are you saying you disagree equal 100% or don't. >> we disagree they equal 100% because of the schur of the entire statute. there are another set of costs. i'm sorry, your honor. no. we tried to tell you at the beginning that -- if you want to keep arguing. that is your chevron one type argument.

we're trying to tell so you don't waste your time. none of us buy that. it's even-pronged however. it's the same sort of argument under step two. the fixed costs -- if you keep fighting the fight that little i and double little i capture the entire universe of cost you have a really difficult argument to make. if you persist -- you have the lek turn. everybody if it were a third category cost they can't fall within it. your argument has to be at that point that the board's interpretation of the statute is unreasonable. >> right. you have to be able to -- [inaudible] in to the reasonable for the board to say that the cost specific cost to a specific

transaction are all costs that name possible for the transaction occur. you center to make that argument. well, -- [inaudible] part of the reason that first of all, you have to look at the legislative history. it exists completely support the position that -- reasonable? >> this is unreasonable simply because the entire -- if you look at the statute as a whole, it's clear that congress didn't intend these sorts of costs could be recovered.

supports the transaction to monitoring. you look -- i assume it might be right and not right. what about the other costs they're talking about apart from the costs that might be in the category. >> apart from the fraud costs. there are other things they're talking about. why are they it's one of the things they're talking about. we'll take the fraud out for a minute. what are the other costs. the fixed costs. yeah. it comes in to play here. the purpose of the -- [inaudible] have been clearing a par.

actually producing the cards. they're comfortable to checks. that's not what the council -- that's not what the fred argued in the brief certainly. they said something much different all along. they didn't include those because they occur with regard to there a particular transaction. that's how they argue this. [inaudible] a machine that is useful each transaction is billions of the machine right.

how do you think the statute requires -- [inaudible] marginal cost is like short run incremental costs and is effectively -- [inaudible] dwhre, that would be the answer. reasonable proportion charges. what the fed is saying that is we can completely disregard the use of the term incremental. congress is -- you're wrong. that might be. but we don't have to define that. a matter of time rise you're looking at.

it encompasses fixed costs. what is wrong with that? >> again, the design of the statute was to assimilate check clearing. and we believe it is intended to put downward pressures on the fee and not allow these. bad checks. does the board reduce that.

if answer to the incremental -- incremental; right? >> right. if your rule about the reading of this statute will be

distinction. if there is a category of costs to a transaction. can be included that are not increment costs. they don't have to be incremental. they only have to be related to a specific transaction. why did you answer judge williams by saying the fixed costs --

that prevent the bank and the networks from restricting the number of network in which an electronic dpebt transaction may be promised. >> you're focusing on transaction. >> that's right. the operative word in that sense is network. it is network.

if you are you are represented did you -- [inaudible] the electronic -- that is the network. it modifies the network. the key thing is network. t not transaction. the point is the issuers and networks. the rule eights is setting up a system in which the issuers limit the number of network which the transaction may be processed. now one of the things that -- number of networks. no. >> correct. the very rule that the fed has adopted violates the statute. and the reason for that is the -- as congress recognized in

recognizing there are different methods authentication of a transaction, congress recognizes that when it customer goes to a merchant and presents the card, and says, you know, i want that process as a visa credit transaction the merchant has no choice whatsoever. the that's what the rule sets up. [inaudible] >> well, your honor. our argument has never said it needs to be two of the same sort of network. what we are saying is that there

have been rules historically and that continue that prevent signatures, transaction aca from being processed over pin network. and those cross routing rules -- [inaudible] no, your honor. quite frankly. we would be happy if they were, your honor. we would view that as a victory. if they were the rules exist. prevent a transaction from signature transaction from being routed over a pin network. the rules are still in place. it allows within a network a pin to be processed without a pin. but it still prevents cross

routing of the transaction. we don't believe the fed rule. we don't believe the fed's rule prevents cross routing. so the problem. there are a number of rules in play here. the banks -- i'm sorry the fed says here that, you know, when a customer makes the election it's really a customer. actually the rules require visa's rule require that a merchant honor the customer choice. visa says if a customer comes in and says i want this process visa transaction. the transaction has to be processed as a visa transaction as a credit or a signature transaction. the her chant can't route in that circumstance. it's very much visa's rule that set up the whole problem.

165 of the final rule. the board recognizes under the rule there's only for each transaction. it's always going to be visa and mastercard. it's going to be discover. whatever that signature network is the rule pacifically memorializes that. we don't believe it's the case. the first time the representation was made by the board was in the reply brief in this court.

we're not comfortable relying on it. if it were true that cross routing were allowed. if, you know, pin next couldn't in fact -- could in fact route a signature transaction one would be fine with us. it would in fact the statutory requirement. we don't this it does. the issue here doesn't provide for that, your honor. our position is that network and issuer and restrictions are part of this rule but it's the network and issuers that are restricting. the choice for the merchant.

anymore questions, your honor? at the same time which actually that is happening now. there is such an network. roar rule said it may not restrict or otherwise limit an issuer's ability to contract with the other payment card network. ..

and so as far as crowds writing rules are concerned, there are no restrictions on crossruffing. the practical restrictions that result from the fact that technology infrastructure is different, those are not

restrictions imposed by networks or issuers. think you. that completes our time. thank you. >> a minute or two. >> i'm happy they're answer any questions that the court has. otherwise i am happy also to wait. >> thank you. the cases submitted. >> we are live from carolina. expected to discuss jobs to memphis structure, education initiative. members of the state legislature waiting for the government to arrive. her dresses expect to be momentarily. [inaudible conversations] [applause]

[applause]

[inaudible conversations] [inaudible conversations] [inaudible conversations] [inaudible conversations] >> please be seated.

ladies and gentlemen of the joint assembly and/or our guests, i am proud to present to you the owner on the -- hon. mickey haley, the governor of south carolina. governor. [applause] [applause] >> mr. speaker, mr. president, ladies and gentlemen of the general assembly, constitutional authors and my fellows of brilliance, let us start tonight as we have rightfully done in the past by honoring those heroes we lost over the last year. it is my sincere prayer than a

year will come when there are no names for us to read the reason that please join me as we pay tribute to those who gave the last full measure of devotion in the service of our state and country. specialist member holds, p john, did the share of joseph c., lake city, a private first class derek l. austin

[applause] >> i'm glad to have the support of an amazing family, both sets of parents, my brothers and my sister, but more than anything and the proud mom of to amazing kids who keep me grounded. to them and just mom and nothing makes me happier. please help me welcome mailing who is 12 and arena is now 15 in my happy cheerleader. [applause]

>> i am touched, honored, and so fortunate to be a military. his employment played out more publicly than we would wish. it was time for the case. in the tell me the year ago by fast. well, it didn't. we are thrilled and i am a happy girl to be about the semi soldier home. please submit tokamak the coolest first man, michael haley. [applause] >> one of the best things about giving this speech each january is it gives me the opporunity is celebrate some of the people in deeds that have made a small smile. last year we had one in particular they show the country her exceptional grace and talent .

she was out of the nation when she won american idol, and when i met her she allowed me. an inspiration, a shining example of what it means to never give out. she was a four-star before she ever made it to the live show, but once she got her chance she grabbed it with both hands and never let go. kendis, the daughter of john and carol, the oldest of seven children and a graduate of you for high-school. john and carol, you are advising parents and raise an exceptional dollar, wonderful young woman who portrays south carolina in the best possible light. please help me congratulate don't think, and celebrate our very unamerican idle kendis clever. you have major hubs incredibly proud. [applause]

[applause] >> i cannot go any further word that talking about what happened in the state house est festive house yesterday and i will start by saying carroll campbell, the father of restructuring in our state, smiling down on south carolina this evening. patients is not always been my strong suit, the biggest and most important piece of government reform south carolina has seen in two decades was will work the way. we're able to celebrate this win is the product a lot of work by a lot of people. there are few who have been done in the trenches fighting to make this a reality. going to take a moment to single them out. representative gary smith, representative j. lucas, representative greg delaney, former representative jim

harrison, former senator thomas alexander, larry martin, and shame messy. south carolina is better because of your efforts. [applause] there is not time for me to go into all the good that will come from this change but will say this, the budget control board, what i call the big grain of the monster is that it with it the legacy of a backward administrative government that was as this was a was clumsy, and efficient as it was embarrassing. we are better state today. [applause]

to nine marks the first time asset in this chamber and explain to you were apple reversed the stands and more importantly where i believe she will go. time flies. during that time much as accomplished. i am pleased to report that the state of our state is strong and we are just getting started. it's important that we take a look because our successes have so much to teach this. the bible tells us that if the house is divided against itself at house can i stand. i believe it applies to south carolina. there is no state in this country, no place in the world that has more potential than we do. for too long we were not realizing. for too long we were held back by our differences, whether political, regional, or personal

for too long we fail to understand that we are a team and that the success or failure of our state is determined by our ability to work together. and work together we have. governor campbell is portrait now hangs in a library of the residents believe that if you give a person a job you take care of the family. three years ago and had a lot of families to take care of. south carolina was formed to and we have never looked back. it changes in south carolina over the last few years are not the result of one person or one city or one region. we have realized that what is good for charleston is give for revell. even what is different gibson is good for carolina. we have to lift up all of south carolina. and what a difference is made. we have announced 43,000 jobs

and 45 out of all 46 counties. we have seen almost 10 billion invested in south carolina. we have seen almost 186 expansions of existing companies , the ultimate compliment a business can devastate. we have seen a revival of our manufacturing industry with the announcement of a total 6,000 new manufacturing jobs. we have seen the unemployment rate of our national guardsmen drop 12 full percentage points from 16 down to four. we have seen companies from 25 foreign countries decide that they want to do business on american soil that time for an implied south carolinian and find a job, decreased by a full month. the lowest unemployment rate in five years and seen our rate fall two-thirds faster than the national rate. we have been referred to with our lives as the beast of the

southeast. we now have the fastest growing economy and 70,000 more south carolinian is are working today than just three years ago. that is progress. that is real. that is the state i am so proud of each and every day. that is proof there is nothing we can accomplish. invested their future in south carolina and her people. please join me in a warm welcome and pleased and when i got your name. representing 200 jobs in a county, pete davis. representing 200 jobs in dillon county from harbor freight tools usa great elmore. representing 145 jobs in orange county from btr industries

representing 500 jobs in fairfield county from element electronics mike a shaughnessy. representing 318 jobs in chester county from it in fires. represent 134 jobs and ms. mckinny. david rogers manufacturing. representing 149 jobs in greenville county d representing 501 jobs. care america corporation. us stand again and thank you for making our own their home. [applause]

today the entire country is looking at south carolina and alcee has to offer. but we cannot take our success for granted. as president kennedy said, in the world does not stand still. changes the law of life. those who look only to the past and present are certain to not -- missed the future. our future is bright, but we have to stay one step ahead in order to compete. and competing baldly means of ways strengthening our business climate, continuing to prepare our work force and fighting back the federal government when it pushed to treat every state the same. every year standing here and ask you to join me in decreasing the tax burden we place on the family and the businesses of carolina. this budget year is the third year arrow that we have cut taxes for small businesses.

that's a you staying in sends a message to companies both within and outside of our borders that we value them, their contributions to our state, and that in south carolina there will always be taking care of. we have to do so much more. just look around us. last year north carolina has one of the largest income tax cuts in their state's history. tennessee, our custom competitor , renewing company's investment and jobs with no income-tax. likewise florida and texas. my tax -- the tax cut is to be more simple, flat, and fair. in one year should not pass when we fail to move further down the road. in this year's budget i have renewed my call for the services of our state to receive a tax cut of around, this time eliminating the 6% individual income-tax bracket. this simple change will put money back into the pockets of self carolina working families and i asked you join me in

giving our taxpayers additional relief. infrastructure must also remain a priority. we herbalist to have an asset that is the envy of our friends and competitors in states across the nation. year after year we are breaking export record after export record. our board is only as good as our manufacturers' ability to get their product to quickly, faithfully, and cheaply. last year using revenue we already had we were able to pass into law the largest investment in south carolina's roads and bridges in more than two decades . a billion dollars. and we did it without raising taxes. south carolinian are about to see orange cones popping up all across our state. it is a beautiful thing, and i wanted thank the chairman and senator for helping make that happen. we know there is more to be done you might ask the question, how

do we pay for it. my answer will be, not by hiking taxes. we proved last year that we can invest in our roads and bridges with the dollars we already have raising the gas tax, forcing our people and our businesses to pay for more for the simple act of getting around is not an option for me. i will veto any bill that reaches my desk that raises taxes on gasoline. unlike during a recession -- [speaking in native tongue] [applause] unlike during the recession this is a good budget year with enough revenue coming in to colombia that will allow us to make smart, new investments in education, roads to and public safety. that did not just happen by magic, and it did not happen because we raised taxes are put more burdens on businesses and family. we have a steady and strong flow

of revenue in the columbia because we have the fastest growing economy on the east coast, and unemployment is down to its lowest level in five years. we start raising taxes, rolling over federal mandates and crippling businesses, we will damage our growing economy and bring in less revenue, not more. most importantly we will stop the amazing progress we're making in putting people back to work. instead of this year as last our budget riders should take the additional revenue that inevitably appears after our budget is balanced, what i call a money tree, and invested in our infrastructure. since he doesn't find the money tree that falls every year has averaged 1m $106 million. according to the part of transportation those dollars invested in the right way will be worth more than 1 billion in additional roads in bridge improvements. that is prioritizing. that is our job.

it will come as no surprise to anyone who has heard me speak gore has watched this administration that it is my firm belief that the federal government causes far more harm to south carolina that good choice. those running the federal government make our job more difficult day in and out. unfortunately that is simply the reality we are faced with. what is that a reality in south carolina, however, is the idea that we simply have to take every problem the fed's send our way. we don't command we have not. those of us who fought the president's disastrous health care plan have watched his predictions of lost coverage, rising costs, and unprecedented dysfunction come true. obamacare is damaging to the country, and it is damaging to south carolina. premiums will skyrocket. all of our citizens to like plans will not, in fact, be able to keep them. quality of care will suffer, and so, too, will patients.

as a state and an elected government we will not be victims in this process. we rejected that federal government less than generous offer to run a state exchange, an offer that would have washington bureaucrats dictating the exchange in south carolinian is paying for it. in with your help we emphatically said no to the central component of obamacare, the expansion of a broken medicaid program that is already cannibalizing our budget and would completely destroy in the years to come. these are not decisions made lightly without thought or analysis, but i am wholly convinced that south carolina will be better for them, and a place to you this, we will continue to fight obamacare every step of the way. [applause] [applause] while we oppose obamacare we

have an obligation when the federal government stands in no way to get creative posts and figure out how to better serve our citizens. we have certainly done that in health care working within the system to increase transparency in drive costs out of medicaid says. this year we are proposing a new way to cut the waiting list for the neediest among us providing 1400 disabled south carolinian with the care they had been deprived of far too long. there is no greater example of south carolina getting resourceful and innovative with the federal program than the way we have tackled welfare. one of my focus is since the day i took the oath of office as been to change the perception of south carolina. we have some much to be thankful for, some must be proud of. i won every citizen in and out of our state to feel the same way a bus of carolina and added. traveling the state, i often had a complaint that there were too many dependent upon government assistance. there was a belief that some of

our fellow south carolinian is urging to remain on welfare rather they get a job site. i don't believe that. we are proud, resilient people. given the a virginity we want to make a better life for ourselves and our families, but with the old welfare system that of virginia did not always exist. under the of aid to the kid and innovative public servant who is once named the nation's public official of the year, we have chase that. previously with washington having its way we would handle welfare recipients by asking a few simple questions easy incoming easy out instead of just asking routine questions designed to do little more than the numbers and process people, we dig deeper ask them about their stick bills, there get to

market like, what they want to do, and then together with our ever willing business community we find them a job. it seems like a simple contest, but here's the deal. it works. since starting this program in 2011 we have moved more than 20,000 south carolinian is from welfare to work. [applause] we should all be proud of this program, but more than that we should be proud of those workers , the south carolinian soon traded the possibility of a welfare check for the chair dignity of the welland paycheck. michele remember what the success story proves, those out there struggling day today don't want to spend there lives on the couch. they want a chance for more to make their children proud. it is our responsibility to give

them that chance, and i could not be more proud of the fact that here and now has a responsibility we will continue to the appellate. there is more to changing the perception of south carolina and putting people back to work, much more, and it starts with all of us in the chamber here tonight. the 20th century supreme court justice once remarked the most important political office is that of the private citizen. the system of representative democracy dangerously close to losing the trust of the south carolina public.

that was to this shameful way the ethic falls ascenders for south carolina officials were raised by independent what stocks. i thought about doing so again tonight. there was no need because we already know that the ethics laws that we have are not enough when of the public deserves better than the government we are getting the we know that we cannot wait until we are the very last to fix the problem. among senators investigating senators. most of all we know that we have to do better. public officials should not fear

more transparency. we should not fear fair and independent investigations. we should embrace them because we each have nothing to hide from the people we serve. the good news is, and one year we have made real progress. the house has passed the strongest at six reform bill in a generation. the senate in large part thanks to the first of parents of chairman mary martin moved that bill quickly through the committee process. would be remiss if i did not again think attorneys general henry mcmaster and travis wedlock for their remarkable reform package said they put together. and if i did not give special recognition to senator chip khamsin, said there was aids, and representative read quinn for their in helping to push this legislation forward. but we are not done yet. as the senate has been poised for debate, asking not to order down this historic reform. i ask that you not make excuses, and i ask each and every one of

you republican and democrat, senator in house member to send me a strong ethics reform bill this year and share the people of this state that we, as their elected representatives, deserve a trust. [applause] >> just two days ago our nation celebrated the likes of dr. martin with the king jr. pier because of us saying that he wrote and said much of great consequence in a live cut altogether too short. but one particular sentiment struck me. dr. king said, there comes a time when one must take a position that is neither safe nor politics of popular, but the mistake it because conscience tells him it is right. that caught the contents could apply to the ethics laws i just spoke about and the need to representative restore the

public's faith in our government . to meet headed for a meeting instructed of record. the time has come for us to do what is right. many of you may know why star by now a my educational experience, something had been talking about for years, i think it bears repeating here. was born and raised in gander and went to school in a bread box. we did not know what we did not have, but we always took care of each other. now my daughter attends the brand new river bisects school in lexington where every classroom has a similar to his television and every child has an ipad. i wish i could say that was generational progress, but the thing is, it is progress based upon your roofie command on generational advancements. because when i went back to give an anti bullying speech, the school did not even have the equipment to show a video.

that is wrong, immoral to have @booktv as to change. still remember when it was like as a young girl. arab the feeling of seeing other schools that were bigger in nicer than ours and wondering what that must be like. our kids should never feel that they are more or less worthy based upon where they live. our children should all feel like they have every opportunity to be a successful person. in south carolina can no longer accept the quality of our children visitation being determined by where they're born and raised. [applause] in truth, i came to you last year knowing much of this. my childhood experiences have not changed in the last 12 months, and reno was getting a wonderful education long before she moved. what i did not know was exactly how to change it, so i asked for

help. as i have found to be the case time and again, the people of south carolina deliver just what was needed. the education conversationally started one year ago was one of the most interesting and enlightening experiences i have had. i want to acknowledge the legislators who participated in this process with me. senator john portman, senator west case, senator john mathis, senator nicky sisler toward representative kinney bingham, representative jack e. hayes, and representative felons. you came into this with an open mind and a willingness to work and to listen week met with teachers, parents, former state superintendent's door republicans and democrats. a planned 7r eddy that south carolina we need to take

targeted approaches to education in a way that charge results for our kids. we looked at the way we funded education at the state level. we found a formula to be updated, misguided, and then as a result we're entering the gulf -- best out of directing dollars to where they're most needed. those who require individuals traction. we don't have difficulty with those speaking english that the lawsuits are still the person in a plumber. the most glaring failure on our part has been the failure to acknowledge that it simply cost more to educate a job in poverty . research shows that the constant teaching low-income students was proven methods is roughly $1,200 more faugh per child. as a state we cannot afford to ignore that any longer.

under our proposed changes school districts will receive 20% more in state dollars for each child that falls into the poverty index. in real terms a simple change means that next year almost 100 million more will flow to south carolina's neediest children. we cannot spend an unlimited amount of our schools, and money is far from the only answer to our problem in education. we can do is be smarter about how we spend what we spend to begin make sure it is going where it is most needed, where it will make the most difference that starts this year. [applause] we have fallen into the bad habit in south carolina promoting students your grade levels before they're ready. teachers don't want to do this. they feel pressure from administrators and districts and school boards to keep children

moving in to keep numbers, and they feel pressure from everywhere not to damage a child socially by keeping them back. to that i was simply say that a child he cannot read at the level of his or her peers is already damaged socially because a child to cannot read is a child you cannot learn. studies show that children who cannot read efficiently by the end of the third grade are four times more likely not to graduate as :. in south carolina we rank 42nd in the country when it comes to our fourth graders ability to read at a basic level. those two statistics together painted dangerous picture for south carolina's feature, but we can turn the tide. led by governor j. bush florida and it took one of the most meaningful transformations of education this country has ever seen. when i asked me tell me the most important thing they did was teaches kids to read. we're going to follow that

model. every elementary school in south carolina will be offered a reading coach to make sure that no child leaves the third grade unable to read. we're going to increase our investment in summer reading camps and ensure that sues to regress from year to year. in places like allendale the may have fewer opportunities outside the school year the markets have a safe and productive way to spend their summers. it is said that to learn to read this line of fire. we can like that fire in the mind of every child in south carolina, chase the fortunes of generations of children yet to come and forever alter the direction of our state. earlier i spoke briefly about my trip and the gap that exists this regard technology between our schools that have been those that have not.

technology is the future, not just education, but in all aspects of our lives. we cannot pretend that we are preparing south carolina's children for the world that awaits if some of them remain unaware of what the world looks like especially when a lack of awareness was not their choice but was imposed upon them by circumstance. first it will invest in technology in a way that we never have before. may shed the action at this to our schools to make sure the schools are wired to receive it, provide the tools, computers start tablas, and as such a material such as get the most of our investment and students. south carolina schools are going to be equipped to compete with a schools in the state.

the most impact on media had her last year was with about a group of 50 teachers from across the state. there were in a difficult place, know the problems of the school, see them firsthand every single day. what they said desperately want is for us to help them apart kids. in many ways have the dates of education and damage their confidence. well we're not careful about how we talk real education needs begin be down the teachers who are especially between a job in his or her education. that has to stop. we have to support our future with the right training and right attitude about what i schools are achieving their what they can achieve in the future. these are big changes we are calling for. i know. nelson of the big changes are anoles easy, but the size of these changes pales when compared to the size of their

importance. we can make them. a contrast from education is that carolina, and we can do it without raising a single tax, without taking a single existing dollar away from a single district. member of the core, this is just a simple question are we willing to stand to children side-by-side and sell one through no fault of his own he is going to attend a school with less well at the same time telling the other he will have every ounce of support she needs to drive. i can tell you, i am not, and i hope you'll join me. [applause] i started tonight proclaiming

the state-by-state to be strong. believe the path and volunteer tonight will make south carolina even stronger. it is a path that creates jobs in a much faster rate than the rest of the country, pat that moves more people from all two of welfare to work, that the claims of bar ethics law and the pad that gives every child, no matter the circumstances of their birth, a chance at success last year the world lost an iconic woman, and i, a personal hero, margaret thatcher was a towering figure in history, a force for what was right and what was good. she will be missed, but her words will remain with us. look at a day when you were supremely satisfied at the end. is that a day when he lands around doing nothing. is when you have had everything to do and you have done it. south carolina is in a far better place than just a few short years ago, but we still command ladies thatcher's words can have everything to do.

we can keep south carolina surging forward, create new opportunities and tackle our challenges. we can continue to make south carolina the best place in america to live, work, raise a family, but i can't do alone. as each one of you in this chamber to lend your support and energies to securing the future of the state we all so dearly love. it is a future that is just so bright. thank you, god bless you, and may continue to bless the great state of south carolina. [applause]

>> looking ahead to next regard coverage of president obama's date of the union address will start at 8:00 eastern with the president's speech at night. as always, comments by phone, twitter, facebook. >> earlier today in sacramento, california, governor jerry brown delivered his state of the state address talking about his new budget proposal and his state's economy. [applause] [applause] >> thank you. [applause]

think you. this seems like people a kind of excited, and so i might. i did come here a long time ago. some of you may have forgotten because you were not born then. i came here in 1959 for the first time in my building guard, my room and dollar and rival black suit and sat right down there and looked up says. this is for the state of the state. so the to the governor, i appreciate change. i also value continuity. [applause] take the ends and throw them out. i will say that anymore. my message, there is no substitute for experience. anyway. ramp.

[applause] i am here to report on the state of our state, article five of our constitution requires the governor to force the legislature is outdated. you cannot report on the condition of the states in sacramento bee is california is to spread at an adverse. then nothing to say in the face of the california comeback well, i am going to reported. what a comeback is. million new jobs since 2010. [applause] a budgetary surplus in the billions, and the billions. [applause]

a minimum-wage. this year california has a lot to be proud of. for a decade questions and stability with the order of the data may lead to a combination of national recession, in providence tax cuts into a spending, a financial sink pull into a fight every effort. three years later here we are with state, state spending, and revenues of a rebound and more to come. for that i think all of you for your courageous and dedicated legislative work. it is truly impressive. also want to thank the members of my administration who worked so hard tell me. above all else voters of california.

[applause] tsks in 2010 they established a majority vote for passage of the state budget. in two dozen 12 they approved a temporary tax increases. these two initiatives together with the recovery of the economy , the tough decisions made all the difference. where none of the lloyd's in serving none of the job. like these uncertainties, the climate is changing, not for the better. business cycles, our stories evolve. we could use painful regularity. and what we know of revenue is fluctuating up and down, long-term liabilities are enormous ever-growing faugh. well over 100 billion over state

workers and the teachers to lead judges. tens of billions needed. nearly 3 billion, teachers and public employees, well over 100. tens of billions of hate to cover retiree health care and 65 billion is needed to maintain and keep the roads and buildings and our other infrastructure in solid repair. and we must also watch out for future risks that could negatively affect our budget by congressional decisions, national disasters, and certain costs of the affordable care act. so we take it back to business as usual, boom and bust is our life, and we must follow the agent and vice the jussive gave to the pharaoh, put away, you will be, ready for the new year's which are sure to follow. most governors and legislators

have forget this advice to. this summer will. fifes famously said those who cannot remember the past are condemned to repeated. help us keep our fiscal realities in line. i have some playing cards here that puts the chart in the budget ceremony of the last 15 years. you probably can't see it, but it is mostly red. a little black in the beginning in the end, that is not discourage you. i put something in the back of his playing card. a picture. underneath -- on this side we have a "saying don't forget. on this side a member of the

comments. market you don't like deficits. so. >> you can be sure of that. this discipline is that the enemy of our democracy, but the fundamental predicate. great importance and we must also establish a solid fund locked into the constitution. in 2004 the people voting for a rainy day fund was found to be unworkable. in 2010 we created another rainy day fund the schedule for the november elections. but this latest effort does not illustrate is the option to pay off debt for common is the deal with the ups and downs of proposition 98 and is now account for the spike in capital gains.

so let's fix these laws before going back. fess. [applause] analysis arrest book of the principal subsidiary. a rather cranky word but nevertheless points to a profoundly important principle, namely that in our federal system there are separate ways of governing coming each with its own this -- respective responsibility. fees the oxford dictionary defines subsidiary as the idea that message to a party should have a subsidiary function performing only those tasks which cannot be formed effectively at a more immediate or local level. no better example of this can be found been in the enactment last year of a local control funding. this was a major breakthrough in the lay -- the way funds are allocated to california schools.

so the laws explicitly recognize difficult problems faced by low-income families and those whose first language is other than english. as a result, those are the threats that are going to receive more, and that is good for all of us. [applause] but something else is at work in this local. instead of mr. -- descriptive commands issued from headquarters here in sacramento, more general goals have been established. for each local school to obtain, each in its own way. this puts the responsibility where it has to be, in the classroom and at the local district. the 6 million students there is no way this state can micromanage teaching and all the schools. we should not even try. last week three new control people from across the state

several to sacramento to speak to the state board of education about the merits of this to law and the way elections should be adopted under three principals, teachers, students, parents, religious groups, and, of course , lawyers all came forward to express their views. now, that shows interest, that shows real commitment, but their work is beginning. each local district el is putting the practice of the local funding formula. that it together with the new common course standard for math and english would be a major challenge for teachers and local administrators, but they are the ones who can make it work, and i have every confidence that they will. along a similar vein in the fields of public safety we have changed the start practices and transferred significant responsibilities to local authorities. a federal court backed up by the end is the supreme court has ordered major reductions in our

prison population and dramatic improvements in the medical and mental health programs in the state's. we transfer the supervision of tens of thousands of low -- lower-level offenders from the state to a 58 counties. this is bold and far reaching and is also necessary under the circumstances and local law enforcement has risen to the occasion. our prisons are finally finding new programs and treatments, so the counties. last week visited the jail does not the bakersfield and sat in on glasses. it was moving to hear the stories and struggles. it was also inspiring day to see the enthusiasm and efforts of the realignment to work with probation, district attorney, local judges, and police to find new ways to deter crime and help

offender straight up their lives of course there are issues with realignment of the together with local partners will face them. we have plenty of work ahead of us including building more capacity at the state level and becoming more effective for those who suffer mental illness would prediction schav. we are on the right track and want to stick to that. all of this legislative work particularly funding is crucial. we should never lose sight of the reality that life is local and that so many things and try to do here can only be handled by local representatives and leaders of the people themselves these problems we face deal not with abstractions but flesh and blood realities. among all our uncertainties, this is one of the most basic. we cannot control it.

we have to live with a very serious doubt of uncertain duration. right now it's imperative to do everything possible that taskforce has -- everyone in every part of the state to serve as water. regulators will rebalance water rules, enabling voluntary transfers of water and they must prepare for forest fires. as the state water action plan lays out water recycling, expanded storage, and serious crime water management must all be part of the mix. so too must the investments in safe drinking water. watershed expiration of the delta conservation plan. it is to you ready for the next. our current problems.

we take this drug as a stark warning of things to come. mimesis panel on climate change 795 percent confidence that human beings are changing this means more doubt. in in california more forest fires and less. as you know, leaving most of the country and the world california is the leader in dealing with climate change. 1832 tech are booming and it appointed its efficiency standards, our new portfolio standards of california's leading the way. obeys challenge means the amount of gasoline california would use . each year are vehicles use more than 40 million gallons of gasoline to travel

330 billion miles. i said billion. with those numbers in perspective the sun is 93 million miles away. reducing that row consumption, two-thirds of which by ship and take guards increasingly will take time to a breakthrough technologies and suggest the amendment. we will also require that the countries that are the most join with us. research building partnerships. we get to mexico biggest california can do a lung. [applause] in so many other ways california is a pioneer. 25 percent of the nation's foreign-born and the first-aid in modern times have a plurality of families of latino origin. so it is unsurprising that california is the state limit this and not only dream that

drive legally. [applause] be -- we also the state of innovation, silicon valley, more goods for capital investments. we are building the nation's only high-speed rail. health care coverage until millions more. california is the nation's leader in developing medical and scientific advancements to cure diseases and lower cost. we have six of america's 12 top performing metropolitan areas in biotechnologies, san diego, san jose, san francisco, oakland, says a list, and orange county. last year we increased tax credits. four of the world's 20 leading academic institutions are

located here in california. ucsf and berkeley, ucla, stanford, and uc san diego. just as california has led the way, so to weekend plane near the new fields of precision medicine which uses it to genomics, medical devices, computer sciences and other fields to treat individual patients is set of broad populations. yes, california is the leader in some many ways. the dangers and difficulties faced. too much debt and too many unknowns. overcoming challenges will test division protest a discipline, and test our ability to persevere. but overcome them we well, and as we do we will build for the future, now steal from it. thank you. [applause]

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