Mr. Speaker .... Mr. President ... Ladies and Gentlemen of the General Assembly, distinguished guests.

It feels a little bit like coming home tonight ... As I look out over the floor where I worked for 11 years ... I see so many familiar faces.

Senator John Drummond ... what an honor to be able to stand with you. A true war hero ... ace fighter pilot and prison camp survivor.

You are just the kind of ally I want in the fight to make our schools better.

Representative Terry Haskins ...welcome back.

I value the time we've spent working on important issues .... like government restructuring. And I am personally inspired by your own fight for your health. Your presence here is a daily reminder to all of us of the primary importance of our family ... and friends.

As we begin a new administration ... I look forward to working with .... and introducing the many new faces of South Carolina who will help.

One of them is here with us tonight .... Michael Tecklenburg.

Michael's story should inspire us all. When he was born ... Michael's parents were told he was mentally retarded. At age four, doctors learned the truth ... Michael is deaf.

Through a life-long series of educational challenges, Michael kept at it ... insisting on being a full partner in his own education ... eventually becoming the first deaf student to graduate from the Columbia University School of Law.

As our Washington representative ... Michael will work to advance South Carolina's interests in the nation's capitol.

Governors making a state-of-the-state address typically sound like a speaker at a testimonial dinner. Lots of grandiose rhetoric, patting yourself on the back, praise for all that's been accomplished ... with maybe a hint or two about the future.

Not here. Not tonight.

My friends, we face serious problems in South Carolina. We don't have the luxury to contentedly sit back and rest on our laurels. We need to solve these problems and we need to solve these problems starting right now.

One week ago, I stood on the State House steps and asked you to join me in a crusade for South Carolina's children. I said that .... working together .... we could put South Carolina on a march to greatness.

But to paraphrase an ancient saying, a march of a thousand miles must begin with the very first steps. We must take those first steps tonight, my friends, because for too many children in South Carolina, the state of our state is not bright.

Just look at the sobering statistics in the national Kid's Count Report.

South Carolina's rankings are dismal. Forty-seventh in infant mortality. Forty-fifth for children living in poverty. And when they add up everything that measures a child's health and welfare, we are forty-eighth. .... Forty-eighth!

And what happens when these kids get to school? For most, the situation doesn't get any better. In South Carolina, we face today a $4 billion problem with substandard school buildings.

During my campaign, as I walked through schools I heard horror stories about insulation falling through the ceiling .... puddles in the hallway from dripping pipes .... bathroom fixtures broken off or inoperable .... dingy, makeshift classrooms beyond repair.

Superintendent Rhett Dean tells me that in Marion School District 3, he'd like to produce students ready to take on the scientific and technical challenges of the 21st century. But he's got science labs so out of date his students have no chance to compete.

These aren't isolated examples. This is the state of our schools.

Sure there are some so-called "rich" districts. But so many families are moving into those communities that children privileged to live there are rewarded with crowded, portable classrooms.

Superintendent Frank Vail in Lexington District 4 can tell you about the challenges of growth. He's already got the equivalent of an entire school in portables ... and his district is growing by 150 to 200 students a year.

My friends, I propose an agreement. .... an agreement that we all begin tonight to improve the state of our state .... by improving the state of our children's education.

Now, I want to speak directly to the parents of South Carolina's children.

Many parents think that educating our children is the government's responsibility. They couldn't be more wrong.

Government can hire teachers and buy educational software and computers and textbooks and facilities. But government can't do it all. You can't buy educational excellence.

Education isn't something that's done to your children. Education is something that's done by your children and with your children. Parents can't drop their children off at school like they do their dry cleaning and then expect their kids to come back from school at the end of the day all well starched and nicely folded to be put away until tomorrow.

Excellence in education only happens when parents join government and teachers and students to make it happen.

Parents, join us in our crusade for our children.

I propose that during this school year ... and at the beginning of each school year ... every parent sign a "Compact with Our Children" .... a pledge to set high standards for ourselves as partners in our children's education.

We've got to set the bar high ... teachers, students and parents share in the responsibility to set ... and live up to high standards. That's what accountability is all about.

What do we need from you?

A pledge that you will require regular and punctual school attendance. A pledge you will read to your young children, and encourage the older ones to read for themselves. A pledge to provide a quiet, well-lighted study area, adequate rest, food and a healthy environment. A pledge to support school activities by volunteering, visiting the classroom and attending parent-teacher conferences.

I'll make sure a copy of this "Compact with Our Children" gets to every parent of South Carolina's public school children. I urge each of you to sign the compact to help us set higher standards in education.

Members of the General Assembly ... there are things you can do to help our schools.

Let's get specific.

First, we must adopt a state lottery with the proceeds constitutionally committed to education.

An education lottery will generate at least $150 million dollars a year for our children. That's $150 million above and beyond any other existing state funding for education.

If we need a reminder why those dollars are so important ... look around this familiar old building.

The renovation of the State House and this chamber, completed just months ago, is a beautiful tribute to the importance of government. We cannot send our children a message that the condition of their schools is any less important.

Each day in session, you sit at custom-made work-stations ... work with the help of personal laptop computers. You realized lawmakers can't do 21st century business with 19th century tools and technology.

Our children's access to the latest tools and technology for learning cannot be any less of a priority.

Let us begin by pledging to pass a joint resolution to place a lottery referendum on the ballot in the year 2000.

With lottery dollars, we can build the 21st century schools our kids need. We can get them out of those overcrowded classrooms.

In our sister state of Georgia, lottery dollars are already paying big education dividends. Since 1993, almost 400,000 Georgia students have shared more than $600 million in HOPE scholarship money.

This year alone, 61,000 Georgia children will attend pre-kindergarten programs funded by lottery dollars.

And now, more than 44 percent of secondary school classrooms in Georgia are computer-equipped. Before the lottery, that number was two percent.

I know some of you here tonight don't favor a lottery. But I admire the statesmanship of people like Senator John Courson ...and Representative Joe Neal, who, while personally opposed, recognize that the lottery issue must ultimately be decided by all South Carolinians next year.

But South Carolina children can't wait until the year 2000 for us to move ahead. They're looking for leadership tonight. Education must be our number one budget priority this year.

This marvelous building has seen great strides in education funding before ... witness Gov. Dick Riley's programs in the 1980s.

But then, our priority for school funding fell .... and school performance flattened out.

It's time to take another giant step.

I'm requesting the General Assembly dedicate fully one half of the available dollars coming to the general fund and the EIA to educate our children from kindergarten through twelfth grade. This represents increased educational spending of $380 million.

This $380 million will jump-start us on the march to educational greatness.

Let's use some of these dollars to cut class size. Today our teachers in kindergarten through third grade are often teaching twenty or more kids in a class.

My own son, Luke, attended kindergarten with 25 children in his class. No teacher can give the individual attention every child deserves in classes of that size.

We've got to get that ratio down to a manageable level. Let's shoot this year for an average of no more than 17 children for every teacher, in kindergarten through third grade. That's still too many, but it's a good first step on the way to 15-to-1 ... that's where you can begin to see real performance gains.

Decreased class size demands more good teachers. To assist in solving this problem, I propose we turn to our corps of retired teachers.

As the law stands, those veteran educators take their experience home ... or to post-retirement teaching jobs in Georgia or North Carolina. We can change the retirement law without jeopardizing our retirement system. Let's give our school districts the flexibility to keep some of our most experienced teachers in the classroom.

And while we're at it, let's recognize the value of our current teachers to the future of our state by giving teachers a salary that, for the first time, will give them a salary that is $300 above the Southeastern average.

I'm tired of South Carolina being at the bottom of the nation in SAT scores.

Other states use special courses to prepare students for the SAT. I propose we take $25 million of that $380 million to buy laptop computers and SAT review software programs.

Then assign those take-home computers to high school students studying to take the test. Let's take the steps necessary to prepare our kids for the SAT. Let's raise their standards.

Of all the goals I hope to realize during my term of office, nothing would give me greater personal satisfaction than to see our current kindergarten students complete the third grade as good readers.

Reading skills form the foundation for all other learning. That foundation must be in place by the end of the early grades.

That's why I'm proposing a Governor's Institute of Reading. The Institute will bring to South Carolina the nation's leading reading experts, promote reading through grants to local schools, provide the best professional development for reading teachers, and promote a world-class collaborative reading effort.

We need to teach our children that the most valuable possession a kid can have is not a new pair of Nike's or a Game Boy ... it's a library card.

Tonight, kindergarten students from Rosewood Elementary School are with us. Kids, I will visit your school three years from now. I look forward to seeing confident readers .... students who are reading at their grade level and beyond because of our focus on this important skill.

Reducing class size, recruiting more good teachers, preparing students for the SAT, building better readers .... these are specific proposals to solve specific problems. But we don't have all the answers here in Columbia.

Let's be innovative.

I'm proposing tonight that we budget $125 million our schools can use to build 21st century schools... to help build more classrooms, homework centers or alternative schools.

These dollars will give educators at the local level the flexibility to solve specific problems that plague schools statewide.

Now, I want to speak directly to our business community, .... foundation directors .... community leaders.

We all know that children need a foundation upon which to build a successful and meaningful life.

That's why I'm calling for the establishment of what I call South Carolina First Steps . ....my program to assure that all children enter school healthy and ready to learn.

I've modeled South Carolina First Steps on North Carolina's successful program called "Smart Start" .... a program that won the Ford Foundation's Innovation in Government award.

South Carolina First Steps is a community based initiative that will bring together the expertise of state and local agencies .... churches .... parents .... teachers .... and businesses to identify children's needs and find ways to address them.

South Carolina First Steps will promote better child care .... coordinate children's health services .... and help parents help their children.

We can begin this first year with $20 million from state budget funds. But South Carolina First Steps will only work if business leaders, foundation directors and community leaders commit their time, talents and financial resources to make it work.

We're on our way. Joe Anderson, president of Bell South in South Carolina, has signed on to chair the South Carolina First Steps Advisory Council. Soon, we'll announce more top-rank civic leaders who have agreed to support this program. It's commitments like these that ensure South Carolina First Steps will pay huge dividends for generations to come.

My proposals tonight focus on our crusade to improve our public schools. But before we leave the subject of education, I want to speak to the students and families of students at our state colleges and universities.

You, too, will share in the benefits of increased educational funding, including proceeds from a state lottery .... lottery money to provide stable funding for merit-based scholarships and expand our need-based scholarships.

In addition, we will address the need for new buildings and other facilities at our colleges and universities.

Funding for education must be our number one priority. But it's certainly not our only concern.

My fellow South Carolinians, I want you to be safe in your homes and communities.

That's why we're planning innovative crime-prevention programs. Lexington County offers an example.

There, two years ago, Judge Billy Keesley convened South Carolina's first Drug Court. Offenders have no history of violence .... And have committed non-violent crimes to get money for their addiction.

Instead of costly incarceration, those convicted are sentenced to hundreds of hours of community service. They're tested and re-tested for drug use. Any hint of illegal drugs means instant jail time.

This tough program is getting results. Former drug abusers are beating their addiction ... and heading away from a life of crime.

I encourage the General Assembly to establish drug courts statewide to fight the war on drugs.

As the former chairman of the House Judiciary Committee, I support sentencing guidelines. The bad guys need to know .... if they do the crime, they do the time. Speaker David Wilkins' sentencing bill, introduced last week, is a major step in the right direction.

Let me make another point tonight about law enforcement. I pledge to you that the operators of every business in South Carolina will be on the right side of the law.

Every business, including video poker.

I will sign an executive order authorizing SLED Chief Robert Stewart to begin immediate criminal background checks on all persons who apply for video poker licenses in South Carolina.

Early this month, I outlined for legislative leaders my proposal to tax the proceeds of video poker. I believe this industry should contribute $200 million a year to our state in taxes and fees. This represents roughly one-third of the video gaming industry's net profits.

As long as it's legal, I will lead the fight to make sure video poker is tightly regulated and fairly taxed.

But I believe the legality of video poker should ultimately be decided by the voters of South Carolina in the next general election. .... thumbs up, or thumbs down .... let the people decide.

I want to lower taxes for our senior citizens. This generation defended us in war, raised families, paid lots of taxes .... built our great state. They've given so much .... now it's time to give back to them.

I propose tonight we take the next step to wipe out income taxes on retirement income. Let's raise the income tax exemption for seniors to $20,000. That alone eliminates income tax for 58 percent of our seniors 65 and older.

I'm a businessman. I've found that successful companies are companies that encourage productivity. State government is no exception. It's time for South Carolina to reward its hard-working employees. Let's join the mainstream by helping employees save toward their retirement.

I propose we match up to $300 of any state employees' annual contribution to their 401-K retirement plan.

In addition, I am recommending a three percent pay raise for state employees.

Last week I pledged that the Hodges administration will be a pro-business administration. The living proof is here tonight .... my nominee for Commerce Secretary, Charlie Way and his top deputy, Wayne Sterling.

Charlie is universally acknowledged as a businessman's businessman. Wayne, who gets the credit for helping land BMW for our state, was described last week by the Wall Street Journal as a "corporate recruiting ace."

My strong economic development agenda is coupled with a strong conservation ethic. We made an environmental mistake several years ago. South Carolina should never, never have pulled out of the Southeast Compact for Low-Level Radioactive Waste Management.

The results .... disaster. Instead of every region in the country handling its own waste .... it's dumped right here.

Step number one: We must explore joining the Southeast Compact again. Senators Leventis and Courson are exploring this option.

But we're not signing our membership card without two guarantees. First, establish a definite date after which South Carolina will no longer be the national and regional landfill for nuclear waste.

Second, the Southeast Compact must hold those North Carolina tarheels to the fire.

If North Carolina fails to build a replacement site, we're prepared to tell them and others .... take your waste elsewhere.

In my inaugural address, I predicted that South Carolina is poised to march into a 21st century of unrivaled prosperity, boundless opportunity, and most importantly, the golden triumph of education over ignorance.

It's time to begin.

Pass the education lottery referendum .... put education first in this year's budget .... help South Carolina's children with their First Steps .... rein in video poker .... reward our senior citizens and hard-working state employees.

Join me tonight ....join me to take these first steps on our march to greatness.

Thank you.