DALLAS - Texas Gov. Rick Perry yesterday told lawmakers that the state's condition was "good," while acknowledging the impact of a deepening national recession that has sent energy and home prices plummeting and prompted massive bailouts for finance and automotive firms.

"Over the course of this session's remaining 126 days, we might define the word 'good' a little differently or diverge on how to get it done," Perry said in a state of the state speech that broke little new ground and skirted issues that he had focused on in the past.

Perry, who faces the prospects of a 2010 Republican primary challenge from U.S. Sen. Kay Bailey Hutchison in his bid for re-election, deplored what he called a leadership "void" in Washington as well as the prospects for an "increasingly activist" Environmental Protection Agency "whose potential to harm our state with punitive actions will only increase in the months and years to come."

He ignored the prospects for federal stimulus funds for state infrastructure and avoided mention of his pet project, the Trans-Texas Corridor, that was pronounced dead by the Texas Department of Transportation earlier this month.

In fact, Perry mentioned transportation only in passing early in his speech and again toward the end, proposing that fuel-tax revenues be used exclusively for construction, to the exclusion of agencies like the Department of Public Safety.

Hutchison has frequently criticized proposals to toll existing highways as a way to raise revenue. Perry was the chief proponent of private development of toll highways in the state, particularly in conjunction with the $150 billion Trans Texas Corridor that was to have included a network of highways and rail lines.

An independent panel of Texas business and transportation experts has concluded that an estimated $313 billion will be needed to meet the state's road, bridge, rail, and port needs through 2030.

Perry boasted of Caterpillar Inc.'s decision to open a plant in Seguin near San Antonio that will employ 1,400, but did not mention the heavy equipment maker's plans to lay off 20,000 workers nationwide. He also avoided mention of the perils of General Motors Corp., which has a major assembly plant in Arlington. Toyota's new truck plant in San Antonio has also been affected by the economic travails.

Perry said that Texas' fiscal restraint has left it in remarkably good shape compared to other states and urged lawmakers to stay the course.

"When other states are bonding additional debt for daily operations, let's invest wisely to create even more jobs and opportunity," he said. "As we wrestle with lowered revenue estimates, we must stay committed to the proven policies that have brought us so far, and resist any calls to panic."

To help create jobs, Perry asked lawmakers to provide more than $500 million for a job-creation fund, an emerging technology fund, and a movie-making incentives account in the coming two-year budget.

To ease the tax burden on businesses, Perry said he supports raising the small business tax exemption to $1 million, up from the current $300,000 in gross receipts. The tax was created in 2006 to change the Texas system for funding public schools.

The governor asked lawmakers to appropriate funds for a disaster contingency fund created by the 2007 Legislature. The fund was created for disasters like Hurricane Ike that struck Galveston on Sept. 13. But because it has no money, the fund cannot be used to provide financial relief for the local governments there.

"We simply cannot, in good conscience, allow our citizens to shiver in a tent or sit in the sun as Washington drags its feet on housing and reimbursements," he said.

Perry, the longest-serving governor in state history, succeeded George W. Bush after the latter's election as president in 2000. He has been re-elected twice since then, winning with just 39% of the vote in a five-way race in 2006.

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