what we do in this field is a measure of our compassion as a people and our vision as leaders. if we believe in society, we must accept that we have a duty to care for and protect those among us who cannot fend for themselves. i am reminded of the way -- how putting a moment's help into a life's dependence in the third of the history buffs out there, it was three, well shg, actuall four, but in the third state of the union address he said to dole out relief in this way is to administer a narcotic, a subtle destroyer of the human spirit, and it is an nis agains traditions of america. that is powerful from a leader

who is qualified to give it. so what must we do? what tradition must we preserve? we cannot maintain what we have been doing for 40, 50, 60 years when it has not improved the lives of the poor. the budget i bring you is built to transform the public welfare system not to eliminate. but the right-size it. it modifies programs to give incentives to those who are able to transition from the welfare line to the unemployment line. while it gives real relief to the poor. we are proposing the merge seven separate lines into bloc grants, and it will give the counties the flexibility they need to identify their most pressing needs and apply the funds as they know best. all of these adjustments have been done with an abiding belief that the best route from the welfare line is to the work line

by focusing on job creation. there is no other sensible way. yesterday marked the 101st birthday of president ronald reagan our 40th president. he was a man who supported franklin roosevelt, and also understood roosevelt's own warnings about the need for a balance between a vigorous government, and an overbearing one. he chose vigorous. here's what he had to say. quote, government has an important role in helping develop a country's economic foundation, but the critical test is whether government is genuinely working to liberate individuals by creating incentives to work, save, invest and succeed. pennsylvania is, as i said, still in difficult times. its future will rely on that sense of purpose that reagan and roosevelt both embodieembodied. another roosevelt, teddy roosevelt, dedicated this building that we are in here a

century ago. he is often quoted as saying, i dreamf of men who take the next step instead of worrying about the next thousand steps. here today is the first step. we need a budget that emp ploys simple honesty for the common growth of the commonwealth. we must continue the journey that will turn the road to recovery into the path to prosperity. please, let's get started. thank you, all. [ applause ]

>> the nation's governors are headed to washington, d.c. this weekendb to attend winter meeting of the national governors association. our live coverage picks up on saturday at 10:00 a.m. eastern with the opening news conference. we'll also show you a discussion on growing state economies. sunday, our coverage starts at 9:30 a.m. east wern a look at emgbication and early childhood issues. the nation's governors will talk about hunger and the changing role of the national guard. and they will wrap things up monday with the closing session at 9:00 a.m. eastern. join us later for more from american history tv. the focus tonight is on the u.s. space program. at 8:00 is jeanne kranitz on his

experiences as nasa's flight admissions director op rayer to. and at 9:30, we will hear from john glenn, and michael collins and kneel armstrong and buzz aldrin. and then an hour later, we will hear about nasa's exploits of john glenn. and now more of the state of the state speeches with john kitzhober who delivered his remarks in portland. this is about 30 minutes. >> thank you. thank you very much. thank you. thank you. thank you very much for that warm introduction.

if i might, i'd lick ke to take moment here in acknowledging our friend gail ackerman and the tremendous contributions she has made to the city club and to our state. she is not obviously able to be with us here today and i hope she is listening out there, and i want to say, gail, thank you for all that you have given to the state of oregon. [ applause ] when i was working on my remarks last night at home, apparently i was talking out loud and my son apparently overhead me and logan wonders in, and he is taking a unit on shakespeare and he said, dad i have a quote that i think that you should put in the speech. so here it is [ laughter ] it is not in the stars to hold our destiny, but in our ourselves. and you know, that is pretty

good [ laughter ] if i had to summarize the message that i want to leave you today, i probably couldn't do it any better than that. i'm very, very proud of what we have all accomplished together over the past year can. i am very proud that we have not shyed away from the difficult challenges in education, and health care and the budget. and i'm very proud and deeply grateful that we have such tremendous bipartisan leadership in salem who has chosen to put probleming ahead of partisanship. i think that ul of those things are tremendous and i'm committed to continuing that spirit of collaboration going forward, because we have a long, long way to go. for example, i am stuck on this image from an oregonian article that came out last october which is the image of an extension cord. an extension cord that runs from the house of one crook county resident to her neighbor,

because she has been without a job after exhausting unemployment benefits and being pushed to the edge. an extension cord is a lifeline for her, but a fragile reminder that we are at the high point of the human need in the state, and at or near the low point of resources to provide the services. but the extension cord is also a simple, and-- symbol, a symbol us oregonians to unite and we will emerge more stronger than when we began. because this story is also about the landlord who has cut the rent in half to keep her from going homeless and the neighbor who is sharing power despite she is two months behind in her mortgage payment and so this

encourages me that in the places of under 3% unemployment the words of ken keyesy still ring true, oregon is the citadel of the human spirit, and we are in it together. it is true, but extension cords and neighbors can go so far. and the more and more oregonians are pushed to the limit -- and in the past year, it is rooted in my belief, and i hope your belief that embedded in the recession is a opportunity for profound change to secure a future and change that is based on our spirit in the state, and on the shared commitment to one another. i'm here to tell you that the vision still stands and oregon's best days are still ahead of us, and in fact, many of the things that we need to move forward are already under way. when i spoke to you the last time, i think 10 months ago, i

focused on two things. the first one was trying to ensure that we get the private sector economy going again, and the second one was the importance of transforming the way that we provide public services starting with health care and education, and we have made significant progress on both of those fronts. when i spoke to the oregon business summit last month, i focused on what the state is trying the do to be a good partner to get the en ttreprene sector going, and small businesses. we have made progress in that front. we had ted wheeler talking about the proposal of an act that we will bring to the legislature in february to shore up providing capital to the business community. but the point i want to make to you today is that all of the efforts of job creation and economic development will be futile in the long term unless

we can fundamentally transform the public education and health care system. public education, because none of us should accept a high school graduation rate of 55%, or the fact that a majority of the kids arrive at school not ready to learn or that more than half are not going to have the education of their parents. and simply we cannot stand by and pay more and more and more to a hyperinflationary system that is not making itself healthy and dollars that could be used to create jobs and families use to pay down debt, and state using to invest in education for children. last session with strong leadership, the legislature set the stage for fundamental changes in both the system of public education and the health care system.

changes that i think are absolutely crucial to secure our economic future. in education, with the creation of the oregon education investment board, and with education that promotes professional development for teachers and more learning opportunities for children, the legislature took a unified p-20 education system to focus from funding enrollment, to funding students based on success. for the first time funding and governance will be across the continuum from childhood to postsecondary schools to achieve the objecties. the legislature also created a early learning council focused on changing and restructuring the fragmented system to provide child services in oregon. each year we spend $800 million on programs for children zero

through fife and six state agencies and dozens of local programs, but they are not coordinate and in many cases they don't measure outcomes and disconnected from the k-12 system, and from health care services. the average cost per child is about $15,000 every two years, but less than the children who needs the services are getting them. and maybe 25% or 30% at best of the at-risk kids will meet the state reading benchmarks out there. there are good programs out, head start being one of them b tow continue to support a system that spends that money and produces these outcomes should not be acceptable here in oregon. in health care we laid the foundation for the state's first health insurance exchange to provide easy to compare information for individuals and small businesses about the affordability and quality of various health insurance products. the ne of this

new council is appoint and confirm and meeting on a monthly basis. and with bold reform plans to decrease costs and increase outcomes for oregonians in the health care system is. and the tool through which this transformation will take place shifts from the emergency room to acute systems of wellness and early prevention and management of chronic condition like diabetes and congestive heart failure. the potential savings are enormous, $3 billion over the next five years which will allows to ensure that the most vulnerable citizens continue to have coverage, and we can have more resources to invest in other areas like education. and that we can provide a model of private commercial health insurance market. but in both education and health care are su

care, our success to date has been setting the stage for the change, and now comes the hard work of the implementation. ongoing success depends upon working together in the next year in the same way that we worked together in the last year and in bringing to the legislature next month the tools to actually implement and move forward the work that we have already started. and before i turn to those specific legislative measures, i want to remind you again that change is always difficult. it always makes somebody ununcomfortable. if you recall the last time i was here, i offered you an analogy by comparing the development of a system to which we provide public education and health care. if you recall we had an art exercise around that. but let me refresh you, because it is relevant. a successful business results from the climate in which investment produces growth, and the climate in which the

business operates changes if the business does not design a new business plan to reflect the new circumstances rather than the old ones, and the growth will flatten off and begin to decline. but a successful business when it sees the world changing redesigns the business model, and it builds a new growth curve. the challenge is for a period of time the old growth model and the new growth model coexist. and that ear yarea between them the area of paradox and area of churning and concern because people know what they are doing is not working, but they don't know the alternative so they continue to cling to the status quo even though it is continuing to take them over the edge. now more than ever, that is is where we find ourselves in oregon today particularly with health care and education. in this area of paradox. we are well down the road for creating transformation change for building new business models for both of the services based on today's realities and not the

realities of the 20th century, but we have reached a critical moment in time. there are some who have suggested that we have come too far, too fast. what i hear from the oregonians is that we have is not come far enough. we are not going to lose our nerve at this critical moment in time, and we are going to forge ahead with these reform efforts with an urgency driven by the precarious situation of citizens and communities throughout the state. 21 oregon counties still face double-digit unemployment and one in four children in this state of ours is going hungry. half of all african-american children in the state of oregon are living in poverty. imagine a 6-year-old showing up for the first day in kindergarten unable to match any spoken or written words, and not aware that print is written or read from left to right, unabe to sou

-- unable to sound out words. imagine the incredible disadvantage that child has, and imagine -- imagine the state of elementary school in the state of oregon. you are looking at hunger, poverty, and thousands of kids who are just not going to make it. so for the first time we have the opportunity to do something profoundly important about it. all of the research demonstrates that children who are ready to learn at kindergarten and ready to read in the first grade and at level in the third grade are much more likely to graduate from high school and find social and economic success. the fact is that early childhood success is the foundation for every one of the economic and educational objectives. five years ago in 2006, the city club issued a report called early care and education.

which noted, and this is a quote, the multiple programs across multiple state agencies with no clear or common vision. that report called on state officials to strengthen oregon's effort to coordinate disparate early childhood programs, and that is what the early learning bill will do. it implements the recommendations of the early learning council on the website that will streamline the system and ensure coordination and accountability and get the programs focused on outcomes for children and families. everyday we delay, every year, 46,000 kids are born in the state, and 40%, over 18,000 are at risk. risk that we are going to pay for down the road through school failure, school dropout, social dependency, involvement in the criminal justice system, and lost opportunity and wasted human capital, and yet you hear people say, these change cans are happening too fast.

for who? certainly not for the 18,000 at-risk kids. for those kids, these changes could not happen fast enough. so your vocal and committed support next month for our legislation to implement the recommendations of the early learning council will allow us to move from diagnosing this policemen to actually beginning to solve it and give every child in this state the chance they deserve to be successful and set our state and our citizens up for prosperity in the future. the second education bill we're going to introduce is necessary to achieve our ambitious objectives of 100% high school graduation. next year's class of kindergarten students is a benchmark. they are the class of 2025. and 2025 is the year we've set to have 100% high school graduation in the state of

oregon. that's a tall order. 13 years from now. because just yesterday, education week ranked oregon 46th out of 50 states in its k-12 achievement. our choice for the class of 2025 is very, very clear. we can continue our decade-long experiment with the no child left behind law in its one size fits all approach to school accountability, or we can adopt our own tailored approach to improve student outcomes. we can still with federal control and an oregon high school graduation rate at 65% or take the responsibility upon ourselves as a state to work together with teachers, parents, district administrators, students, legislators and the larger community, to devise a system that allows more flexibility while pushing every district and every school to better student outcomes. we can continue to label schools and teachers and districts as

failures and overrely on standardized testing as a single measurement as student achievement, or we can recognize there is no single formula for school improvement, and instead we can set some meaningful goals of performance on a small number of outcome-focused measures like third grade reading and high school achievement we noel accelerate learning and free up resources for a comprehensive education. choice is clear. and the time is now. we have the opportunity to seek a waiver from the punitive aspects of the no child left behind law if, if we can create our own home-grown alternative that provides smart accountability and better paths for students' success. so the second bill we're going to submit will establish educational achievement compacts which are essential to winning that waiver and also essential to achieving our goal of 100% high school graduation rates by 2025. so the achievement compacts will

replace the federal compliance-based approach and create partnership agreements between the state and our educational institutions, school districts, universities and community colleges to express a common commitment to approved student outcomes but tailor those outcomes to the unique circumstances of each school district or educational institution. it will also allow us to be able to compare progress and outcomes between districts that are comparable and will begin to connect funding to outcomes so that over time the state can be a smarter investor in education. so if we fail to adopt these achievement compacts in february, we'll be left under the no child left behind law that i think everyone agrees is not a good outcome, and if we fail to make this shift we'll continue to have funding debates without a context, debating a big number with no real information in the relevance between different funding levels

and student outcomes. i want to pause a moment and make a comment about funding. we need to be very cognizant of the fact that we will not achieve our long-term ambitious education attainment goals without additional resources. as i've said before our system of public education is underfunded at all levels. the capacity of our public universities is going to have to expand dramatically to absorb tens of thousands of new graduates. class sizes in twchlt-12 need to come down, particularly in the lower levels. classes like vocational and technical training, art, music and p.e. need to be added back. but we can't allow the debate about funding to be the only debate that we have. and we can't allow the lack of adequate resources to get in the way of a real discussion about how we can be more effective with the resources that we do have. we need to focus those on key leverage points like early learning and third grade reading and college completion that we

know drive down costs and increase performance. now, regarding health care. action in next month's legislature is equally important. to qual -- implement and build out our new health insurance exchange and allow us to move forward by establishing coordinated care organizations across the state, now, there are those, some of them i know and can see out there, who are understandably concerned about if this is going to work out, if and whether we can realize these savings in our budget. so i want to pause again and put this concern into a larger context. and that context is what is going on in our nation's capital regarding our escalating national debt and the implications that has for health care here in the state of oregon. so i assume all of you have a personal credit card. and your credit card has a credit limit. and if you don't pay your bill, your credit limit is reduced or your card is eventually canceled. now, the federal government also

has a credit limit and it is called the debt ceiling. it's set by congress and congress has to raise that periodically so we can continue to borrow. if the congress doesn't raise the debt ceiling, its credit card isn't canceled, we default on our national debt. and that is a specter that's playing out today in greece and italy and other countries in europe. that's -- not something we really want to invite here in our country. uh the debt ceiling is not based on a thoughtful discussion of what the united states can pay to its debtors but rather, increasingly, on the politics of trying to maintain current programs without raising the taxes necessary to pay for them. because it is deemed politically risky to cut things like medicare, medicaid, defense spending in an election year. soabout simply roll those costs up onto our kids' credit card. that is exactly the political dynamic we saw playing out last august in that high-stakes game of chicken about whether or not to raise the debt ceiling to

deep us from defaulting on the national debt. in the end congress kicked the can down the road to 2013, just past the election, by raising the debt ceiling $2.1 trillion. but they did almost nothing to address the real underlying driver of the u.s. national debt, which is the intersection of an aging population with the hyperinflationary medical system. now, they did create a super committee whichutterly failed in its charge and triggered $1.2 trillion of debt reduction over a decade. $2.2 trillion is a at we need. the $1.2 trillion in debt reduction will be accrued over 10 years. we're going to increase our national debt by two times, almost, that much by next january. meanwhile, a year ago this month, the first of 78 million baby boomers started coming on the medicaid program, coming on at a rate of 10,000 a day every

day for the next 20 years. by 2020, the average medicare recipient will be taking $3 out of medicare for every $1 they paid in during their lifetime. so my point is, regardless who wins the presidential election, regardless which party is in control of congress a year from now, there is no way to get our arms around the national debt unless we take on medicare and medicaid. and absent any rational pathway to a new delivery model, congress is simply going to turn off the tap. and that is really bad news for a health care industry that's built on a business model that assumes that the public sector and private employers are going to continue to finance an inflation rate that's several times higher than the cp it. those days are gone forever. that brings us back to oregon where people are concerned about whether we can actually realize these cost savings. but think about the shortfall in the billions of dollars which is exactly what we're going to face if we concontinue to cling to t

status quo. there are people who think, if we can just stall out this health care reform the problem will go away. it won't. because health care reform is not just about politics, it's about economics. and the laws of economics are just as immutable as the laws of physics. the reaction time's just a little longer. the fact is that we are rapidly approaching the end of the runway for health care financing as we know it. here's the good news. you may know that for every dollar we spend on medicaid the federal government gives us $2. every dollar we save in medicaid saves the federal government $2. i was in washington the day before yesterday at the white house with the president's health policy adviser and deputy chief of staff and also the head of cms, the agency that oversees medicare and medicaid. and we took documentation that we ran through the omb that