INDIANAPOLIS -- Gov. Mitch Daniels urged the state legislature to finally act on significant reforms to public education and local government in his annual State of the State speech Tuesday, repeating a call for the expansion of charter schools, merit pay for teachers and the elimination of township government.

Democrats said the Republican governor missed the mark, ignoring a jobs crisis around the state. And local lawmakers were steaming over his comments on the state of Indiana's education system.

But GOP leaders say improvements will help the economy.

"It's clear that that's where the battle lines are being drawn," Sen. Karen Tallian, D-Portage, said.

Now empowered by a Republican majority in both legislative chambers, Daniels said "it's going to be a session to remember." He was escorted to the podium by several lawmakers of both parties, including Sen. Earline Rogers, D-Gary.

He said Indiana should let students finish their high school studies a year early and be given scholarships for college studies. Teachers should be rewarded based on student performance, he said, adding that one in three Hoosier children can pass the national math or reading exam.

Meanwhile, he said 99 percent of Indiana teachers are rated "effective."

"If that were true 99 percent, not one-third, of our students would be passing those national tests," Daniels said.

Families who can't find the right public or charter public school, he said, should be able to apply state dollars toward "the non-government school of their choice."

Finally, the governor talked about the discipline of foreign education systems he has visited in Japan, Korea, Taiwan and China, where he said students attend classes as many as 230 days a year. He said Hoosier children will compete with them for jobs, but Democrats swiftly shot back.

"I don't think that's a fair comparison," Rep. Mara Candelaria Reardon, D-Munster, said. "Because they certainly do a little bit more tracking than we do. Our job is to educate whoever appears on our doorstep. Certainly not the same policy they have in communist China."

Rep. Vernon Smith, D-Gary, said it's important to hold people accountable but merit pay could create a system of favoritism.

"I don't think he really understands the traditional schools and what they face," Smith said of the governor.

House Speaker Brian Bosma, R-Indianapolis, called Daniels' education reform proposal "the jobs issue of 2011." He said it would lift a weight off the Indiana economy as employers search for quality schools for their children.

"The part that's slowing the engine down is the status of the perception of our K-12 education," Bosma said.

Democrats didn't see it that way. House Minority Leader Rep. B. Patrick Bauer, D-South Bend, called it a "non-job speech." Other Democrats noted he made one passing reference to Indiana's broken unemployment insurance system.

The speech wasn't entirely about education, though. He told the General Assembly to pass a balanced two-year budget without tax increases or "gimmicks." He called for an automatic taxpayer refund.

Daniels also advocated for several local government reforms he has promoted in the past

They include the elimination of township governments and restrictions on "double-dipping" government workers who also sit on city and county councils.

He also said Indiana's three-member county commissioner structure should be consolidated into a single executive.

Bauer called that a distraction.

"If you're the governor or the president, either one, and your state or your nation's in a budget crisis and a job crisis, you ought to focus on that and worry about restructuring of anything the next session," Bauer said.

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