Take just those four areas - education, TennCare, corrections, mental health and retardation - plus the federal funds and pass-through dollars I mentioned a moment ago and you've accounted for almost 90 percent of the buget growth during our administration.

In my judgement these are all fundamental responsibilities of state government. And the fact is, they grow more quickly than the revenue our out-dated tax system can produce.

The result is a structural deficit. That's what the economists call it when, year after year, your fixed costs grow more rapidly than your income.

You can't grow your way out of a structural deficit. It's caused, after all, because revenue doesn't grow with the economy, so no matter how much the economy grows, tax receipts lag.

Historically, Tennessee has compensated by raising the sales tax rate every five to eight years. That's how our sales tax has come to be one of the highest in the nation.

Our heavy reliance on sales taxes is a big part of the problem. Tennessee gets most of its money from sales taxes. It's not just that sales taxes don't keep up with demand, it's that changes in the economy are eroding the sales tax base.

A generation ago a majority of the things Tennesseans bought were subject to sales tax. Today, almost 60 percent of our spending is on services which are not sales taxable. Tennesseans, like people everywhere, also buy more things over the Internet or from catalogues - again, without sales tax.

If we continue to rely mainly on sales taxes, we are hitching our wagon to a falling star. And the higher we set sales tax rates, the more we encourage our citizens to shop on-line or across the river.

The easy thing for my to do would be to pretend there's no problem. I could recommend that we cut spending on schools and health care, raid the reserves and the state pension fund, maybe raise the sale stax another half-cent. I could get through the rest of my term, and the consequences might not start to show up until the next governor took office.

But I can't do that. I cannot in good conscience recommend the kind of budget cuts necessary to balance our budget without reform. It would dishonor my oath of office and my obligations to the people I serve.

All of the factors I've touched on this evening - an out-dated tax structure, an eroding tax base in a time of economic growth, a state budget driven by demands not of our making - these have led me to propose tax reform.

This is the most difficult challenge I have faced during my career in public service. I am a conservative who believes that taxes ought to be government's last resort, and I have not come easily to believe that Tennessee is at that point now. But we are.

We have a structural deficit too big to be finessed. The great majority of the state's spending is linked to items we have little choice but to fund. That leaves less and less for needed investments in areas like higher education, or long-term care alternatives for older citizens.

And soon, we will be unable even to maintain current levels of support for education, health care, public safety - to say nothing of needed new investments in higher education, economic development, or long-term care alternatives for older Tennesseans.

We will always work to make government more efficient. We will always look for ways to save money. But we can't cut nearly $400 million from our budget - a tight and conservative budget - unless we are prepared to cut things that matter - schools, colleges, health care for kids, law enforcement.

Dealing responsibly with our state's oblications is, for everyone in public office, a critical test of leadership. The choices are hard and not without consequences. But there are consequences, as well, to inaction. In fact, the consequences of doing nothing are more serious, both as a matter of policy and as a matter of politics.

Our state has run out of easy solutions. Whatever option we take will anger some of our citizens. But we will anger a great many more Tennesseans if we fail to meet the challenge before us responsibly and soon enough to avert harm.

Someone pointed out to me recently that, in the late 60s, when Ronald Reagan was governor of California, he went through the same kind of budget crisis.

Interestingly, he did a lot of the same things I have: he cut operating budgets, reduced the state's workforce, instituted a hiring freeze, restricted travel and reclaimed reserves held by state agencies. It wasn't enough to close his budget gap.

And faced with the alternateve of making damaging cuts to services he felt his state needed, he instead sent a revenue bill to his legislature. And he sought a long-term solution to California's budget problem by proposing tax reform - even though he had campagned against taxes. Something he said at the time caught my attention.

Because he had shifted on taxes, he noted: "there has been some editorial jumping-up-and-down with glee, holding that this makes a failure in our long-held belief in economy, let's set the record straight here and now...

We do not intend to spend one dollar more of the people's money than is necessary to conduct the people's business."

That's exactly how I feel about it, too.

Our comprehensive tax reforms represent the most important public policy choices our state has faced in a generation.

They offer us an opportunity to create a tax system that is broad-based, fair, and built on low rates, a system that works in today's economy, and that assures us enough revenue "to conduct the people's business."

It's important for our state and for our families and for our future.

It deserves your support.

Thank you.