First among the principles is providing the education and training our citizens need to compete with the best and the brightest from around the world.

Our workforce development plan emphasizes the teaching of science, technology, engineering and math skills. These skills are known collectively as STEM.

Earlier this month, I unveiled a series of specific actions we can take together to make this vision a reality. They include: providing students in grades 6 through 9 with enhanced opportunities to develop STEM skills through hands-on, project-based learning; establishing high school STEM academies taught with the help of University of Hawai'i community college instructors where students will earn both high school and college credits; and for students who successfully complete the STEM curriculum, I am proposing we fund undergraduate scholarships at the University of Hawai'i, or any other local college or technical school of their choice.

INNOVATION

It is not enough to encourage today's citizens and businesses to innovate and think big ideas, we in government have to be willing to do the same.

In that spirit, I am following up on Speaker (Calvin) Say's proposal from last year and proposing to establish a $100 million Hawai'i Innovation Fund.

I am proposing that the State Employees Retirement System invest $100 million in this professionally managed fund to finance promising high technology and creative industry companies as an affirmation of our belief in Hawai'i's innovative capabilities. The ERS, at $10.5 billion, is the state's largest institutional investor, and can play a major role in spurring new companies that create high-paying jobs here at home, while earning good returns for its beneficiaries.

These newly created companies, including those focused on life sciences, will need quality incubator facilities, including wet lab space.

We are proposing to meet this need by partnering with Kamehameha Schools which is planning to build the Asia-Pacific Research Center near the medical school in Kaka'ako. The state's High Technology Development Corporation would become the Center's master lessee.

HOMELESSNESS

The recent shame we felt reading about our homeless problem on the front page of The Wall Street Journal and in the New York Times is an uncomfortable reminder that we can't take our eye off the ball in our efforts to help thousands of our fellow citizens regain their self-sufficiency.

But successfully opening emergency and transitional housing alone will not solve the housing problem. To do this, we must generate many more affordable rental and for-sale housing units.

I am calling for an immediate deposit of $50 million in cash into the Rental Housing Trust Fund, $50 million for the Dwelling Unit Revolving Fund and another $50 million to repair and renovate public housing projects. This money — when leveraged with private funds — can result in the development of thousands of additional affordable rental units as well as for-sale units.

Finally, we can attack the problem by funding infrastructure that will open up lands for affordable housing that otherwise would have remained unused.

One such opportunity exists in Kona, where for an expenditure of $14.4 million to develop a water system, we can create a true partnership between the State's Housing Finance and Development Corporation and the Department of Hawaiian Home Lands to build over 2,600 more affordable homes and rental units.

These are bold steps, and represent a significant commitment of our state's resources. But they are steps that we must take if we wish to erase the stain of homelessness from our community and ensure that the American dream of home ownership remains alive for our families.

HEALTHCARE

We were recently rated the fourth healthiest state in the nation, and while that is a great distinction, the paradox is that our healthcare system is itself in nearly critical condition.

The signs are all around us, from the decision of Kahuku Hospital to close its doors to a lack of emergency room physicians at our major trauma center to a lack of certain specialists.

The problem is mostly about the bottom line: High costs and low reimbursements are driving hospitals out of business and physicians out of the practice.

First, I am renewing the call for sensible, medical malpractice reform based on the California model. This proposal ensures that plaintiffs can recover for their actual damages, while putting reasonable limits on so-called non-economic damages.

Second, we must revamp the Certificate of Need process, which is used to determine whether a hospital or other medical facility can be built. Just last year, this process resulted in the denial of a request to build a privately funded, state-of-the art hospital on Maui — a facility that was supported by the majority of Maui citizens. We must revise this process so that local communities have the final say in determining which new medical facilities and services to support. We need to make sure that health insurance is affordable by eliminating tax barriers that have kept competition out of the marketplace and by enabling sole proprietors to obtain the same rates as larger companies.

A lack of nurses is another healthcare system deficiency that needs to be addressed.

We are requesting more funding for the University of Hawai'i School of Nursing to increase the number of graduates and we want to create a nursing specialty in geriatrics to prepare for our increasing aging population.

TAX RELIEF

The most direct and immediate way government can address affordability is by lowering the tax burden on its citizens.

I am proposing a substantial but prudent $346 million tax relief package.

Because the state constitution requires us to give all taxpayers a refund this year, I have left enough room in my budget for a $100 per person tax refund for those filers with less than $100,000 in income and $25 per person to the small minority of residents whose income exceeds $100,000.

Besides a one-time refund, we need to give our residents long-overdue, permanent tax relief.

We need to fix an insidious tax problem that affects everyone and causes your taxes to go up without you even knowing it. Because tax brackets, personal exemptions, and standard deductions are not adjusted for inflation, their value diminishes over time, so you end up paying a bigger share of your income in taxes.

I am proposing the Taxpayer Protection Act of 2007 that will require the director of taxation annually to adjust these three factors.

It is also time for us to take the first step to eliminate the tax on the food that families eat at home. I am proposing that we exempt 11 different foods from the general excise tax, including milk, eggs, cereals and baby formula — foods recognized by the USDA as healthy and basic to a child's diet.

To give extra tax relief to families, I am proposing the 'Ohana Tax Reduction Act of 2007. This new law will provide an additional $1,000 exemption for children under 19 years old, and more than double allowable dependent care expenses for families caring for young children, aging parents or both.

I have tried to outline for you today a shared vision of what our Hawai'i of the future can look like. It is a Hawai'i in which our location in the Pacific and our cultural diversity will be significant advantages as we compete with the rest of the world.

It is a Hawai'i in which prosperity will be created more through the power of innovation and new ideas and less through the development of land and overuse of our natural resources.

And most important, it is a Hawai'i that will still be the Hawai'i that we all love. A place of unsurpassed natural beauty that cares for those in need. A place that honors its rich, multi-cultural heritage, and a way of life that is unique in all the world.