COLUMBIA -- Gov. Nikki Haley said the state is looking at an opportunity, not a problem, as it faces the need to slash the budget by another $1 billion this year.

Haley delivered her first State of the State address Wednesday night from the House chamber, warning that the cuts to the $5 billion budget might seem unfair, even callous, and they are going to hurt.

And to get lawmakers started, Haley offered at least $20 million in suggested budget cuts, such as eliminating funding to South Carolina's public television and radio network, ETV, and the Arts Commission.

The budget hole is much larger than that. It is $829 million, coupled with $264.5 million in agency deficits at the departments of Health and Human Services, Social Services, and Corrections, all Cabinet agencies.

And that's on top of the 20 percent that already has been cut from state government spending in the past three years because of declining tax collections during the deep and prolonged economic downturn.

Haley, a Republican, asked South Carolinians to embrace the state's struggles as opportunities.

"If you do, we will transform South Carolina in ways that have long been imagined but never realized, ways that will make our state the envy of the nation, and ways that will ensure our pride in the South Carolina we pass along to my children and yours," Haley said.

She used teleprompters to deliver her 34-minute speech, stumbling occasionally but recovering quickly.

Last year, she was seated on the chamber floor as a House representative from Lexington for former Gov. Mark Sanford's eighth and final address. That was before her meteoric rise to become South Carolina's first female and minority governor.

Rep. Jim Merrill, a Daniel Island Republican and former House majority leader, said he admires Haley for laying out ideas for budget cuts, especially those that won't be popular.

"The fact remains, everybody says they want cuts and that we need to streamline government until it affects something they like," Merrill said.

"And it takes quite a bit of fortitude to sit there and to take on something like ETV or the Arts Commission, which we know is popular. But the fact remains, it is not as important as serving autistic kids or taking care of our seniors or funding K-12. That is what's called prioritizing, and she's doing it."

Rep. Robert Brown, D-Hollywood, said he does not share Haley's optimism. The state's Republican leadership has sworn off tax increases while the state's neediest do without, he said.

"With all these cuts, Medicaid, education? No, I don't see it," Brown said. "I might as well tell you the truth. I don't see it. It's only going to get worse."

Haley's vision for a slimmed-down, reformed state government includes:

--Starting the budgeting process at zero and asking: "What do we have to have?"

--Consolidating government property, equipment and administrative services. Haley noted that in her first week she moved the Department for Alcohol and Other Drug Abuse Services from a privately leased space to empty offices in a government-owned building, for a savings of about $700,000 in four years.

--Fire taxpayer-funded lobbyists that cost $1.2 million.

--Require HIV/AIDS, cancer and mental health patients on Medicaid to use generic drugs. The savings -- about $1 million.

--Ditch the legislative decree that stops the state's Department of Health and Human Services from cutting the rates paid to doctors and hospitals that treat Medicaid patients. Every 1 percent cut saves $10 million, she said.

--Privatize the state school bus fleet.

--Say no to federal cash. The money comes with strings attached, and Haley said it drives up state spending.

Haley touched on a myriad of other issues, such as revamping the cumbersome method of funding public schools and consolidating the Department of Probation, Parole and Pardon Services into the Department of Corrections.

But she left out a lot of red-meat Republican issues, such as tax cuts, requiring voters to carry picture IDs to voting booths and authorizing state and local law enforcement officers to kick illegal immigrants out of South Carolina.

Still, House Speaker Bobby Harrell, R-Charleston, said he was pleased with Haley's speech, especially the tone. Harrell said he was most interested in hearing about economic development and combating the state's 11 percent unemployment rate.

Haley said she is impatient and won't wait another 20 years to land the next Boeing or BMW. She said she is working the phones daily.

"Our focus will not be on the quantity of companies we recruit but on the quality of companies that call our state home," she said.

"As I have said many times, Boeing was not just a win for our state for the jobs it directly created but for the auxiliary jobs and the economic activity it will bring to South Carolina."

"'Let's work together. Let's try to use our energy to come up with solutions,' rather than engaging in political fights. With the challenges facing the state, I think that's a very wise strategy."

Senate President Pro Tem Glenn McConnell, R-Charleston

"She had a lot of specific suggestions on how to deal with our problems. She's going to go on the attack to make the best of our situation and that's the kind of leadership she was elected for."

Sen. Mike Rose, R-Summerville

"I thought she was phenomenal. I thought that she delivered a very candid, pragmatic and hopeful message, but it obviously was in the reality of the tough decisions that the state is facing.

Karen Floyd, state GOP chairwoman

"It needs to be a thoughtful process, sensitive to the constitution but I am supportive of that."

Lt. Gov. Ken Ard on Haley’s call for the lieutenant governor and governor to run on one ticket

"I think it was a safe speech. It calls for all of us to work together. I could definitely pick up on some philosophical differences. The federal government is a branch of government that we ought to use for the betterment of our lives."

Rep. David Mack, D-North Charleston

"The openness she expressed, the willingness to listen to ideas, the agreement to work with the Gen- eral Assembly, I think those are terrific ideas that will really drive an air of cooperation that we've been missing."

Sen. Paul Campbell, R-Goose Creek

"What I really wanted to hear from the speech was a lot about economic development, how we're going to deal with the unemployment rate, how we're going to grow jobs in this state, and she talked at length about that."

House Speaker Bobby Harrell, R-Charleston

"I love Nikki as a human being but her political views and understanding and mine, we're a thousand miles apart. She didn't talk about none of the needs of the 4 million people who live in South Carolina."

Sen. Robert Ford, D-Charleston

"I am actually very excited about what the governor is saying. The fact remains, everybody says they want cuts and that we need to streamline government until it affects something they like. And it takes quite a bit of fortitude to sit there and to take on something like ETV or the Arts Commission, which we know is popular."

Rep. Jim Merrill, R-Daniel Island

"Where? With all these cuts, Medicaid, education. No, I don't see it. I might as well tell you the truth. I don't see it. It's only going to get worse."

Rep. Robert Brown, D-Hollywood, on Haley’s call for optimism

"As many of you will come to know in the weeks and months ahead, the door to my office has a sign for all to see every time they walk through my doorway. The sign says, 'Can't Is Not An Option.' "


Reach Yvonne Wenger at 803-926-7855.